WTO AGREEMENT ON AGRICULTURE The WTO s Agriculture Agreement was negotiated in the 1986 94 Uruguay Round and it was

a significant first step towards fairer competition and a less distorted sector. WTO member governments agreed to improve market access and reduce trade-distorting subsidies in agriculture. In general, these commitments were phased in over a six years from 1995 (10 years for developing countries). The Agriculture Committee oversees the agreement s implementation. Agricultural trade is the most distorted sector in the world. It is characterized by very high trade barriers, high levels of domestic support and export subsidies The WTO Agreement on Agriculture developed as part of the Uruguay Round of multilateral trade negotiations (1986-1994) was a major milestone for the global trading system. For the first time, international rules were established to address some of the major distortions in agricultural trade. The Agreement on Agriculture eliminated import quotas, bound all agricultural tariffs and imposed disciplines on domestic support measures (such as production subsidies) and export subsidies. Doha Round negotiations on agriculture The Doha Round of trade negotiations is Australia s highest trade priority and an opportunity to: y y y y y strengthen existing WTO rules impose new and more rigorous disciplines on the policies and programs of other countries eliminate agricultural export subsidies substantially reduce subsidised agricultural production, and deliver improved market access for exporters by cutting tariffs.

Overview\ Among various agreements of the WTO, the Agreement on Agriculture (AoA) is of great relevance for developing countries with respect to their economies and food security. The principal aim (three pillars) of the AOA pertains to market access (developed countries have to reduce the tariff by 36 percent and developing countries 24 percent on average), reduction of domestic support (the purpose is to reduce domestic support by 20 percent for developed countries and 13.3 percent by developing countries), and elimination of export subsidies (export subsidies are to be reduced by 36 percent by developed countries and 24 percent developing countries). The domestic support commitments in favour of agricultural producers under the provision of the World Trade Organization (WTO) include the government measures of assistance, whether direct or indirect, to encourage agriculture and rural development. The domestic support under WTO has been annexed with three Boxes i.e. Amber, Blue and Green. The domestic support measures included in Amber Box i.e. payments and subsidies paid to producers are to be reduced, but not eliminated. These measures are

based on Aggregate Measurement of Support (AMS), which is cash equivalent to total government support for agriculture producers. Blue Box embodies certain direct payments to farmers aimed at limiting production and are specifically exempted from reduction commitments. This type of support is given in only European Union (EU) and United States. The Green Box measures are non-actionable i.e. are permitted. The Green-Box category is comprised of forms of support that are considered to have no or minimally distorting effects on production or trade. These include such policies as general government services (in areas such as research, pest and disease, and so on); public stockholding for food security purpose; domestic food aid; direct payments to producers; decoupled income support (that is, support not related to or based on production); structural adjustment assistance; payments under environmental programme; and payments under regional assistance programmes. Agreement on Agriculture required countries to classify their domestic agricultural policy measures according to one of four categories. First of all is Aggregate Measure of Support (AMS). It is an instrument through which government gives exemption to farmers from tax or debt repayment obligation. RESULTS AND DISCUSSION Pakistan at present is in full conformity with WTO regime on agriculture and has already fulfilled all of its obligations relating to Agreement on Agriculture (AoA) vis--vis market access, domestic support and export competition. Regarding domestic support, agricultural producers in Pakistan are provided price support for few commodities. The implementation of the support price policy has been restricted to wheat, rice, cotton and sugarcane. Crops such as gram, onion, potato, and non-traditional oilseeds, i.e. sunflower, canola , soybean and safflower have been excluded from the programme and now these are traded in private sector CONCLUSION AND RECOMMENDATIONS Agriculture plays an important role in Pakistan's economy, accounting for about 22 percent of GDP and employing 44.8 percent of the country's workforce. Agricultural output has increased at an average annual rate of over 4 percent in the past two decades, contributing significantly to overall economic growth, food supplies and nutrition and exports. Agricultural exports have contributed significantly to overall export growth (Govt. of Pakistan, 2005-06). Despite the rising trend of agricultural output, the country faces a number of challenges in respect of the sector. One is to reduce food imports, which have been growing steadily, especially in recent years. With limited scope for expansion of cropped land, higher crop output will have to come essentially from higher yields, which requires investments in agricultural research and irrigation. Contrary to the requirement investment in agriculture in Pakistan is far below than the desired level and international standards Continued high incidence of poverty is also a major challenge. Broad-based agricultural growth provides the best chance for reducing poverty in general and rural poverty in particular.

, . Pakistan has a strong comparative advantage in the production and exports of a number of agricultural products, including cotton and rice. The country's climate and location give it an advantage in accessing a number of markets and it is generally considered that, given an enabling environment, agricultural exports could grow substantially. All this necessitates that owing to its importance in the economy of Pakistan, agriculture sector be prioritized in the allocation of resources and all types of permissible domestics support should be extended to this sector. The findings of the study reveal that that Pakistan is far behind in allocating resources for the agricultural sector. Pakistan can increase support to agriculture in all forms as on domestic support, there is very little by way of constraint on policy. Pakistan's product-specific AMS was negative and non-product-specific AMS was less than 1 percent of the value of agricultural production. It means Pakistan has a big cushion to provide domestic support first to reach a positive sign and then it can further utilize the de minimus provisions laid down in the agreement. The Agreement on Agriculture (AoA) sets no ceiling on Green Box and SDT expenditures, so there are no direct consequences for policy. Rather, the main problem seems to be very low levels of support to agriculture, given the important role of the sector in the economy It is also explained in the agreement that governmental measures of assistant to encourage agricultural or rural development are integral parts of development programs of developing countries. Agricultural input subsidies will be available to those farmers who have very low income or those who have very few resources.

The effect of domestic subsidy programs on international trade has become one of the key policy issues within the current agricultural trade negotiations. The WTO's Agreement on Agriculture (AoA) identifies three main categories of government support: trade-distorting support (amber box); support with no, or minimal, distorting effect (green box); and a category of direct payments under production-limiting programs (blue box). There are also exemptions for developing countries and no commitments for least-developed countries. Total support to production provided by policies found in the amber box is measured by the Aggregate Measure of Support (AMS), which countries agreed to reduce by 20 percent in the 1995-2000 implementation period. A critical issue in the current WTO negotiations on agriculture will be the domestic support reduction commitments and deciding which policies go in the "amber" versus 'green'or 'blue' box categories, or whether the whole system should be revised.

While member countries' commitment to reduce domestic support is an important step and unique to the agricultural sector, the on-going challenge for WTO negotiations on domestic support policy is to obtain effective commitments to reduce agricultural trade distortions while allowing countries flexibility to use minimally trade-distorting policies to achieve their national goals. After over 7 years of negotiations the Uruguay Round multilateral trade negotiations were concluded on December 15,1993 and were formally ratified in April 1994 at Marrakesh,Morrocco. The WTO Agreement on Agriculture was one of the many agreements which were negotiated during the Uruguay Round. The implementation of the Agreement on Agriculture started with effect from January 1, 1995. As per the provisions of the Agreement, the developed countries would complete their reduction commitments within 6 years, i.e., by the year 2000, whereas the commitments of the developing countries would be completed within 10 years, i.e., by the year 2004. The least developed countries are not required to make any reductions. SAILENT FEATURES OF AGREEMENT ON AGRICULTURE The WTO Agreement on Agriculture contains provisions in 3 broad areas of agriculture and trade policy: market access, domestic support and export subsidies. Market Access This includes tariffication, tariff reduction and access opportunities. Tariffication means that all nontariff barriers such as quotas, variable levies, minimum import prices, discretionary licensing, state trading measures, voluntary restraint agreements etc. need to be abolished and converted into an equivalent tariff. Ordinary tariffs including those resulting from their tariffication are to be reduced by an average of 36% with minimum rate of reduction of 15% for each tariff item over a 6 year period. Developing countries are required to reduce tariffs by 24% in 10 years. Developing countries as were maintaining Quantitative Restrictions due to balance of payment problems were allowed to offer ceiling bindings instead of tariffication.

Domestic support For domestic support policies, subject to reduction commitments, the total support given in 198688,measured by the total Aggregate Measurement of Support (AMS) should be reduced by 20% in developed countries (13.3% in developing countries). Reduction commitments refer to total levels of support and not to individual commodities. Policies which amount to domestic support both under the product specific and non-product specific categories at less than 5% of the value of production for developed countries and less than 10% for developing countries are also excluded from any reduction commitments. Polices which have no or at most minimal trade distorting effects on production are excluded from any reduction commitments (Green Box-Annex 2 of the Agreement on Agriculture http://www.wto.org). The list of exempted green box policies includes such policies which provide

services or benefits to agriculture or the rural community, public stock holding for food security purposes, domestic food aid and certain de-coupled payments to producers including direct payments to production limiting programmes, provided certain conditions are met.

Special and Differential Treatment provisions are also available for developing country members. These include purchases for and sales from food security stocks at administered prices provided that the subsidy to producers is included in calculation of AMS. Developing countries are permitted untargeted subsidised food distribution to meet requirements of the urban and rural poor. Also excluded for developing countries are investment subsidies that are generally available to agriculture and agricultural input subsidies generally available to low income and resource poor farmers in these countries. Export Subsidies The Agreement contains provisions regarding member's commitment to reduce Export Subsidies. Developed countries are required to reduce their export subsidy expenditure by 36% and volume by 21% in 6 years, in equal instalment (from 1986-1990 levels). For developing countries the percentage cuts are 24% and 14% respectively in equal annual installment over 10 years. The Agreement also specifies that for products not subject to export subsidy reduction commitments, no such subsidies can be granted in the future.

Agreement on Agriculture The negotiations have resulted in four main portions of the Agreement; the Agreement on Agriculture itself; the concessions and commitments Members are to undertake on market access, domestic support and export subsidies; the Agreement on Sanitary and Phytosanitary Measures; and the Ministerial Decision concerning Least-Developed and Net Food-Importing Developing countries.

Overall, the results of the negotiations provide a framework for the long-term reform of agricultural trade and domestic policies over the years to come. It makes a decisive move towards the objective of increased market orientation in agricultural trade. The rules governing agricultural trade are strengthened which will lead to improved predictability and stability for importing and exporting countries alike.

The agricultural package also addresses many other issues of vital economic and political importance to many Members. These include provisions that encourage the use of less trade-distorting domestic support policies to maintain the rural economy, that allow actions to be taken to ease any adjustment

burden, and also the introduction of tightly prescribed provisions that allow some flexibility in the implementation of commitments. Specific concerns of developing countries have been addressed including the concerns of net-food importing countries and least-developed countries.

The agricultural package provides for commitments in the area of market access, domestic support and export competition. The text of the Agricultural Agreement is mirrored in the GATT Schedules of legal commitments relating to individual countries (see above).

In the area of market access, non-tariff border measures are replaced by tariffs that provide substantially the same level of protection. Tariffs resulting from this tariffication process, as well as other tariffs on agricultural products, are to be reduced by an average 36 per cent in the case of developed countries and 24 per cent in the case of developing countries, with minimum reductions for each tariff line being required. Reductions are to be undertaken over six years in the case of developed countries and over ten years in the case of developing countries. Least-developed countries are not required to reduce their tariffs.

The tariffication package also provides for the maintenance of current access opportunities and the establishment of minimum access tariff quotas (at reduced-tariff rates) where current access is less than 3 per cent of domestic consumption. These minimum access tariff quotas are to be expanded to 5 per cent over the implementation period. In the case of tariffied products special safeguard provisions will allow additional duties to be applied in case shipments at prices denominated in domestic currencies below a certain reference level or in case of a surge of imports. The trigger in the safeguard for import surges depends on the import penetration currently existing in the market, i.e. where imports currently make up a large proportion of consumption, the import surge required to trigger the special safeguard action is lower.

Domestic support measures that have, at most, a minimal impact on trade ( green box policies) are excluded from reduction commitments. Such policies include general government services, for example in the areas of research, disease control, infrastructure and food security. It also includes direct payments to producers, for example certain forms of decoupled (from production) income support, structural adjustment assistance, direct payments under environmental programmes and under regional assistance programmes.

In addition to the green box policies, other policies need not be included in the Total Aggregate Measurement of Support (Total AMS) reduction commitments. These policies are direct payments under

production-limiting programmes, certain government assistance measures to encourage agricultural and rural development in developing countries and other support which makes up only a low proportion (5 per cent in the case of developed countries and 10 per cent in the case of developing countries) of the value of production of individual products or, in the case of non-product-specific support, the value of total agricultural production.

The Total AMS covers all support provided on either a product-specific or non-product-specific basis that does not qualify for exemption and is to be reduced by 20 per cent (13.3 per cent for developing countries with no reduction for least-developed countries) during the implementation period.

Members are required to reduce the value of mainly direct export subsidies to a level 36 per cent below the 1986-90 base period level over the six-year implementation period, and the quantity of subsidised exports by 21 per cent over the same period. In the case of developing countries, the reductions are two-thirds those of developed countries over a ten-year period (with no reductions applying to the least-developed countries) and subject to certain conditions, there are no commitments on subsidies to reduce the costs of marketing exports of agricultural products or internal transport and freight charges on export shipments. Where subsidised exports have increased since the 1986-90 base period, 1991-92 may be used, in certain circumstances, as the beginning point of reductions although the end-point remains that based on the 1986-90 base period level. The Agreement on Agriculture provides for some limited flexibility between years in terms of export subsidy reduction commitments and contains provisions aimed at preventing the circumvention of the export subsidy commitments and sets out criteria for food aid donations and the use of export credits.

Peace provisions within the agreement include: an understanding that certain actions available under the Subsidies Agreement will not be applied with respect to green box policies and domestic support and export subsidies maintained in conformity with commitments; an understanding that due restraint will be used in the application of countervailing duty rights under the General Agreement; and setting out limits in terms of the applicability of nullification or impairment actions. These peace provisions will apply for a period of 9 years.

The agreement sets up a committee that will monitor the implementation of commitments, and also monitor the follow-up to the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries.

The package is conceived as part of a continuing process with the long-term objective of securing substantial progressive reductions in support and protection. In this light, it calls for further negotiations in the fifth year of implementation which, along with an assessment of the first five years, would take into account non-trade concerns, special and differential treatment for developing countries, the objective to establish a fair and market-oriented agricultural trading system and other concerns and objectives noted in the preamble to the agreement.