What are the different Domestic support or

subsidies to agriculture under WTO?

The WTO’s Agreement on Agriculture (AoA) classifies
policies for agriculture into three: tariff (market
access), domestic support (domestic subsidies) and
export subsidies. But the most controversial as well as
the important one is the set of domestic support
measures for agriculture. These domestic support
measures are nothing but subsidies given by the
member countries to their agricultural sector.
https://www.indianeconomy.net/splclassroom/what-
are-the-different-domestic-support-or-subsidies-to-
agriculture-under-wto/
• Trade distorting subsidies are defined by the WTO that subsidies that affect trade severely.
• E.g agriculture subsidies whose main intention is providing food security and livinghood security to the poor
consumers and farmers. Which is further classified in three categories.
• Amber box-which affect the trade most.Upper cap for developing countries 10%. and for developed countries it is
5% of production cost of agricultural produce.
• Blue box-moderate severe-maximum limit is 8% for developing countries.
• Green box-Which practically did not affect trade at all. It generally applied on agricultural development and
environmental sustainability and policies.
• Money which a country gives to farmers in order to buy grains above market price is also comes under Amber box
catagory.Generally developing countries gives this kind of price to support farmers to buy crops at minimum
support price.They always oppose the consideration of this kind of activities under umbrella of amber box.Because
they did not consider it as subsidy.
• WTO tends to penalizes countries who break above norms.
• Developed contries always supported trade facilation and custom rules harmonigation disscussions at WTO but
strongly opposes agricultural subsidies under amber box.
• Because of this indifference future comodity market is highly speculative and volatile, prices of commodities not
reflect actual supply and demand.This harm poor farmer as they do not get the benefits of international price rise
but conversely looses when market flooded with imported agricultural produce when international price fall and
sometimes poor consumer have to pay more in there domestic market.
• Developing countries always negotiate with WTO regarding its policies and actions which is based on average
international market price calculated on old 1986–88 level.
 What are domestic supports? How
are they classified?
• Domestic supports are subsidies given by member countries to promote their
agricultural sector. Different types of subsidies are given to support the agricultural
activities –including input subsidies, subsidies for R&D, subsidies for food security
etc. The AoA classifies domestic support into trade distorting (reducible or to be
reduced) and non-distorting (which are non-reducible or need not be reduced)
categories. For trade distorting type of subsidies, the WTO sets limit beyond which
members can’t give support (de minimis box).
• Of the three clauses of AoA, domestic support is the most important one because
domestic supports or subsidies are the most actively used set of policy instruments
by countries for promoting their agricultural sector. Simultaneously, it is the
controversial part of the AoA as several countries extend high level of subsidies to
their domestic agriculture sector.
• Often domestic support related issues are a cause for conflict at various Ministerial
Conferences. Given the diverse feature of different agricultural systems and import
and export status of the member countries, the domestic support measures under
AoA have divided the WTO members into different pressure groups.
Please also explain what the WTO rules stipulate
concerning subsidies for agriculture
 Different types of subsidies
• The Agreement on Agriculture classifies domestic subsidies into
different types; under various boxes with assigned colours– Green
Box, Blue Box and AMS (Amber Box). This classification is based
upon their effects on trade (whether they distort trade or not). The
colour of the boxes is quite symbolic as in traffic lights: green
(permitted), amber (slow down — i.e. be reduced) and a red box
(prohibited). Colors symbolically indicate whether they are
permissible or not. The AoA signed at Uruguay has no red box. But
subsidies above the reduction commitment levels in the AMS are
often expressed as red box.
• The AoA instructs member countries to reduce trade distorting
domestic supports. As indicated, trade distorting domestic support
are those which influence price and production. Though the
prominent boxes are three; a broad classification based upon all
type of specific exemption categories will make them five:
 Different types of subsidies
• (a) Aggregate Measurement of Support (AMS) or Amber box which
includes product specific and non-product specific support
• (b) Green box support
• (c) Blue box support
• (d) De minimus support and
• (e) Special and differential (S&DT) treatment box.
• The amber box is directly linked to production and prices and hence
is considered to be trade distorting.
• Blue box is production limiting programs that may not distort trade.
The green box doesn’t distort trade or may cause only minimum
distortion. Out of these domestic support measures, WTO
agreement requires reduction (nonexempt/not
permissible/reducible) only in AMS (amber box), whereas, support
under all other heads is exempted (permissible).
 1. Green Box
• Green Box is domestic support measures that doesn’t cause trade distortion or at
most causes minimal distortion. Hence they don’t have any reduction
commitments (non-reducible and exempt). These subsidies are government
funded without any price support to crops. They are implemented as programmes
aimed at income support to farmers without influencing (decoupled) the current
level of production and prices. Green box subsidies are therefore allowed without
limits provided they comply with relevant criteria.
• The ‘green box’ measures are large in number. They comprise of two support
groups. The first involves public services programmes (for example, research,
training, marketing, promotion, infrastructure, domestic food aid or public food
security stocks). The second involves direct payments to producers which are
fully decoupled from production. These mainly involve income guarantee and
security programmes (natural disasters, state financial contributions to crop
insurance, etc.); programmes aimed at adjusting structures and environmental
protection programmes, regional development programmes.
 2. Blue Box
• Blue box supports are subsidies that are tied to
programmes that limit production. Hence it is an
exemption to the general rule related to
agricultural support. The Blue box subsidies aim
to limit production by imposing production
quotas or requiring farmers to set aside part of
their land. It covers payments directly linked to
acreage or animal numbers (reduction). The blue
box measures are exempt from reduction
commitments.
 3. AMS (Aggregate Measurement of
Support)
• The AMS represents trade distorting domestic support measures. It is
referred as the “amber box” in the Agreement on Agriculture.
• The AMS means annual level of support (subsidies) expressed in monetary
terms, provided for an agricultural product in favour of
the producers (product specific) of the basic agricultural product and non-
product specific support provided in favour of agricultural producers in
general.
• The Aggregate Measurement of Support (AMS) consists of two parts—
product-specific subsidies and non-product specific subsidies. Product-
specific subsidy refers to the total level of support provided for each
individual agricultural commodity. Non-product specific subsidy, on the
other hand, refers to the total level of support to the agricultural sector as
a whole, i.e., subsidies on inputs such as fertilizers, electricity, irrigation,
seeds, credit etc. Usually, these non-product subsidies are given to all
crops.
• In India, the price support given in the form of Minimum Support Prices is
an example for AMS.
 4. Special and Differential Treatment
Box (S&DT)
• WTO gives special concessions to the developing
countries under the S &DT box given the backwardness
of their agricultural sector. The S&DT measures
generally comprises of (i) investment subsidies like
tractors and pump sets to farmers (ii) agricultural
input services like fertilizers to farmers. These subsidies
should be provided only to low income and resource
poor producers (or poor farmers) in developing
countries. Domestic support to producers in
developing country members to encourage
diversification from illicit narcotic crops is also qualified
under S&D treatment box.
 5. De-minimis support
• De minimis support indicate the minimum
level of trade distorting (AMS) subsidies that
can be given by a country to its agricultural
sector. This de minimis subsidy is expressed as
percentage of the country’s agricultural
GDP. The de minimis level is 5 per cent of
agricultural GDP for developed countries
whereas for the developing countries
including India, the de minimis ceiling is 10 per
cent.
 How can governments protect their domestic agricultural markets?
In how far should national governments have the right to protect
domestic farming?

Allowed
• tariffs (“ordinary customs duties”) within the agreed (and legally
bound) ceilings
• temporary tariff increases as a “special safeguard” where the right
has been reserved
• “other duties and charges” up to maximums also listed as binding
commitments
• measures that are allowed under other agreements such as:
– general safeguards
– anti-dumping measures
– regulations on food safety and animal and plant health (sanitary and
phytosanitary measures)
– other product standards, regulations and labelling requirements
(technical barriers to trade).
https://www.wto.org/english/res_e/books
p_e/agric_agreement_series_2.pdf
Not allowed
• tariffs and other duties and charges exceeding the legally agreed
maximums
• quotas other than tariff quotas (lower tariffs on quantities inside the
quotas than outside)
• import bans
• import duties that are not fixed (“variable levies”)
• minimum import prices
• discretionary import licensing
• voluntary export restraints (usually bilateral agreements between
importers and exporters)
• other similar measures unless listed as allowed. See more details in
the section on market access above.
• Governments usually have three reasons for
• supporting and protecting their farmers, even
• if this distorts agricultural trade:
• • food security: to ensure that the food
• produced is adequate to supply a share
• of the country’s needs
• • to support farmers and shield them from
• the uncertainty inherent in agricultural
• markets (for example, harvests depend
• on the weather)
• • “non-trade concerns”: to meet objectives
• other than trade (such as rural development
• or protecting the environment).