WTO and India

Agreement on agriculture
The Agreement on Agriculture forms a part of the Final Act of the Uruguay Round of Multilateral Trade Negotiations, which was signed by the member countries in April 1994 at Marrakesh, Morocco and came into force on 1st January, 1995.

AOA :Uruguay Round

India signed the final act of GATT on April 15th,1994 This treaty introduces agricultural trade in the multilateral agreements for the first time. (Multilateral trade agreements are between many nations at one time. For this reason, they are very complicated to negotiate, but are very powerful once all parties sign the agreement. The primary benefit of multilateral agreements is that all nations get treated equally, and so it levels the playing field, especially for poorer nations that are less competitive by nature.

AIM of AOA..contd..
Free agricultural trade from physical control Remove trade distorting practices Facilitate fair and market oriented agricultural trading system But why this was needed????????????

 The root cause of distortion of international trade in agriculture has been the massive domestic subsidies given by the industrialized countries to their agricultural sector over many years. This in turn led to excessive production and its dumping in international markets as well as import restrictions to keep out foreign agricultural products from their domestic markets. Hence, the starting point for the establishment of a fair agricultural trade regime has to be the reduction of domestic production subsidies given by industrialised countries, reduction in the volume of subsidised exports and minimum market access opportunities for agricultural producers world-wide.

 The obligations and disciplines incorporated in the Agreement on Agriculture, therefore, relate to (a) market access; (b) domestic subsidy or domestic support; and (c) export subsidy.

 On market access, the Agreement has two basic elements: (i) Tariffication of all non-tariff barriers(NTBs). That is to say, non-tariff barriers such as quantitative restrictions and export and import licensing etc. are to be replaced by tariffs to provide the same level of protection. Tariffs, resulting from this tariffication process together with other tariffs on agricultural products, are to be reduced by a simple average of 36% over 6 years in the case of developed countries and 24% over 10 years in the case of developing countries.

1.Market Access

 With India being under balance of payments cover (which is a GATT-consistent measure), we had not undertaken any commitments with regard to market access and this has been clearly stated in our schedule filed under GATT. The only commitment India has undertaken is to bind its tariffs on primary agricultural products at 100%; processed foods at 150%; and edible oils at 300%.

(ii)The second element relates to setting up of a minimum level for imports of agricultural products by member countries as a share of domestic consumption.

Domestic Support : Agricultural subsidies

Agricultural subsidies are grouped in one of three boxes (green, blue or amber) at the WTO, depending on the degree to which they distort trade. Green box subsidies are permitted because they are deemed to cause minimal distortion, and typically include those to research and development (R&D), environmental protection and animal welfare, nutrition programmes Blue box subsidies are also permitted, but on the condition that they must not lead to increased production.

 Meanwhile, all domestic support considered to distort production and trade (with some exceptions) falls into the amber box, which is defined in Article 6 of the AoA as all forms of domestic support except that placed in the blue and green boxes. Included in the amber box are measures to support prices, and subsidies directly related to production quantities.

 Blue box:It covers payments directly linked to acreage numbers. Countries using these subsidies and there are only a handful say they distort trade less than alternative amber box subsidies. Currently, the only members notifying the WTO that they are using or have used the blue box are: the EU, Iceland, Norway, Japan, the Slovak Republic, Slovenia, and the US (now no longer using the box).

 Whether subsidies deserve to be placed in the green or blue box, rather than the amber box, is sometimes a matter of contention at the WTO. Within the current negotiations, many developing country members have expressed concern over "box-shifting": the movement of subsidies from the amber to the blue box without significant changes in the nature of the subsidy

Indias position
India was required to replace all types of non-tariff barriers by 2005 India used to maintain quantitative restriction on the import of 825 agricultural products It proposed to eliminate quantitative restriction over a seven year period(1997-2003) WTO had said this is a very long period, so India needs to shorten it. Hence by April 2001 India had phased out all restrictions These restrictions have been replaced by tariffs 100%agricultural products,150% processed food and 300% for edible oils

What Does Asian Financial Crisis Mean?

Also called the "Asian Contagion", this was a series of currency devaluations and other events that spread through many Asian markets beginning in the summer of 1997. The currency markets first failed in Thailand as the result of the government's decision to no longer peg the local currency to the U.S. dollar. Currency declines spread rapidly throughout South Asia, in turn causing stock market declines, reduced import revenues and even governmentupheaval. The Asian Financial Crisis was stemmed somewhat by financial intervention from the International Monetary Fund and the World Bank. However, market declines were also felt in the United States, Europe and Russia as the Asian economies slumped. As a result of the crisis, many nations adopted protectionist measures to ensure the stability of their own currency. Often this led to heavy buying of U.S. Treasuries, which are used as a global investment by most of the world's sovereignties.