60 WTO countries support new method on food subsidies

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60 WTO countries support new method on food subsidies

The G-33 including India, the African Group and the ACP (African, Caribbean and Pacific) group have submitted a joint proposal to the WTO. In this, there has been talk of improvement in the method of calculation of food subsidy.

Current Procedure of WTO

  • The WTO mandates that the food subsidy bills of member countries should not exceed the limit of 10 percent of the production value based on the ‘External Reference Period (ERP)’.
  • This 10% limit is known as ‘De minimis’. It means the minimum amount of domestic assistance to be provided under the Agreement on Agriculture.
  • The ‘External Reference Period’ (ERP) is the average value based on the base year 1986-88. The ERP has not been revised for decades. This method has failed to take into account the high inflation levels in developing countries.

These countries have suggested a new method for calculating subsidies:

By computing extreme inflation in the External Reference Price (ERP), or by computing the ERP based on the last five years. It will not add the highest and lowest entry for the respective product.

Domestic support includes an assortment of subsidies. These are classified according to the colors of the traffic lights.

Green-box Subsidies

  • These measures are exempt from deduction commitments. In fact, it can even be extended without any financial limit under the WTO.
  • This applies to both developed and developing member countries. But in the case of developing countries, special treatment is provided with respect to government shareholding programs for food security purposes and subsidized food prices for the urban and rural poor.
  • India’s Public Distribution System-(PDS) does not come under green box.

Amber Box Subsidies

  • All domestic support (with a few exceptions) that are considered to distort production and trade come in an amber box.
  • For example- Minimum Support Price (MSP); sum total of the purchase price and the subsidy on inputs like fertilizers, water, credit, electricity etc.

Blue Box Subsidy

  • It actually has amber box subsidies. But, they limit production. Any such support which is normally in an amber box will be placed in a blue box if such support forces farmers to limit their production.
  • These measures are also exempt from deduction commitments.

Special and Differential Treatment (S&DT)

  • This includes investment subsidies like tractors and pump sets, agricultural input services like fertilizers to farmers, etc.
  • Such subsidies can only be given by developing and low-income countries.

Source – The Hindu

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