World Trade Organization (WTO) Food Subsidies
Recently, India has defended its Minimum Support Price (MSP) system at the World Trade Organization (WTO) for procurement of domestic food grains.
India’s Public Stock Holding (PSH) program was challenged at the WTO by major food grain exporters, including the US and Canada.
This challenge was given on the grounds that India provides excessive subsidies in this program (especially for rice).
India was the first country to use the Bali Peace Clause.
Under this, no country will be legally prohibited from operating food security programs even if the subsidy violates the limits specified in the Agreement on Agriculture (AoA) of the WTO.
India has informed the WTO that its rice production in 2019-20 was valued at $46.07 billion, while it subsidized $6.31 billion, or about 13.7 percent, as against the permitted 10 percent.
Agreement on Agriculture (AoA) and Peace Clause
- Under market access conditions, both developed and developing countries were required to convert all non-tariff barriers into tariff barriers.
- Subsidies in domestic support are classified into different colored ‘boxes’. This classification is based on the effects of subsidies on production and trade.
- Export subsidies and other methods are used to make exports artificially competitive.
- The AoA contains a due restraint or ‘peace clause’. It regulates the use of other WTO agreements on subsidies in relation to agricultural products.
3 Pillars of AoA:
- Green Box: Subsidies that do not distort trade, or cause minimal distortions. There is no cap on this subsidy.
- Amber Box: This is the widest range of subsidies. It is limited to 5% (10% for developing countries) of agricultural production.
- Blue Box: Wider range of subsidies are permitted, but should be designed to create the least trade distortions. There is no limit on subsidy.
Source – The Hindu
