Concepts in AOA

8/3/2019 Concepts in AOA

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Concepts In AOA

Very important:


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objective The objective of the Agriculture

Agreement is to reform trade in the

sector and to make policies moremarket-oriented.

This would improve predictability andsecurity for importing and exportingcountries alike.


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Contd. The agreement does allow

governments to support their rural

economies, but preferably through

policies that cause less distortion to

trade.


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The new rules and commitments

apply to: Market access- various trade restrictions

confronting imports

Domestic support- subsidies and otherprogrammes, including those that raise or

guarantee farm gate prices and farmers

income.

Export subsidies-and other methods used to

make exports artificially competitive.


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A tariff-quota


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TQRs

Imports entering under the tariff-quota (up to1,000 tons) are generally charged 10%.

Imports entering outside the tariff-quota arecharged 80%. Under the Uruguay Roundagreement, the 1,000 tons would be based onactual imports in the base period or anagreed minimum access formula.

Tariff quotas are also called tariff-ratequotas.


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WTO terminology

In WTO terminology, subsidies in

general are identified by boxes which

are given the colours of traffic lights:

green (permitted), amber (slow down

i.e. be reduced), red (forbidden).


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Contd. The Agriculture Agreement has no red

box, although domestic support

exceeding the reduction commitmentlevels in the amber box is prohibited;and there is a blue box for subsidiesthat are tied to programmes that limit

production. There are also exemptionsfor developing countries


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Amber Box All domestic

support measures

considered todistort production

and trade (with

some exceptions)

fall into the amberbox


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Green Box

In order to qualify,

green box subsidies

must not distort trade,or at most cause

minimal distortion They

have to be government-

funded (not by charging

consumers higherprices) and must not

involve price support.


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Blue

Box

Are certain direct paymentsto farmers where the farmersare required to limit

production (sometimescalled blue box measures),certain governmentassistance programmes toencourage agricultural andrural development indeveloping countries, andother support on a smallscale


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The Sanitary and Phytosanitary

Measures Agreement

It allows governments to act on trade

in order to protect human, animal or

plant life or health, provided they donot discriminate or use this as

disguised protectionism


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What is distortion?

Trade is distorted if prices are higher or

lower than normal, and if quantities

produced, bought, and sold are alsohigher or lower than normal i.e. than

the levels that would usually exist in a

competitive market.


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Contd. For example, import barriers and domestic

subsidies can make crops more expensiveon a countrys internal market. The higherprices can encourage over-production.

If the surplus is to be sold on world markets,where prices are lower, then exportsubsidies are needed. As a result, the

subsidizing countries can be producing andexporting considerably more than theynormally would.


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Reasons to support agriculture

Governments usually give three reasons for

supporting and protecting their farmers,

even if this distorts agricultural trade: to make sure that enough food is produced

to meet the countrys needs

to shield farmers from the effects of the

weather and swings in world prices

to preserve rural society.

Concepts in AOA

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