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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.
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