An international agreement of the World Trade Organization is the Agreement on Agriculture (AoA). It was negotiated as part of the General Agreement on Tariffs and Trade’s Uruguay Round and went into effect on January 1, 1995, the same day the World Trade Organization was founded. The Agreement’s main goals are to improve agriculture policy’s guiding principles and practices as well as to lessen trade distortions brought on by domestic support and agricultural protectionism.
History
In the late 1950s, the twelfth session of the GATT Contracting Parties appointed a Panel of Experts. They were to investigate the impact of agricultural protectionism, fluctuating commodity prices, and the failure of export earnings to keep up with import demand in developing countries. This was the beginning of the idea of replacing agricultural price support with direct payments to farmers decoupled from production. Before discussions on “green box” subsidies, the 1958 Report emphasized the significance of minimizing the impact of agricultural subsidies on competitiveness. It proposed substituting price support with direct extra payments unrelated to production.
Government subsidies to farmers in industrialized nations by the 1980s had led to significant crop surpluses that were sold on the international market through export subsidies, driving down food costs. Due to rising domestic spending and lower import duty revenue, the cost of protective measures increased. Calls for a fresh round of international trade negotiations emerged as the world economy entered a cycle of recession. The round would expand markets for high-tech products and services, ultimately leading to much-needed efficiency gains. Agriculture, textiles, and clothes were also added to the list of disciplines to engage developing nations.
Pillars
Three pillars make up the Agreement on Agriculture: domestic support, market access, and export subsidies.
Domestic support
Domestic support is the first tenet of the Agreement on Agriculture. The Agreement categorizes domestic support into two groups: minimally or not at all trade-distorting and non-trade-distorting. The WTO Agreement on Agriculture, negotiated during the Uruguay Round, categorizes subsidies into three categories based on how they affect production and trade: Amber, which is most closely related to production levels; Blue, which refers to programs that limit production but still distort trade; Green, which refers to the least amount of distortion. Payments in the green box were not subject to the reduction pledges that applied to payments in the amber box. To be given through a government-funded program that does not include transfers from consumers or price assistance to producers. All must nevertheless adhere to the fundamental condition that they, not more than minimally disrupt trade or production.
Market access
Market access is the term used to describe the removal of tariffs or other trade restrictions by WTO members. The 1995 Agreement on Agriculture includes tariff reductions of at least 15% per tariff line over the following six years, with an average decrease of 36% for industrialized countries. For developing nations, an average reduction of 24% with a minimum per-tariff line decrease of 10% over the next ten years. The least developed nations (LDCs) were spared from tariff reductions, but they were required to bind their tariffs, setting a limit that could not be raised in the future.
Export subsidies
The third pillar is export subsidies. According to the 1995 Agreement on Agriculture, wealthy nations had to cut export subsidies by at least 36% (by value) or 21% (by volume) for six years. The accord stipulated cutbacks for poor countries of 24 percent (by value) and 14 percent (by volume) over 10 years.
