Model Answer
0 min readIntroduction
The Agreement on Agriculture (AoA), a key component of the Uruguay Round of WTO negotiations concluded in 1994, aimed to reform world agricultural trade by creating a fairer and more competitive system. Prior to the AoA, agricultural trade was heavily distorted by government interventions. The agreement established three ‘pillars’ of reform: market access, domestic support, and export subsidies. For India, a predominantly agrarian economy, the AoA presented both opportunities and challenges. While aiming for a level playing field, the implementation of the AoA has had a complex and often debated impact on Indian agriculture, affecting its production, trade, and farmer livelihoods.
The Three Pillars of the AoA and their Impact on Indian Agriculture
The AoA’s impact on Indian agriculture can be understood by examining each of its three pillars:
1. Market Access
This pillar focused on converting non-tariff barriers (NTBs) like import quotas into tariff equivalents (tariffs). India was required to reduce its average tariffs on agricultural products from over 60% in 1995 to around 36% by 2005. While this opened up the Indian market to cheaper agricultural imports, it also exposed Indian farmers to increased competition, particularly from subsidized agricultural products from developed countries. The influx of palm oil from Malaysia and Indonesia is a prime example, impacting domestic oilseed farmers. However, the Special Safeguard Mechanism (SSM), intended to protect domestic producers from import surges, has been difficult to invoke effectively due to stringent conditions.
2. Domestic Support
The AoA categorized domestic support into ‘Green Box’, ‘Amber Box’, and ‘Blue Box’ subsidies. ‘Green Box’ subsidies (decoupled from production) were largely permissible, while ‘Amber Box’ subsidies (directly linked to production) were subject to reduction commitments. India primarily relies on ‘Green Box’ subsidies like infrastructure development and research. However, the AoA’s definition of ‘Green Box’ subsidies has been criticized for being narrow, limiting the scope for providing effective support to Indian farmers. The Public Distribution System (PDS), while crucial for food security, has faced scrutiny under WTO rules regarding its potential trade-distorting effects. According to data from the Department of Food and Public Distribution (as of 2023 knowledge cutoff), India’s food subsidy bill remains substantial, raising concerns about WTO compliance.
3. Export Subsidies
The AoA aimed to reduce export subsidies, which distort global trade. Developed countries, historically large users of export subsidies, were required to reduce them. This pillar had a relatively limited direct impact on India, as India is not a major exporter of subsidized agricultural products. However, the reduction in export subsidies by developed countries did create some opportunities for Indian exporters to access new markets. The cotton sector, for instance, benefited from reduced export subsidies offered by the US and EU, allowing Indian cotton exports to become more competitive.
Effectiveness of the AoA on Indian Agriculture: A Mixed Record
The overall effectiveness of the AoA on Indian agriculture is debatable. While it has encouraged some degree of liberalization and market integration, it has also presented significant challenges:
- Increased Competition: Indian farmers faced increased competition from subsidized agricultural products from developed countries.
- Limited Policy Space: The AoA’s rules limited India’s ability to provide effective support to its farmers.
- Distorted Trade: Despite reductions, developed countries continue to provide substantial domestic support, distorting global agricultural trade.
- Food Security Concerns: Concerns remain about the impact of AoA rules on India’s food security programs, particularly the PDS.
| Pillar | Impact on India |
|---|---|
| Market Access | Increased import competition, particularly in oilseeds; Difficulties in invoking SSM. |
| Domestic Support | Limited policy space for providing effective subsidies; Scrutiny of PDS under WTO rules. |
| Export Subsidies | Limited direct impact; Some benefits for Indian exporters due to reductions in developed countries. |
Conclusion
The Agreement on Agriculture has had a mixed impact on Indian agriculture. While it has promoted some liberalization, its inherent biases and limitations have hindered the full realization of its potential benefits for India. The continued presence of trade-distorting subsidies in developed countries remains a major concern. Moving forward, India needs to advocate for greater equity and fairness in the global agricultural trading system, pushing for reforms that address the imbalances created by the AoA and safeguard the interests of its farmers and ensure food security. Strengthening domestic agricultural infrastructure, promoting diversification, and investing in research and development are crucial steps to enhance the competitiveness of Indian agriculture in the global market.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.