Economy

Economy a group of more than 80 members of various Organizations which includes the G-33 Group have presented a joint request to the WTO concerning public stock holding that is based on a fair method of calculating subsidy amounts using the current reference price for external markets instead of an old one.

·       Stockholding programs are employed by certain governments to buy, store and distribute food to those who are in need. 

·       Although food security is an appropriate goal of the government, certain programs for stockholding are deemed to cause distortion in trade when they involve buying from farmers at prices set by the government, also known by the term "supported" or "administered" prices. 

·       In 2013, at the Bali Ministerial Conference, ministers were able to agree that they would be able to conclude that, for a period of time that public stockholding programs in the developing world could not be challenged in court even if the agreed limitations for domestic support to trade were violated. 

·       Ministers agreed also to discuss an end-to-end solution to this problem. 

·       A decision on stockholding for public use that was taken during the 2015 Nairobi Ministerial Conference reaffirmed this commitment and called on WTO members to put forth united efforts to find the best solution for the future. 

·       Presently, the public distribution programs from developing countries are included in trading-distorting Amber Box measures that attract reduction commitments from WTO that are limited to 10% of the value of production total in 1986-88 prices. 

Issue? 

·       Based on the current rules in the Agreement on Agriculture (AoA) Subsidies given to farmers, determined as the difference in MSP in comparison to its global price called external Reference Price (ERP), as well as the subsidies on inputs are classified as an aggregate measure of support (AMS). 

·       A major issue lies in the fact that ERP is based on the period from 1986-1988 as the base without making adjustments for inflation.

·       This results in an overinflated ASM. 

·       Amber box subsidies: The WTOs Agreement on Agriculture (AoA) categorizes domestic subsidies or support that are provided by governments to farmers into various categories. 

·       One of the most important types of subsidies or support is called Aggregate measure of Support (AMS). 

·       The AMS symbolizes trade distorting domestic support, and is often referred by the name of "amber box". 

·       The AMS is the annual amount of assistance (subsidies) that are expressed in terms of monetary value, that is provided to agricultural products in favour of producer (product particular) of the primary agricultural product as well as non-product-specific assistance for farmers in general. 

·       The Aggregate Measurement of Support consists of two parts--product-specific subsidies and non-product specific subsidies. 

·       The term "product-specific" subsidy refers to the level of support that is provided to an specific agricultural product. 

·       For instance, wheat AMS is the type of subsidy specific to wheat. 

·       Non-product-specific subsidies is, however is the amount of support provided to the agriculture sector in general, i.e., subsidies for inputs such as fertilizers as well as electricity, irrigation seeds and credit, etc.

·       In general, these non-product subsidies are provided to all kinds of crops. 

·       The subsidy offered through price support for particular products like wheat is determined by taking the difference in the price that is paid to domestic producers at the time of procurement (by the government)and an external fixed value (world market price established by the WTO) of the particular product. 

·       Then, multiplying that gap by the amount of production which is eligible to receive the administered price, you can determine the precise amount of subsidy of the particular product. 

·       If the domestic price is lower than the reference price of the world which is the case, then AMS will be negative for the specific product. 

·       According to WTO rules, AMS is allowed to be granted as much as 10 percent of the countrys GDP from agriculture for developing nations. 

·       However the maximum is 5 percent for countries with an economy that is developed. 

·       This is known as the de Minimis amount of support.

Peace Clause It was ratified in the context of the WHOs Bali Ministerial Meeting in December 2013, which allowed developing countries to exceed the limits of subsidy for food crops, subject to certain conditions being fulfilled in relation to the notification of PSH programs as well as food security.