India had signed Agreement on Agriculture of WTO expecting that it would:
- Reduce the domestic support given by OECD countries to their respective agricultural sectors
- increase the prices of agricultural products in international markets
- Improve export prospects for India.
But, to its surprise, the agricultural prices went down, putting agricultural countries like India at disadvantage.
The agreement is heavily loaded in favour of developed countries due to following reasons:
- Developed countries have put their agricultural subsidies under Green Box. Highest green box support to agriculture is provided by USA which spends more than third of its GDP from agriculture on this support, while India provides support of only 2.34% of its GDP from agriculture in 1995. Investment in agriculture has been between 8% to 12% of agri-GDP.
- The developed countries are not ready to admit that there exists variation in capacity and structural composition of the economies of developed and developing countries. A developed country might need only 1-2% of its GDP to subsidise 50% of its agriculture. Hence, distortions arising out of Green Box subsidies are significant but are inadequately addressed.
- Developed countries were required to reduce their volume of subsidised export by 21% and budgetary allocation for export subsidies by 36%. But, it favoured the developed countries only, as they were already providing such huge subsidies over their exports that even this much reduction are not likely to make any impact.
- Post Uruguay (1994-98), the export of agricultural products from Asia actually declined steeply to 0.5% from 8.2% in 1990-94. For India, the share in 1990-91 was 18.5%, it fell to 2% in 2015-16. Also, because of the high subsidies given by developed countries, the agricultural products sell below the cost of production in international market, and also results in export dumping of products.
- The developed countries also make use of Agreement on Sanitary and Phytosanitary Measure (SPS) and Agreement on Technical Barriers to Trade (TBT) to selectively ward off imports from developing countries by imposing higher standards than those imposed by international bodies.
- Agreement on Sanitary and Phytosanitary (SPS) Measures: 1995, Uruguay Round.It sets out the basic rules for food safety and animal and plant health standards. It allows countries to set their own standards. But it also says regulations must be based on science. They should be applied only to the extent necessary to protect human, animal or plant life or health. And they should not arbitrarily or unjustifiably discriminate between countries where identical or similar conditions prevail.
- Agreement on Technical Barriers to Trade: 1995, Uruguay Round. It aims to ensure that technical regulations, standards, and conformity assessment procedures are non-discriminatory and do not create unnecessary obstacles to trade. At the same time, it recognises WTO members’ right to implement measures to achieve legitimate policy objectives, such as the protection of human health and safety, or protection of the environment. The TBT Agreement strongly encourages members to base their measures on international standards as a means to facilitate trade. Through its transparency provisions, it also aims to create a predictable trading environment.