America and Australia have accused India of giving subsidies to sugarcane farmers much more than the limits prescribed in global trade norms. Both countries told WTO that they estimate that in the period 2018-19 to 2021-22, New Delhi provided sugarcane subsidies between 91-100% which was “significantly above the prescribed limit” at 10% of the value.
WTO’s Agreement on Agriculture
- The Agreement on Agriculture (AoA) is an international treaty established by the World Trade Organization (WTO).
- It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) and entered into force with the establishment of the WTO on 1st January 1995.
Objective
- AoA is aimed to remove trade barriers and to promote transparent market access and integration of global markets.
- The AoA aims to establish a fair and market-oriented agricultural trading system.
- It sets out rules applicable to all WTO members to provide for substantial progressive reductions in agricultural support and protection in their country.
3 Pillars of AoA
- Domestic Support: It calls for reduction in domestic subsidies that distorts free trade and fair price.
- Under this provision, the Aggregate Measurement of Support (AMS) is to be reduced by 20% over a period of 6 years by developed countries and 13% over a period of 10 years by developing countries.
- Under this, subsidies are categorised into: Blue Box, Green Box and Amber Box subsidies.
- Market Access: Market access for goods in the WTO means the conditions, tariff and non-tariff measures, agreed by members for the entry of specific goods into their markets.
- Market access requires that tariffs fixed (like custom duties) by individual countries be cut progressively to allow free trade. It also required countries to remove non-tariff barriers and convert them to Tariff duties.
- Export Subsidy: Subsidy on inputs of agriculture, making export cheaper or other incentives for exports such as import duty remission etc are included under export subsidies.
- These can result in dumping of highly subsidised (and cheap) products in other countries and damage the domestic agriculture sector of other countries.
Allegations against India Regarding Violating AoA
Background of the Incident
- This allegation follows a previous one from 2019 when Brazil, Australia, and Guatemala initiated a dispute against India at the WTO, alleging that India’s sugar subsidies are inconsistent with global trade rules.
- Consequently, a WTO panel in 2021 confirmed the claims, however, India appealed the findings and prevented the panel’s report from being adopted by the WTO’s Dispute Settlement Body.
Complaint Against India
- The US and Australia have claimed that India’s domestic support measures are inconsistent with various articles of the WTO’s Agreement on Agriculture.
- For the Period 2018-2022, India’s Market Price Support constituted over 90% of the value of production of sugar every year against the permitted level of 10% as per WTO’s AoA.
- The US and Australia also highlighted a crucial absence in India’s reporting claiming that India hadn’t included sugarcane or its derivatives in any domestic support notifications since the marketing year 1995-96.
- This omission has left the WTO without adequate information to assess India’s compliance with global trade regulations.
- Since the WTO’s Appellate Body is currently inactive due to the lack of appointed members, no appeals can be decided on until it becomes operational once more.