The Agreement on Agriculture (AOA), 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 in 1995. It is the first international treaty to recognise a close link between domestic measures and trade policies. One of the key objectives of AoA has been to reduce domestic support, but leaving scope for governments to design domestic agricultural policies.

Types of Domestic Support Measures under AoA

Amber Box: (Production or trade distorting measures)

• Combines price support with aid coupled to production.
• Allows ‘de minimis’ exemptions i.e. no reduction commitment if support < 5% (developed countries) or 10% (developing countries) of the total value of production.
• Example: Product specific subsidy such as MSP and Non-Product specific subsidy such as that on fertilizer and electricity.

Blue Box: (‘Amber box with conditions”)

• Any support that would normally be in the amber box, is placed in the blue box if the support also requires farmers to limit production, by imposing production quotas or requiring farmers to set aside, a part of their land.

Green Box: (measures with no or minimal trade distortive effects)

• Comprises two support measures ie. involving public services programmes (eg. domestic food aid, research and training) and direct payments to producers which are fully ‘decoupled’ from production (e.g. contribution to crop insurance).

Development Box: [S&DT (Special and Differential Treatment) box]

• Additional support available only for developing and low income countries under Article 6.2 of AoA.
• Includes measures of assistance, whether direct or indirect, designed to encourage agricultural and rural development.

An important provision of the Agriculture Agreement is Due Restraint or ‘Peace Clause’, which was adopted in the 2013 Bali Conference and reaffirmed in the 2015 Nairobi meet by making it perpetual (until a permanent solution is mutually reached). It holds that no member can drag any developing country to the Dispute Settlement Mechanism of WTO for violation of De- minimis limits in AoA, provided that the concerned developing country is:

• Paying subsidies for staple food crops for public stockholding programs and food security purposes.
• Providing annual information of its food security program to WTO.

Issues surrounding Peace Clause

• It does not have a legal backing. Therefore developing countries, especially India, are rooting for a permanent solution.
• The clause requires full disclosure of MSPs and annual procurement for food security programmes, which may lead to interference of other countries in one country’s domestic matters.
• One major bone of contention is the different ‘methodology’ adopted for measurement of subsidies. Countries like India and China calculate ‘eligible production’ as procurement by the government, while the USA wants it to be calculated on ‘total production’ basis.
• Another issue is that the de minimis level has been set at around the 1986 level, which has become redundant and doesn’t take inflation into account, thus is discriminatory against the developing countries.
• Further, the countries that exceed the de-minimis limit have to establish that the subsidies are not trade distorting.

Recently, India has invoked the Peace Clause for exceeding the 10% ceiling on the value of production for rice farmers, marking the first time any country has used this clause.