State of play - Domestic support

RUN UP TO HONG KONG/ WTO SPEAK: VEENA JHA, trade expert

Domestic support refers to the financial benefits given by governments to their farmers through direct payments, agricultural input subsidies, market price support, decoupled income support, income insurance, payment for relief from natural disaster and structural adjustment assistance.

World Trade Organisation members are negotiating a reduction in the total trade distorting support, including Aggregate Measure of Support, de minimis (the total support) and the Blue Box credits.

Talks are underway to press for clubbing of overall trade-distorting domestic support (OTDS) by developed countries under three bands. A steeper cut for those providing higher support has been sought.

G-20

It wants trade distorting support extended by developed countries to be clubbed into three bands.

It has sought that developed countries reduce the first band, comprising support of over $ 60 billion, by 80 per cent, while the lowest band (up to $10 billion) should be cut 70 per cent.

The middle band of $10-60 billion should be reduced by 75 per cent. The G 20 has said developing countries with no AMS support should be exempted from reductions.

United States

It has suggested four bands and offered to reduce its OTDS by 53 per cent to $22.97 billion. It wants the European Union to decrease its OTDS by 75 per cent and Japan and Canada by 53 per cent.

The US wants the Blue Box support to be capped at 2.5 per cent of the agricultural production, instead of 5 per cent suggested in the WTO's July framework. It has not suggested any changes in the Green Box and is silent on special and differential treatment for developing countries.

European Union

It has suggested three bands and offered to reduce its OTDS by 70 per cent to ¤34.11 billion. It wants the US and Japan to reduce OTDS by 60 per cent and others to cut by 50 per cent. The EU is wiling to review the Green Box criteria and reduce the trade distorting effect. 

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What's at stake? 

We must protect the livelihood interests of small and marginal farmers and get meaningful market access in services and textiles. We must get a definite timeframe for the removal of non-tariff barriers. 

What should Kamal Nath do? 

The limited objective should be to maintain coalitions which promote development objectives.

LEXICON

Green Box: Non-trade distorting support which is permitted without a ceiling. For instance, payments for infrastructure development.

Blue Box: Support linked to production which is subject to production limits. It is seen as minimally trade-distorting. For example, compensation paid to farmers in the US for keeping land fallow.

Amber Box: Trade-distorting support, which is to be reduced. For instance, minimum support price or counter-cyclical payments in the US.

Aggregate Measure of Support: The total domestic support provided for specific and non-specific products.