Amber Box Subsidies: Issues Around AMS and Recent India-China Proposal
Recently, in a joint proposal submitted to the World Trade Organisation (WTO), India and China have called for elimination of trade-distorting farm subsidies given by developed countries as a prerequisite for consideration of other reforms in domestic support negotiations. This proposal made by India and China is viewed as important in view of the ongoing negotiations for the upcoming 11th Ministerial Conference (MC) of the WTO, which has been scheduled to be held in Buenos Aires in December, 2017. The ministerial conference is the highest decision making body of the WTO. It meets after a gap of two years. In WTO parlance, the subsidies mentioned here are termed as ‘Amber Box’ subsidies or ‘Aggregate Measurement of Support (AMS)’.
Understanding WTO subsidies
In WTO terminology, the subsides provided are identified with different colour boxes viz. Green Box Subsidies, Amber box Subsidies and Blue box subsidies.
Green box subsidies
The subsidies which don’t distort the trade are placed in Green Box subsidies. Examples of such subsidies include those given on research funding; environment protection; domestic food aid; disaster relief; farmer training programmes; pest and disease control programmes etc. The WTO pacts don’t place any limit on such subsidies so any country can provide such subsidies as much as it wants. However, these subsidies should be government funded and must not involve price support.
Amber Box Subsidies
Amber box subsidies are those subsidies which distort the international trade by making products of a particular country cheaper in comparison to same product in another country. Examples of such subsidies include input subsidies such as electricity, seeds, fertilizers, irrigation, minimum support prices etc.
Blue Box Subsidies
Blue box subsidies are also similar to amber box but they tend to limit the production. For example, subsidy on minimum support price will increase with production, so it would be placed in amber box; but at the same time, subsidy fixed on area of farms will not increase with production – so would be placed in amber box. Thus, a subsidy that would be placed in amber box normally would be placed in blue box if that support also requires to limit their production.
Issues around Aggregate Measurement of Support (AMS)
Under the WTO norms, the developed countries are allowed to provide amber box subsidies up to 5% of agriculture production in 1986-88, while the developing countries are allowed to provide 10% of agriculture production in 1986-88. However, the aggregate amount of such subsidies provided by developed countries is much higher than developing countries mainly because of two reasons. Firstly, the developed countries have been using Green Box subsidies (no limits) to such an extent that it artificially increases the production and effectively distorting trade. Secondly, most developing countries such as India, China and others exhaust their resources before reaching out what has been prescribed under WTO as de minimus. Thus, the recent India-China document calls the AMS as trade distorting and calls for its elimination. They want to discuss the issue of huge trade distorting farm subsidies on priority basis. India is unhappy that the issue of reduction in the huge subsidies given by the developed countries, which was a clear mandate of the Doha Round negotiations are not even a matter of discussion in the recent meetings.
