Agreement On Agriculture

The Agreement on Agriculture (AoA) is a multilateral treaty administered by the World Trade Organization (WTO), designed to reform international agricultural trade by reducing trade-distorting subsidies and improving market access. Negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), it came into effect on 1 January 1995 with the establishment of the WTO. The AoA marked a significant shift in global agricultural governance by bringing agriculture firmly within the rules-based trading system.
The agreement introduced binding commitments for WTO members across three core areas—domestic support, market access, and export subsidies—thereby attempting to create a more predictable and competitive global agricultural trading environment. Despite this ambition, the AoA has remained politically contentious, particularly between developed and developing countries, due to concerns about fairness, development impacts, and the continued prevalence of high agricultural subsidies in advanced economies.

Origins and Historical Development

The origins of agricultural trade reform can be traced to international economic debates of the late 1950s. In 1958, the Haberler Report, commissioned by the GATT Contracting Parties, examined agricultural protectionism and its impact on global price instability and export earnings, especially in developing economies. The report advocated the replacement of price supports with direct supplementary payments that were decoupled from production, anticipating what later became known as green box support.
By the 1980s, agricultural protection—particularly in industrialised economies—had led to structural surpluses and depressed global prices through subsidised exports. These distortions imposed fiscal burdens, generated trade tensions, and contributed to calls for wider economic liberalisation as the global economy entered recession. The Uruguay Round negotiations, launched in 1986, incorporated agriculture as part of a ‘grand bargain’ that also included services, textiles, and intellectual property, thereby securing the participation of developing countries.
Resistance from farm lobbies in advanced economies was significant. To overcome this, negotiators proposed differentiating between types of subsidies based on their trade-distorting effects, allowing certain forms of domestic support to continue under specific conditions. This compromise, championed initially by the United States and later supported by the European Union, laid the groundwork for the AoA’s subsidy classification system.

Structural Framework of the Agreement

The AoA is built upon three pillars designed to discipline agricultural policy and harmonise global trading conditions.

Domestic Support

Domestic support comprises government measures that assist agricultural producers. The AoA classifies these measures into categories—commonly known as boxes—based on their effect on production and trade:

• Amber Box: Measures considered the most trade-distorting because they are linked directly to production levels. These are subject to reduction commitments through the Aggregate Measurement of Support (AMS).
• Blue Box: Production-limiting programmes that may still distort trade but are exempt from reduction obligations as long as they restrict output.
• Green Box: Support deemed minimally trade-distorting. This includes environmental payments, research funding, and fully decoupled income support. These subsidies must be government-funded and must not involve consumer transfers or price support.

Annex 2 of the AoA sets detailed criteria for green box programmes, with a central requirement that such support cause no more than minimal distortion of production or trade.
While the framework was intended to reduce distortions, the domestic support pillar has allowed developed economies, particularly the EU and the United States, to maintain annual subsidy levels exceeding hundreds of billions of dollars. A significant share of this support accrues to large agribusinesses rather than small farmers, contributing to a structural imbalance in global agricultural markets. Critics argue that subsidised overproduction results in dumping of commodities at below-cost prices, undermining farmers in developing countries.

Market Access

Market access concerns tariff and non-tariff barriers that restrict agricultural imports. Prior to the AoA, many countries depended heavily on non-tariff barriers, including quotas and variable levies.
Key provisions under the AoA include:

• Tariffication: Conversion of all non-tariff barriers into tariffs to create transparency in protection levels.
• Tariff Reduction Commitments:
  • Developed countries: average tariff reduction of 36 per cent, with a minimum of 15 per cent per tariff line over six years.
  • Developing countries: average tariff reduction of 24 per cent, with a minimum of 10 per cent per tariff line over ten years.
• Least Developed Countries (LDCs): Exempt from reduction commitments but required to bind tariffs to establish legal ceilings.

These commitments were intended to improve predictability and enhance market opportunities for exporters, though implementation outcomes remain uneven across regions.

Export Subsidies

Export subsidies, considered highly trade-distorting, formed the third pillar of the AoA. The agreement required:

• Developed countries to reduce export subsidy expenditure by 36 per cent and subsidised export volumes by 21 per cent over six years.
• Developing countries to reduce these by 24 per cent and 14 per cent respectively over ten years.

Subsequent WTO negotiations, including the 2005 Hong Kong Ministerial Declaration, committed members to eliminate export subsidies entirely, though progress varied by country and product.

Criticisms and Debates

The AoA has attracted sustained criticism from civil society, academics, and developing countries.
Major concerns include:

• Asymmetry in liberalisation: While developing countries reduced tariffs, developed economies maintained high domestic support through green and blue box subsidies.
• Shift toward green box subsidies: Although designed to be minimally trade-distorting, several studies argue that green box payments can significantly influence production decisions, land values, and competitive advantages.
• Concentration of benefits: Within developed countries, support disproportionately benefits large producers.
• Environmental consequences: Certain subsidies may encourage environmentally harmful practices despite being categorised as non-distorting.

Analysts note that overall subsidy levels in OECD countries increased after the Uruguay Round as governments shifted from amber to green box support rather than reducing total assistance.

Proposals for Reforms and Negotiating Dynamics

Developing countries, particularly during the Doha Development Round, have advocated stronger disciplines on developed country subsidies. In 2017, India and China jointly proposed the elimination of the most trade-distorting subsidies (AMS/amber box) in developed economies as a prerequisite for broader domestic support reforms.
Two mechanisms have been central to discussions on safeguarding developing-country interests:

Special Safeguard Mechanism (SSM)

The SSM is designed to allow developing countries to impose temporary additional duties in response to sudden import surges or significant price depressions. This aims to protect vulnerable agricultural sectors characterised by smallholder farmers and limited rural employment alternatives.
Debate around the SSM remains contentious:

• Some members argue it could be overused and impede trade.
• The G33 coalition contends that tariff breaches must be permitted for the mechanism to be effective.
• Simulation studies have shown varied effects on global trade, with implications for both exporters and import-dependent economies.

Special Products (SPs)

Special Products refer to agricultural goods that developing countries may treat differently based on food security, livelihood security, or rural development concerns. These products would benefit from flexible tariff commitments, aiming to shield sensitive sectors from adverse liberalisation impacts.