Abstract:

The possible welfare gains and likely beneficiaries for the facilitation of agricultural world trade formulated by the Agreement on Agriculture remains a matter of debate and concerns. Therefore the impact of the Agreement on Agriculture on production, price structure and trade in agricultural sector needs proper introspection and evaluation from Indian perspectives. The paper attempts to evaluate and analysed the impact of the agricultural reforms brought about by the Agreement on Agriculture on the Indian agricultural economy and its position in world trade.

What is Agreement on Agriculture (AOA):

The Agreement on Agriculture was formed on April 1994 at Marrakesh, Morocco as a part of the final Act of the Uruguay Round of multilateral trade negotiations which came into force on 1st Jan. 1995. This was a result of the long drawn talks on General agreement on Tariffs and Trade (GATT) aimed at opening up of International markets and also to reform world trade which was highly distorted. A major reason for the formation of the Agreement on Agriculture was the need to reduce excessive surplus production in agricultural sector in the global commodity markets during the 1980`s and early 1990`s. This was caused by the rising levels of support and protection in a number of developed countries as some of the largest agricultural exporters competed on the basis of their government`s ability to subsidised production and exports of agriculture while limiting access to their markets to keep out foreign agricultural products from their domestic markets. Therefore the core objective of AOA was to establish a fair and market oriented trading system which was to be implemented for a period of 6 years in developed countries and 9 years in developing countries. With this, agriculture was brought under the new rules of world trading system for the first time. There are 3 main features of the Agreement:

1. Market Access
2. Domestic support.
3. Export subsidy.

The market access required that tariffs for agricultural product fixed by individual countries be reduce to equivalent tariff in order to allow free trade and encourage liberalisation in world trade. Under this, the AOA required the conversion of all non tariff barriers into tariff barriers. This process was known as Tariffication. This was to be implemented for a period of 6 years for the developed countries and 10 years for the developing countries, least developed countries were exempted from undertaking such reductions.