Domestic support is the support/favour given to the resource poor farmers under the provision of the World Trade Organisation (WTO) in order to improve their present pitiable condition. This commitment comes under Agreement on Agriculture (AoA).
This support could be direct or indirect to encourage agriculture and rural development in terms of Government assistance. It can also be provided in terms of production subsidies, price support or other like measures. However, some of the domestic support policies are thought to be more trade distorting as compared to others.
The Agreement on Agriculture provides different rules for different types of measures according to their impact on trade. Thus domestic support is further subdivided into three categories. These categories have been described into three boxes ie Amber Box, Blue Box, and Green Box.
The Amber Box measures are actionable ie are permitted temporarily but are to be drastically reduced. Domestic policies that have direct effect on production and trade have to be cut back. WTO members were required to calculate level of such support for the base period 1986-88 and then reduction commitments were to be applied according to an agreed formula.
Developed countries agreed to reduce these figures by 20% over six years starting in 1995. Developing countries agreed to make 13% cuts over 10 years. Least-developed countries do not need to make any cuts. (This category of domestic support is sometimes called the "Amber Box", a reference to the amber colour of traffic lights, which means "slow down".) As this is trade distorting therefore, it is subject to reduction commitments. At present no such type of support is being utilised by Pakistan.
Certain direct payments to farmers are also permitted when they are required to limit production (called "Blue Box" measures). Under this box, special government assistance to encourage agricultural and rural development in developing countries, and other support on a small scale ("de minimis") is allowed but should not be more than 5% of the total value of the product in case of developed country and 10% or less for developing countries including Pakistan. The de minims payments are allowed to be paid in addition to the Green, Amber and Blue Boxes.
Any support with minimal impact on trade can be used freely and it is included in a "Green Box" This category includes, government services such as research, disease control, infrastructure, and food security. They also include payments made directly to farmers that do not stimulate production, such as certain forms of direct income support, assistance to help farmers to restructure their agriculture, and direct payments under environmental and regional assistance programmes. These measures are considered to have no or minimal trade distorting or production related effects, therefore are exempt from reduction commitments.
The use of Green Box subsides is flexible. There is no upper ceiling for this Box and any country can provide whatever quantum they want of Green subsidies provided that those are in conformity with the criteria laid down in Annex 2 of AoA. The fluidity of Green Box has been subject to criticism since it is feared that advanced countries with abundant of resources have used the definition of this category to enhance the volume of Green subsidies, shifted subsidies from other boxes to this box and thus have evaded their reduction commitments in a way. For this reason there is a very vehement demand in the ongoing round of negotiations on AoA, particularly from developing countries that criteria for Green Box is tightened to stop its misuse.
Domestic support need to be given much importance by the Government of Pakistan in the current scenario, when other developed and developing countries are giving support to their resource poor farmers. Government should analyse all these domestic Boxes carefully and then decide about the provision of such facilities.
As most of our farmers are resources poor and illiterate and therefore, high responsibilities went to Government's shoulder to kept them aware from changes that are taking place at the world level and which affect the welfare of our local producer. Government cannot provide price support or other trade distorting activities under WTO provisions, but can protect these resource poor farmers by providing information and extension services. As no domestic support on farmer's output can be provided by the Government in the trade liberalisation regime and therefore, it would have a negative impact on small farmer's welfare that mostly use conventional and traditional methods of farming.
After the implementation of WTO, neither they have resources nor the government assistance to use new technology. The developed countries with their advanced methods of cultivation and high crop yield will definitely enjoy more profit in the WTO regime.
Government should make certain policies for the easy access of the required inputs to the resource poor farmers. Our farmers also have lack of information about modern technology and it is the need of the hour to disseminate most recent information about latest methods of production and modern technology that plays central role to increase productivity at the farm level. In order to protect these small and resource poor farmers government should work out Green Box carefully. Subsidies should be given to small scale farmers as compared to large scale farmers.
Government can provide subsidy in agriculture sector for irrigation purposes. It is estimated that meager amount is being given as subsidy in irrigation water. In the construction of water courses 70 percent share is contributed by the Government and 30 percent by the farmers. Government should make such policies for the betterment of farmers' in present conditions. Tax holidays and tax relief methods should be adopted for the agriculture and industrial sector.
Under the WTO rules watched by International funding agencies like the World Bank, IMF and the Asian Development Bank are not permitting to give subsidy and domestic support to agriculture sector. Moreover, being an economist it cannot be suggested to provide domestic support or subsidy to our agriculture sector because it leads to inefficient allocation of natural resources.
However, we need to take care of our agricultural sector by using tools of green box otherwise our agriculture sector will become uncompetitive, particularly in relation to the developed world, where 360 billion US dollars are being given as subsidy to their agriculture sector.
It is imperative that only proper measures will enable the agricultural sector to become competitive in WTO regime. The developing countries like Pakistan will be able to increase the exports of primary products in which they enjoy the comparative advantage.
There in an ample scope in green box to give domestic support/subsidy under WTO regime to resource poor farmers. Since the political government is in power now, therefore, we should renegotiate our commitments with International Funding Agencies and with WTO partners more tightly that can give us more flexibility to help our resource poor farmers. It is high time to redirect and spare more resources to develop our rural communities and to give greater emphasis to protect small farmers and the disadvantaged regions.
In Pakistan resource poor farmers are not yet well defined and to use the option of support under green box we need define resource poor farmers precisely otherwise we can't get the advantages of giving any support to our resource poor farmers.
Policy managers should arrange a platform that can bring agricultural researchers, farmers and policy makers to develop consensus to define resource poor farmers precisely. We are already too late to develop such consensus and now without any further delay we need to work quickly along these lines.
This option will also allow us to give limited amount of subsidy to our resource poor farmers (any time we need) to make them competitive in some particular crop. Otherwise we will remain uncompetitive in international markets as long develop nations will continue their subsidy programs.
Is it not shocking that developed countries are giving subsidies to their farmers under the umbrella of green box and why we cannot? We can if we will be able to define our resource farmers and can convince the WTO community that they are really resource poor and under the umbrella of green box they need to be protected.
By employing these tools of helping small farmers there should be no doubt that we can survive under WTO regime but the only issue is to work in the light of WTO rules and have to prove that these rules are permitting us to protect our resource poor farmers. In other words our policy managers have to explore more tightly and carefully the vacant rooms that are available and are providing flexibility to operate in WTO regime.
(The authors are currently working as lecturers at the University of Agriculture, Faisalabad and Govt. College, University, Faisalabad.)
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