India's Challenges Under the WTO's Agreement on Agriculture

The Agreement on Agriculture (AoA), established in 1994 as part of the World Trade
Organization (WTO) framework, was designed to foster a more liberalized global market for
agricultural products.¹ A primary goal of the AoA is to curtail trade-distorting domestic subsidies
while improving market access for member nations.¹ At the core of this effort is a regulatory
system that classifies domestic support into three categories—the Amber, Blue, and Green
Boxes—to balance fair trade principles with the agricultural policy needs of individual
countries.²

For a developing nation like India, where the livelihoods of over 800 million people are tied to
agriculture, the AoA's limitations on domestic support present substantial legal challenges.³
These challenges are particularly acute in relation to India's public stockholding programs, which
are essential for its food security objectives.³ These programs, mandated by India's National
Food Security Act of 2013, have come under WTO scrutiny for being potentially trade-distorting,
thereby highlighting what India perceives as inherent inequities within the AoA's structure.⁴ This
analysis examines the legal complexities surrounding the AoA's domestic support rules, with a
specific focus on India's legal interpretations, compliance difficulties, and key dispute settlement
cases.⁵ It also explores proposed reforms aimed at better aligning WTO law with the critical food
security and rural development needs of developing countries.⁵
The Legal Framework for Domestic Support in the WTO

The AoA regulates domestic subsidies by sorting them into designated categories, often referred
to as "boxes," based on their potential to distort international trade.⁷

Amber Box: This category includes subsidies considered to be trade-distorting, such as

measures that provide market price support.⁷ These are quantified using the Aggregate
Measurement of Support (AMS) and are subject to reduction commitments.⁷ However,
developing countries, including India, are permitted a de minimis level of support, which allows
for subsidies up to 10% of the value of their agricultural production without requiring
reductions.⁸

Blue Box: Subsidies linked to programs that limit production are categorized under the Blue
Box.⁹ These are exempt from reduction commitments, provided they meet certain criteria.⁹ India
has historically made minimal use of Blue Box subsidies, largely due to fiscal limitations.¹⁰

Green Box: This category is for subsidies that have minimal or no trade-distorting effects.¹¹
Examples include decoupled income support and public stockholding for food security
purposes.¹¹ To qualify, these measures must adhere to strict criteria, notably that they are not
linked to production levels.¹¹
The legal interpretation of these categories is a central point of contention for India.¹¹ India's
minimum support price (MSP) programs, which are used to procure staple crops like rice and
wheat for public distribution, are at the heart of this conflict.¹¹ India maintains that these
programs are permissible under the Green Box, arguing they constitute general services or public
stockholding for food security as outlined in Annex 2 of the AoA.¹² In contrast, some WTO
members challenge this classification, contending that the programs' market price support
mechanisms place them in the Amber Box.¹³ The Doha Declaration of 2001 acknowledged the
need to clarify these rules to better accommodate the food security concerns of developing
nations, but the persistent ambiguity leaves India susceptible to legal disputes.¹³

Contrasting Perspectives on Agricultural Subsidies

The debate over the AoA's framework reflects a sharp divide between the positions of developed
and developing nations.¹⁸

Developed countries, including the United States and the European Union, defend their use of
extensive Green Box subsidies, arguing that such support is designed to aid farmers without
distorting trade.¹⁴ Canada, for instance, asserts that its supply management system, which relies
on Green Box support, complies with WTO rules while ensuring stable incomes for its farmers.¹⁵
Similarly, Australia advocates for Green Box flexibility to advance environmental sustainability
goals, while Japan argues its subsidies are necessary to maintain rural communities and cultural
heritage, claiming they have a negligible impact on global markets.¹⁶,¹⁷ India, however, views
these stances as inequitable, pointing out that the historically high subsidies in developed nations
depress global prices, thereby harming Indian farmers.⁴⁵

From India's perspective, the AoA's rules disproportionately constrain developing countries.¹⁸
With agriculture representing 42% of its workforce, India's policy priorities are food security and
rural development, objectives it pursues under the AoA's special and differential treatment (SDT)
provisions.¹⁹ Critics like Joseph E. Stiglitz have argued that the AoA does not adequately
consider the developmental needs of countries like India, whose limited fiscal capacity makes it
difficult to redesign subsidy programs to be Green Box compliant.²⁰ Consequently, India's MSP
and public stockholding initiatives—crucial components of the National Food Security Act that
feeds 800 million people—face persistent legal challenges as potential Amber Box subsidies.²¹

Policy Debates and Implications for Global Trade

In policy debates, India, alongside the G33 coalition of developing countries, advocates for
expanding the Green Box criteria to explicitly include measures for food security.²² This position
is countered by other WTO members who favor stricter disciplines on all forms of subsidies.²³ A
significant point of contention is that the AoA's de minimis thresholds are calculated using 1986–
88 reference prices, which do not account for inflation or currency fluctuations.²⁴ This outdated
methodology progressively erodes the policy space available to India for providing subsidies,
creating ongoing legal compliance issues.²⁴
These disagreements have tangible effects on India's trade relationships. Market distortions
created by subsidies in developed countries, such as U.S. cotton supports that have been shown
to lower global prices by 10–15%, directly harm Indian exporters.²⁵ This situation fuels trade
tensions, with India accusing developed nations of hypocrisy for promoting free trade while
maintaining their own high levels of domestic support.²⁶ Furthermore, the restrictions on India's
ability to invest in its agricultural sector can exacerbate food insecurity and rural poverty,
undermining the sustainable development objectives enshrined in the Marrakesh Agreement.²⁷, ²⁹,
³⁰
Implementation and Compliance Hurdles for India

India confronts several significant legal obstacles in its efforts to comply with AoA obligations.
A primary issue is the ambiguity surrounding the classification of its MSP programs;
procurement at prices above market levels is often challenged as a form of market price support
that is not exempt under the Green Box criteria.³¹ The "Peace Clause" provided temporary
protection from legal challenges but came with the condition that India must prove its programs
do not distort trade—a considerable legal burden.³²

India’s agricultural domestic support Trend:

Additionally, the WTO's monitoring system depends on self-notification by member countries,

and India's delays in submitting its data, often due to technical capacity constraints, have invited
legal scrutiny.³³ Redesigning its subsidy programs to meet Green Box criteria would require
financial resources that India lacks, reinforcing its claims for special and differential treatment.³³
Finally, strong domestic political pressure to maintain the MSP system for the benefit of
approximately 600 million farmers often conflicts with WTO obligations, complicating India's
legal position.³⁴

Precedents from WTO Dispute Settlement

Several WTO dispute settlement cases highlight the legal challenges India faces. In India –
Agricultural Support (DS579), the United States challenged India's subsidies for rice and wheat,
alleging they exceeded the 10% de minimis limit and failed to meet Green Box criteria.³⁵ India
has defended its position by invoking the Peace Clause and SDT principles, arguing that the
calculations should be adjusted for inflation.³⁶
Two other cases have set important precedents. In United States – Subsidies on Upland Cotton
(DS267), a successful challenge by Brazil demonstrated that certain non-Green Box payments
could cause serious prejudice to other members, a ruling India has referenced in defense of its
own programs.³⁷ Similarly, the ruling against the European Union in EC – Export Subsidies on
Sugar (DS265) bolstered India's argument for greater reciprocity in subsidy reductions from
developed countries.³⁸ These cases underscore the crucial role of the WTO's Dispute Settlement
Body in interpreting the AoA's provisions and the continuous pressure on India to justify its
agricultural support measures.³⁹

A Critical Evaluation of the AoA's Legal Framework

The AoA's legal framework presents a series of specific and systemic challenges for India. The
ambiguity in classifying public stockholding programs creates a persistent source of conflict, as
India's food security measures are frequently interpreted as market price support under Amber
Box rules despite their stated purpose.⁴⁰ The reliance on outdated 1986–88 reference prices for
calculating the AMS unfairly penalizes India by not accounting for inflation, which artificially
constricts its legal subsidy space.⁴¹
Furthermore, the conditional nature of the Peace Clause places a heavy evidentiary burden on
India to prove its programs are not trade-distorting, which seems to conflict with the spirit of
SDT principles.⁴² The absence of clear and robust SDT provisions specifically for food security
measures undermines the sustainable development goals of the Marrakesh Agreement,
particularly since fiscal constraints hinder India's ability to transition to Green Box-compliant
subsidies.⁴³ These issues collectively point to a structural bias within the AoA that favors
developed nations, underscoring the need for legal reform.⁴⁴

Proposed Reforms for a More Equitable System

To address these inequities, several reforms have been proposed. First, the Green Box criteria
should be revised to explicitly permit public stockholding programs established for food security
purposes, a change India has long advocated for.⁴⁶ Second, monitoring and enforcement could be
strengthened by establishing an independent WTO verification body to ensure transparency and
reduce bias against developing nations.⁴⁷ Third, some have proposed introducing overall caps on
all subsidies, with higher thresholds for developing countries under SDT provisions.⁴⁸ Finally,
making the Peace Clause permanent and adjusting it for inflation would shield India's essential
food security programs from legal challenges.⁴⁷

Conclusion

The domestic support limitations within the WTO's Agreement on Agriculture create profound
legal challenges for India as it strives to balance its international trade obligations with its
domestic food security imperatives.⁴⁹ Systemic inequities are evident in ambiguous subsidy
classifications, outdated calculation methodologies, burdensome compliance requirements, and
weak special and differential treatment provisions.⁵⁰ While precedents from key WTO disputes
have provided some support for India's position, the existing legal framework remains biased.⁵⁰
Meaningful reform—including expanding the Green Box, strengthening monitoring, and fully
institutionalizing SDT—is necessary to create a fairer system that supports the developmental
objectives of nations like India within the rules-based global trading system.⁵¹

Footnotes

¹ Agreement on Agriculture, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade
Organization, Annex 1A, 1867 U.N.T.S. 410 [hereinafter AoA].

² See AoA, supra note 1.

³ See FAO, The State of Food Security and Nutrition in the World 3–5 (2020).

⁴ Id.

⁵ See source document at 1.

⁶ See source document at 1 (diagram).

⁷ AoA, supra note 1, art. 6.

⁸ Id. art. 6.
⁹ Id. art. 6.5.

¹⁰ Id.

¹¹ Id. Annex 2.

¹² Id. Annex 2, ¶¶ 2–3.

¹³ Id. Annex 3, ¶ 8; WTO, Ministerial Declaration, WT/MIN(01)/DEC/1 (Nov. 20, 2001).

¹⁴ Kimberly Ann Elliott, Agricultural Subsidies and Global Trade, 25 J. Int'l Econ. L. 345, 350
(2014).
¹⁵ Al Mussell, Can.'s Supply Mgmt. Sys. & the Dairy Indus., Agri-Food Econ. Sys. Rsch. Rep. 1–
3 (2016).

¹⁶ Austl. Gov't, Dep't of Agric., Submission to WTO on Green Box Subsidies 5–6 (2019).

¹⁷ Japan Ministry of Agric., Forestry & Fisheries, WTO Negotiations on Agriculture: Japan's
Position 4–5 (2018).

¹⁸ See source document at 3.

¹⁹ AoA, supra note 1, art. 20.

²⁰ Joseph E. Stiglitz, Globalization and Its Discontents, 47 World Trade Rev. 123, 130 (2002).
²¹ National Food Security Act, 2013 (India).

²² WTO, Doha Work Programme, WT/L/579, ¶ 39 (Aug. 1, 2004).

²³ See source document at 4.

²⁴ Stiglitz, supra note 20, at 132.

²⁵ Int'l Cotton Advisory Comm., Impact of U.S. Subsidies on Global Cotton Markets 12–15
(2018).

²⁶ AoA, supra note 1, art. 15.

²⁷ Marrakesh Agreement Establishing the World Trade Organization, pmbl., Apr. 15, 1994, 1867
U.N.T.S. 154 [hereinafter Marrakesh Agreement].

²⁸ AoA, supra note 1, arts. 6, 9.

²⁹ See source document at 4.

³⁰ FAO, supra note 3, at 10.

³¹ AoA, supra note 1, Annex 2.

³² WTO, Bali Ministerial Decision, WT/MIN(13)/38 (Dec. 7, 2013).

³³ WTO, Comm. on Agric., Summary Report, G/AG/R/90 (2020); AoA, supra note 1, art. 15.
³⁴ See source document at 5.

³⁵ WTO, India – Measures Concerning the Importation of Certain Agricultural Products,

WT/DS579 (panel requested 2019).

³⁶ Id.

³⁷ Appellate Body Report, United States – Subsidies on Upland Cotton, WT/DS267/AB/R (Mar.
3, 2005).
³⁸ Appellate Body Report, European Communities – Export Subsidies on Sugar,
WT/DS265/AB/R (Apr. 28, 2005).

³⁹ See source document at 6.

⁴⁰ AoA, supra note 1, Annex 2, ¶ 3; id. Annex 3, ¶ 8.

⁴¹ Deepak Saxena, WTO Agricultural Subsidies and India's Food Security, 35 J. World Trade 789,
795 (2021).

⁴² WTO, supra note 32; AoA, supra note 1, art. 15.

⁴³ Marrakesh Agreement, supra note 27, pmbl.

⁴⁴ Saxena, supra note 41, at 798.

⁴⁵ AoA, supra note 1, art. 15.

⁴⁶ WTO, supra note 22, ¶ 39.

⁴⁷ See source document at 7.

⁴⁸ WTO, supra note 22.

⁴⁹ See source document at 7.

⁵⁰ Id.

⁵¹ Id.

Bibliography

Treaties and WTO Agreements

Agreement on Agriculture, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade
Organization, Annex 1A, 1867 U.N.T.S. 410.
Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 U.N.T.S.
154.

WTO Documents and Cases

Appellate Body Report, European Communities – Export Subsidies on Sugar, WT/DS265/AB/R
(Apr. 28, 2005).

Appellate Body Report, United States – Subsidies on Upland Cotton, WT/DS267/AB/R (Mar. 3,
2005).

WTO, Bali Ministerial Decision, WT/MIN(13)/38 (Dec. 7, 2013).

WTO, Committee on Agriculture, Summary Report, G/AG/R/90 (2020).

WTO, Doha Work Programme, WT/L/579 (Aug. 1, 2004).

WTO, India – Measures Concerning the Importation of Certain Agricultural Products,

WT/DS579 (panel requested 2019).

WTO, Ministerial Declaration, WT/MIN(01)/DEC/1 (Nov. 20, 2001).

Journal Articles

Elliott, Kimberly Ann, Agricultural Subsidies and Global Trade, 25 J. Int'l Econ. L. 345 (2014).

Saxena, Deepak, WTO Agricultural Subsidies and India's Food Security, 35 J. World Trade 789
(2021).
Stiglitz, Joseph E., Globalization and Its Discontents, 47 World Trade Rev. 123 (2002).

Reports, Submissions, and Statutes

Australian Government, Department of Agriculture, Submission to WTO on Green Box

Subsidies (2019).

Food & Agriculture Organization of the U.N. [FAO], The State of Food Security and Nutrition in
the World (2020).

International Cotton Advisory Committee, Impact of U.S. Subsidies on Global Cotton Markets
(2018).

Japan Ministry of Agriculture, Forestry & Fisheries, WTO Negotiations on Agriculture: Japan's
Position (2018).

Mussell, Al, Canada's Supply Management System and the Dairy Industry, Agri-Food Econ. Sys.
Rsch. Rep. (2016).

National Food Security Act, 2013 (India).