Understanding World Trade Organisation
WTO’s Present Methodology
- WTO mandates that its member country’s food subsidy bill should not breach the limit of 10 percent of production value based on the External Reference Period (ERP is the average price based on the base year 1986-88). ERP has not been revised for decades.
- This 10% ceiling, known as De Minimis support, i.e., minimal amounts of domestic support, is provided under the Agreement on Agriculture. This method fails to consider the high inflation levels in developing countries.
Countries proposed a new methodology for calculating subsidies, which would account for excessive inflation in the External Reference Price (ERP) or calculate the ERP based on the previous five years, excluding the highest and lowest entry for that product.
They also proposed that food grain exports from public stocks be allowed for international food aid and humanitarian purposes for the needy countries.
WTO is against subsidies, especially those subsidies that require recipients to meet certain export targets or promote domestic goods instead of imported goods. They are specifically designed to distort international trade and are likely to hurt other countries’ trade. Watch the animated video to understand everything about WTO.
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Source: Economic Times