Current WTO Negotiations on domestic Subsidies in Agriculture: Implications for India

This paper analyses the present state of play of WTO negotiations and evaluates how effective the current WTO provisions will be to reduce domestic subsidies in developed countries. The findings suggest that the broad framework of subsidy reduction, as outlined in the July package, can be considered as a step towards the right direction but it does not guarantee significant reduction in subsidies. A simulation using the subsidy reduction formulas mentioned in the draft ministerial text for the Hong Kong meet also indicates that due to the existence of significant overhang between actual and committed levels of subsidies in developed countries, the effective rate of reduction of subsidies will be much less than it appears at the first glance. Unless deep reduction commitments are imposed on developed countries, it will not lead to a substantial cut in their trade distorting domestic supports.