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Amber, Blue And Green Boxes

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updated on April 12th, 2019

Amber, Blue And Green Boxes

The Boxes

  • The agricultural subsidies, in the WTO terminology, has in general been identified by ‘boxes’ which have been given the colors of the traffic lights—green (means permitted), amber (means slow down, i.e., to be reduced) and red (means forbidden).
  • In the agriculture sector, as usual, things are more complicated. The WTO provisions on agriculture have nothing like red box subsidies, although subsidies exceeding the reduction commitment levels are prohibited in the ‘amber box’.
  • The ‘blue box’ subsidies are tied to programmes that limit the level of production. There is also a provision of some exemptions for the developing countries sometimes called the ‘S & D box’.
  • We may see them individually though they are very much connected in their applied form. The objective meaning of each one of them becomes clear, once one has gone through all of them.

Amber Boxes

  • All subsidies which are supposed to distort production and trade fall into the amber box, i.e., all agricultural subsidies except those which fall into the blue and green boxes.
  • These include government policies of minimum support prices (as MSP in India) for agricultural products or any help directly related to production quantities (as power, fertilizers, pesticides, irrigation, etc).
  • Under the WTO provisions, these subsidies are subject to reduction commitment to their minimum level—to 5 per cent and 10 per cent for the developed and the developing countries, respectively, of their total value of agricultural outputs, per annum accordingly.
  • It means the subsidies directly related to production promotion above the allowed level (which fall in either the blue or green box) must be reduced by the countries to the prescribed levels.
  • In the current negotiations, various proposals deal with issues like deciding the amount by which such subsidies should be reduced further, and whether to set product-specific subsidies or to continue with the present practice of the ‘aggregate’ method.

Blue Box

  • This is the amber box with conditions. The conditions are designed to reduce distortions. And the subsidy that would normally be in the amber box is placed in the blue box if it requires farmers to go for a certain production level.
  • These subsidies are nothing but certain direct payments (i.e., direct set-aside payments) made to farmers by the government in the form of assistance programmes to encourage agriculture, rural development, etc.
  • At present, there are no limits on spending on subsidies in the blue box. In the current negotiations, some countries want to keep the blue box as is because they see it as a crucial means of moving away from distorting the amber box subsidies without causing too much hardship. Others want to set limits or reduction commitments on it while some advocate moving these subsidies into the amber box.

Green Box

  • The agricultural subsidies which cause minimal or no distortions to trade are put under the green box. They must not involve price support.
  • This box basically includes all forms of government expenses, which are not targeted at the particular product, and all direct income support programmes to farmers, which are not related to current levels of production or prices. This is a very wide box and includes all government subsidies like—public storage for food security, pest and disease control, research and extension, and some direct payments to farmers that do not stimulate production like the restructuring of agriculture, environmental protection, regional development, crop, and income insurance, etc.
  • The green box subsidies are allowed without limits provided they comply with the policy-specific criteria.It means this box is exempt from the calculation under subsidies under the WTO provisions because the subsidies under it are not meant to promote production thus do not distort trade. That is why this box is called ‘production neutral box’. But the facts tell a different story.
  • In the current negotiations, some countries argue that some of the subsidies forwarded under this box (by the developed economies) do seriously distort trade (opposed to the view of minimal distortion as used by Annexure 2)— it is the view of the developing countries. These countries have raised their fingers on the direct payments given by the developed countries to their farmers via programmes like income insurance and income safety schemes, environmental protection, etc. Some other countries take the opposite view and argue that the current criteria are adequate, and advocate to make it more flexible (so that it could be increased) to take better care of non-trade concerns such as environmental protection and animal welfare.

S&D Box

  • Other than the above-discussed highly controversial boxes of agricultural subsidies, the WTO provisions have defined yet another box, i.e., the Social and Development Box (S & D Box) allows the developing countries for some subsidies to the agriculture sector under certain conditions. These conditions revolve around human development issues such as poverty, minimum social welfare, health support, etc., especially for the segment of the population living below the poverty line. Developing countries can forward such subsidies to the extent of less than 5 per cent of their total agricultural output.

Export Subsidies

For export subsidy, the WTO has provisions in two categories:

(i) Reduction in the total budgetary support on export subsidies, and
(ii) Reduction in the total quantity of exports covered by the subsidy.

Higher reduction commitment for the developed countries and lower for the developing countries are the provisions. But the developed nations forward such inflated support to their agricultural exports that even after the committed reductions it will be highly price distorting against the agri-exports of the developing countries. It is therefore opposed by the developing countries.

Previously asked Questions in Prelims

In the context of which of the following -do-you–sometimes–find the terms amber box, blue box and green box’ in the news?

(a) WTO affairs

(b) SAARC affairs

(c) UNFCCC affairs

(d)’ India-EU negotiations on FTA

Answer&Analysis

PS : How to prepare Indian Economy for UPSC ?

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