Question

Q. With reference to the WTO’s (World Trade Organisation’s) terminology regarding the agricultural subsidies, consider the following statements:

Which of the statements given above is/are correct?

• A.
  1 only
• B.
  2 and 3 only
• C.
  3 only
• D.
  1, 2 and 3

Answer 1

The correct option is B

2 and 3 only
Explanation:

In WTO terminology, subsidies are identified by “boxes” which are given the colours of traffic lights: green (permitted), amber (slow down / need to be reduced), etc. There is a blue box for subsidies that are tied to programs that limit production. There are also exemptions for developing countries through an S&D box (the Social and Development box).

Statement 1 is incorrect: The Agriculture Agreement within WTO has no red box, although domestic support exceeding the reduction commitment levels in the amber box is prohibited. Amber box subsidies are considered to distort production and trade.

Statement 2 is correct: Price support under the amber box is subject to limits: generally $5\%$ of the total value of agricultural output per annum for developed countries and
10$\%$ for developing countries.

Statement 3 is correct: The support price is placed in the blue box if it requires farmers to limit production.