Question

Under WTO, domestic support measures in agriculture that leads to trade distortion, are put in different boxes (Amber, blue, green and development) from the point of view of their exemption from reduction. Given below are two statements about 'Amber Box':
Statement (I) : The domestic support measures in this category distort trade like support price and subsidies directly related to production quantities.
Statement (II) : The domestic support measures are subject to reduction beyond exception limits.
In light of the above statements, choose the correct answer from the options given below:

• A. Both Statement (I) and Statement (II) are true.
• B. Both Statement (I) and Statement (II) are false.
• C. Statement (I) is true but Statement (II) is false.
• D. Statement (I) is false but Statement (II) is true.

Hint:

Remember the color coding: Green is exempt from reduction ("go ahead"), Blue is exempt under specific criteria, and Amber is subject to strict reduction commitments ("proceed with caution").

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
The World Trade Organization (WTO) classifies domestic subsidies under its Agreement on Agriculture into "boxes": Green (non-distorting), Blue (distorting but with production limits), and Amber (trade-distorting).
Detailed Explanation:
Let us analyze the statements regarding the Amber Box:
- Statement (I) analysis: The Amber Box contains all domestic support measures deemed to distort production and trade. This includes direct production subsidies, input subsidies (such as those for electricity, water, or fertilizer), and price support mechanisms (like the Minimum Support Price). These alter competitive market conditions, making this statement true.
- Statement (II) analysis: Under WTO rules, member countries are committed to reducing their Amber Box subsidies if they exceed designated de minimis limits (typically 5% of the value of agricultural production for developed countries, and 10% for developing countries). Hence, this statement is true.

Step 2: Final Answer:
Since both Statement (I) and Statement (II) are correct, the correct choice is Option (A).