Agreement on Agriculture classifies domestic subsidies into various categories:
Green box: It includes subsidies which do not cause any trade distortion or cause very minimal distortions.
- They are not product specific subsidies. These are direct income support to farmers who are distressed due to crop loss or any such other calamity.
- Therefore, they are allowed by the WTO.
- Examples include, research funding, environment protection etc.
Amber box: These are the subsidies that distort international trade by promoting excessive production. As a result, the products become cheaper than their counterparts from other countries.
- Examples include, input subsidies such as subsidies on seeds, fertilisers, Minimum Support Price (MSP) etc.
- WTO limits this subsidy by capping it at 5% of their total agriculture production for developed countries & 10% for developing countries.
Blue box: These are basically amber box subsidies but they tend to limit production.
- Currently only few countries like Norway, Iceland use these kinds of subsidies.
- There is no cap by the WTO on these kinds of subsidies.
