Blue Box subsidies are given under production limiting programmes and are exempted from being capped. However, proposals have been put forth in the WTO for capping Blue Box subsidies at 2.5% of a countrys total value of farm production.
At a meeting of farm negotiators in Geneva on December 5, this year, the EU said that it should be given the right to pay 300 million euro a year, with a view to honour its earlier commitments to Greece and Spain on their accession to the Union. The EU said that in return it would reduce its cotton subsidy to zero under the Amber Box. Amber Box subsidies are considered as trade-distorting.
The draft text released by the WTO agriculture committee chair, Crawford Falconer in July 17, had proposed that any Blue Box payment for individual products should not exceed the average payments made in 1995-2000.
However, an increase in Blue Box payment can be allowed, if a one for one reduction is made in Amber Box subsidy. In the case of cotton, the ratio proposed by Falconer was two to one; every dollar in additional Blue Box payment would mean a $2 cut in Amber Box subsidy.
The president of Bharatiya Krishak Samaj, Krishan Bir Chaudhary said, If the EU is allowed to shift its cotton subsidy, the US would agree to reduce its $4 billion cotton subsidy, and this would spell doom for third world farmers.
Reacting to the European move to shift its cotton subsidy, the secretary-general of the Confederation of Indian Textile Industry (CITI), DK Nair said, This is a clever move by EU. India and other developing countries, particularly the African countries, should resist it.
If the Falconer formula is applied without the one to one ratio cut, the EU would be able to pay only the 180 million euro Blue Box subsidy to cotton growers.
With a view to pay 300 million euro, the EU preferred a one to one ratio cut formula.