Developing countries are demanding substantial reduction in trade distorting domestic support to agriculture sector by developed countries. Under the existing rules of the AoA, many developing countries are facing lack of policy space to implement measures like price support to increase the income of farmers. Some members of WTO circulated a proposal (EU-Brazil proposal) on OTDS, which seeks a cap on trade distorting spending. This study critically examines the implications of EU-Brazil proposal regarding OTDS on the flexibility for developing and developed countries member to provide domestic support to agriculture. The results of this study show that EU-Brazil proposal is likely to result in steep reduction in policy space for the developing countries. It will further curtail the limited and already insufficient policy space for implementing agricultural policies which are compatible with the socio-economic situation prevailing in the developing country members. On the other hand, USA and EU will undertake negligible or no reduction in trade distorting support to agriculture sector and these countries will preserve their existing flexibilities in future as well. Contrary to Doha Declaration, this proposal would provide special and differential treatment to EU and USA. Acknowledgement :