India is the biggest producer of milk in the world. Not satisfied, a High Powered Committee on Animal Husbandry and Dairying has in January 2010 submitted a report to the Planning Commission calling for redoubling of efforts to increase milk production. Well, all this seem to be fine. After all, with increasing population growth, India should be planning for future needs.
But then came President Obama. He brought along more than 200 CEOs and a total of 3,000 officials to pressurise India to provide a market for various American industries. Among the thrust areas the US was looking for dairying topped the agenda as far as the farm sector was concerned. India's Agriculture Minister Sharad Pawar did have a series of negotiations with the US Agriculture Secretary Tom Vilsack.
Sharad Pawar later told media that he has an 'open mind' but for now the Ministry of Agriculture had held back permission for importing US dairy products.
US milk products in any case come laced with harmful hormones, antibiotics and are also derived from milk that has been produced from cows fed with feeds carrying GM ingredients.
India is not a major player when it comes to international trade. The three big players, European Union last year accounted for 32 per cent of the dairy commodity export market by volume, with New Zealand on 22 per cent and the US third on 16 per cent. With markets shrinking, the US, Canada and Europe are now aggressively looking for new markets. And India happens to be a major one.
According to The Hindu (Nov 15, 2010): "In recent bilateral talks during U.S. President Barack Obama's visit to India, the Agriculture Ministry made it clear that India will subject US dairy products to the same protocol and veterinary certification as was applicable to other countries, and that India would have to be sensitive to religious sentiments.
Drawing a parallel with the Codex Alimentarius-recognised Islamic and Jewish dietary code, which is applicable to Halal and Kosher foods, the Indian side held that religious sentiments would not allow for the import of dairy products such as cheese that were manufactured from the milk of cattle fed on blood meal and tissues of ruminant origin or those which contain animal rennet and are unlabelled."
Let me illustrate. For production of cheese, India uses synthetic rennet, which is derived from non-animal sources. In America, animal rennet is used. Animal rennet comes from the membrane lining the stomach of a young calf containing an enzyme called rennin used for curdling milk to make cheese. India is demanding labelling of American cheese.
Now let us understand why the US is able to over-produce and dump the milk products in the developing countries. It is all because of monumental subsidies that are doled out to inefficient US producers (and that includes multinationals). Even though, India is the biggest producer of milk, its dairy industry does not receive any subsidies. On the contrary, the US dairy sector received US $ 4.9 billion between 1995 and 2009. Much of these subsidies are provided for the following programmes (Source: Environment Working Group):
1. Milk Income Loss Contract Payment $2,784,722,485
2. Market Loss Assistance - Dairy $994,714,404
3. Milk Income Loss Transitional Payment $555,990,950
4. Dairy Ecomonic Loss Assistance Program $267,385,319
5. Milk Marketing Fees $171,578,059
6. Dairy Disaster Assistance $21,547,587
7. Dairy Indemnity $3,671,552
Such huge subsidies bring down the international prices and insulate the domestic producers against the volatility of the markets. As if this is not enough, the US has reintroduced export subsidies for the dairy introduced in May 2009. This is what the US Agriculture Secretary had to say in defence: "Subsidies would support the dairy industry, which had “seen its international market shares erode, in part due to the reintroduction of direct export subsidies by the European Union earlier this year.” EU Agriculture Commissioner Mariann Fischer Boel called it ‘very unfair’ of the US to use Europe’s reinstatement of export subsidies “as an excuse to go ahead in this direction.”
US dairy subsidies are for a mere 91,000 metric tons of milk powder, butter and cheese that it has for export. Also its unfair to countries trading fairly, and potentially damaging to global economy's recovery, as someone pointed out. And it is not only US that plays the dirty game. In March 2009, EU had also reintroduced dairy subsidies. As per news report: "the EU also restarted buying excess butter and milk from farmers at intervention prices set respectively at €2,218 and €1,698 per tonne." With these subsidies, EU is also pressurising India to open up its market under bilateral trade agreement, the EU-India FTA.
Ironically, the US had won a dispute against Canada's dairy subsidies in 2003. But who cares if the US were to itself violate the WTO norms. Might is always right. And with economists in tow, and trade negotiators benefiting from the trade regime, the resulting social cost must be borne by the poor and developing countries.