Dec 19, 2013

Bali WTO Ministerial has only postponed the problem relating to India's food security: My interview


                                           Farmers protesting at a WTO Ministerial
      Question:  After the conclusion of Bali Summit, what comes in India hands. How does it affect Indian agriculture sectors and overall economy at large?

Answer: India has only managed to postpone the problem relating to price support for the farmers. Bali Ministerial has allowed an interim Peace Clause which will ensure that no country is able to take India to the WTO Dispute Settlement mechanism till a permanent solution is found. In my understanding this is a lost opportunity. Already the issue of agriculture subsidies in developing countries has been on the negotiating table for eight years. It was therefore crucial for India to push for a permanent solution instead of postponing it effectively for another four years. 

India has breached the maximum quantum of agricultural subsidies allowed for developing countries under the WTO. Under the Agreement on Agriculture, India is allowed a maximum of 10 per cent of what is called ‘e-minimis support in agriculture. This means that the procurement price cannot exceed 10 per cent of the value of the particular crop, treating the 1986-88 prices as the reference period. For instance, in case of rice, against the 10 per cent allowed, India is already providing 24 per cent price support to farmers. This has implications for the livelihood security for India’s 600 million farmers. The issue should have been discussed and finalized once for all. India cannot afford to reduce the procurement prices for farmers. The future of India’s 600 million farmers and 830 million hungry to benefit from food security law cannot be compromised for the sake of future of WTO.
2    Q: At the global level, what is the impact of WTO deal on various aspects of economy, like infrastructure spending on agriculture and job creation?

      A: We have just witnessed a nationwide protest by sugarcane farmers. While two farmers died, these farmers were protesting against the low sugarcane prices being paid by sugar mills. Imagine a situation where under the WTO dictat the procurement price for wheat and rice farmers is reduced by 50 per cent. The procurement price for rice at present is Rs 1310 per quintal. If it was to be reduced to ensure 10 per cent level from 1986-88 period, rice farmers should be paid a maximum of Rs 600 per quintal. Such a drastic reduction in farm income will create an unprecedented social and political crisis for the government. This is in turn will make farming highly uneconomical forcing farmers to either commit suicide in hordes or to quit agriculture. There can be nothing more catastrophic than the WTO ruling that binds procurement prices to a level that is outdated.

      Cutting down procurement prices will hit food self-sufficiency built assiduously over the past four decades following Green Revolution. This would mean that India will have to once again go back to the days when food would come directly from the ship into hungry mouths. Those years before the Green Revolution was launched in the late 1960s, India was called a country living in ‘ship-to-mouth’ existence.

      Q: What is your opinion on the trade facilitation services, which aims to brings transparency, lowering down the transaction cost, clearing goods and services at ports/airports by a faster pace?

      A: Trade facilitation agreement essentially benefits the multinational and big business of the rich and developed countries. This was being aggressively pushed by the US/EU since clearing goods and services at the ports would enable business and trade of rich countries to operate flawlessly. It however does not benefit the developing and least developed countries since the rich and industrialized countries do not have to make any commitments. Here again India has lost an opportunity to simultaneously push for more liberalized regime for the movement of skilled labour into the rich countries. Trade facilitation negotiations could have been easily tied with the demand for opening up for India’s skilled manpower not only in information technology but also in other service sectors, medicine, education and sciences.

WTO’s analysis is that trade facilitation would bring in a windfall gain of $ 1 trillion to the world economy. This is an highly exaggerated and inflated figure So far, all the claims of enhanced trade and the boost to the global economy that was projected under WTO have turned to be false. If global trade was so beneficial I don’t see why the global economy continues to be in a slump, with unemployment creating massive political problems in US and EU. The economic gains therefore were fake, and only aimed at luring developing countries to sign on the dotted line. Even the $ 1 trillion figure has now been challenged by Tufts University in America.What is equally important is that India could have also projected the gains arising from increased movement of skilled labour to the global economy as well as to the Indian economy. 

Q: How do the rich countries subsidise their agriculture. What does it mean and where does India stands under this purview?

A: It’s a case of double standards for the rich and developed countries. US provided $ 130 billion support for agriculture in 2012. European Union provided roughly Euro 90 billion support in the same year. Most of these subsidies are protected in the Green Box, which cannot be challenged in WTO. Over the years, the developed countries have only shuffled subsidies from one box to another like a magician and since countries like India did not object, these massive farm subsidies in America and European Union remained sacrosanct. In European Union, farmers get subsidy when they enter into agriculture. They get subsidies for keeping animals like cow and horses, for protection of biodiversity and environment, for machinery, and when they retire at the age of 55, they still get subsidy. These subsidies cannot be challenged.

In America, let us take the example of cotton subsidies. There are 20,000 cotton growers in America. According to a study I did in 2005-06, America produced a cotton crop valued at $4 billion iin 2005. It paid a subsidy (including direct income support) to farmers to the tune of $4.7 billion. In addition, America had paid a subsidy of $187 million to its textile industry to buy subsidized cotton from farmers. Such heavy subsidization of cotton results in international prices coming down by about 45 per cent as a result of which cotton farmers in India appear to be inefficient, and they commit suicide. 

Q: At current level how much food subsidies are given by developed and developing countries and how does the shape of subsidy changes after this deal?

A: In case of food subsidies, America provides 385 kg of food support every year (including cereals/grains) to its 47 million hungry people, under food stamp, mid-day meal programme etc. In 2012, it’s food subsidy bill stood at $100 billion, up from $90 billion in 2010. Against this, India promises to provide 60 kg of wheat/rice/millets to its 830 million hungry. The total financial outlay for food security in India is about $20 billion or Rs 1.25 lakh crore. The US is objecting to India’s food subsidy but has no problem with its own food subsidy which is five times more than India. 

Q: Has the Bali Ministerial made an effort to correct the imbalance in the treatment of subsidies?

      No, it has failed to resolve the issue. It has failed miserably to correct the imbalance. I will blame India for its failure to aggressively pursue for justice in the WTO. While US/EU have nothing to worry from their high levels of subsidy support, a sword will continue to hang over India in the years to come. This is a great failure on the part of India whose only objective at Bali Ministerial was to somehow seek smooth passage before the 2014 elections. The next government is left to face the music.# 

      Further reading: Here is the Hindi version of this interview, in Business Bhaskar, Dec 19, 2013. 
भारत के मुकाबले पांच गुना सब्सिडी दे रहा है अमेरिका 

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