Essay for students on WTO and Indian Agriculture
India is one of the founding members of WTO which came into
existence on January 01, 1995 replacing GATT (General Agreement on Tariffs and
Trade) and promising the herald of new era in the rule based system of
governing and promoting international trade concomitant with the needs of the
on-going processor globalization.
WTO
provisions related to international trade are now similarly applicable to
agriculture which was brought within the fold of GATT in the Uruguay Round
(1986-93) of multilateral trade Negotiations (MTNs).
Application
of WTO provisions on agriculture involves many contentions issues and is an
area of serious concern for developing countries which are primarily agrarian
economies, Moreover, the world, despite growing interdependence and
integration, is highly heterogeneous with regard to levels of development. This
heterogeneity is very much noticeable when we compare the agricultural sector
of developed and developing countries.
Support
infrastructure like storage, processing, finance, marketing, transport and
R&D facilities are much more advanced and organized. In sharp contrast, in
a country like India, for millions of farmers who derived their livelihood from
agricultural, it is still a way of life and not an occupation they have chosen
for themselves. Indian farmers are mostly involved in subsistence farming with
very little or no marketable surplus.
On the
other hand, there have veer instances where in the USA farmers have been given
subsidies worth millions of dollars to keep their farmland uncultivated. In
India 70% of the holding are not of the economy size, making application of
modern technology difficult and unaffordable for the farmers.
The
developed countries like the USA, Japan and EU countries heavily subsidize
their agriculture with high quality standards and aggressive marketing
practices, these countries hold 72% share of world trade in agricultural
products are keep the developing countries virtually at the periphery of world
market.
The silent
features 0f this agreement include three main provisions which have become
effective 1 Jan, 2000.
Under
access all non-tariff barriers like quota will be converted into tariffs. India
has already removed quantitative restriction on all her import. It has now
imposed protective tariff on imports of sensitive agricultural products in
order to protect the interest of its farming community.
As far as
the maximum limit of tariff is concerned no country is permitted to impose
tariff beyond a certain limit. All industrialization countries are to reduce
tariff by 36% within six years. For individual agricultural products tariff has
to reduce by at least 15%. Developing countries like India have to reduce
tariff by 24% within 10 years. On any individual agro product tariff cut has to
be at least by 10%.
Under
Export Competition the developed countries are to reduce the value of direct
export subsidies by 36% over a period of six years and in volume terms 21%. The
base period for these cut is 1986-90 or 91-92 if exports were higher in that
period. Over the same periods the developing countries are to reduce the value
of direct export subsidies by 24% and volume terms by 10%.
Under
domestic support this issue is linked to providing state support to farmers in
farm production. Under AoA (Agreement on Agriculture) the developed countries
are to reduce AMBER BOX subsidies within 6 years by 20c starting from 1995 with
1986-88 periods as base. The same has to be reduced by 13c with in 10 years by
developing countries.
AoA has
classified all subsidies given to farmers into three categories AMBER BOX
subsidies, BLUE BOX subsidies and GREEN BOX subsidies. Under AMBER box
subsidies such domestic support its included which is meant to encourage
farmers to produce more.
BLUE BOX
subsidies are related to quantum of output and hence are considered minimally
trade distorting. Such subsided is provided only up to certain limit of
production. GREEN BOX subsidiary aid to farmers comes under this category. The
developed countries have used provisions of AoA to further infest of their
farmers.
The
developed countries have used provisions of AoA to further the interest of
their farmers. For example, they have remodeled AMBER BOX subsidies in such a
way that these qualities to be put into BLUE or GREEN BOX subsidies. These
countries are constantly pressuring the developing countries for greater market
access for agricultural product but are not willing to bring down the level
support that they provide to their own farmers.
Developing
countries like India feel that they are being discriminated against in matter
like tariff on food imports into developed countries. For example, in the name
of mutual access, OECD countries impose very low tariff on imports from fellow
members while similar imports from developing countries are subjected to higher
tariffs.
The Nov.
2001 Doha round of ministerial talks were termed as “Development Round” because
comprehensive development of the accepted as its agenda.
Theoretically,
issues like production and trade of agriculture products along with domestic
support and subsidy to it, compliance issues, intellectual property rights,
special discriminatory practices and market access were to be discussed. But
soon it became clear that on the ground developed countries were not willing to
yield much to the developing countries for deeper market access. By the
termination of this round it was clear that issue related to agriculture pushed
other issues to the background.
For the
developing countries safeguarding the interest of their farming sector is a
matter related to the very survival and substances of there population.
Moreover in a representative democracy like ours it would be a political
hara-kiri if the government ignores the interests of farmers and agriculture
under international compulsions.
In the
Doha round of negotiations, while the developed countries were mainly concerned
about issues like market access and IPR, the developing countries were
concerned about food security, poverty elimination and economic growth with
respect to the process of globalization. It is alleged by developing counties
that the developed world shows only hypocritical concern about these issue.
In the
farm bill in the USA and the collective farming policy in EU, agate support has
been promised to the farmers than before. Sensing a major deadlock in future
rounds of discussions on AoA, the agriculture ministers of EU countries
presented a reconciliatory package in the last week of June 2003. In this they
promised not to offer any subsidy to their farmer but insisted that
agricultural income world still be protected. This is a wily move as it
replaced a trade distorting measure like subsidy by protection of agriculture
income which will not be treated as trade distorting and hence qualifies to be
put in the GREEN BOX.
It would
be a misnomer to call such protection as minimally trade distorting because it
will influence the allocation of recourses in the since that in the absence of
such protection fewer resources would be committed to agriculture protection
will serve as an inceptive not to move resources away from agriculture leading
to over production this surplus produce will be used to disallow imports from
the developing world or for dumping in the world market. The worst aspect of
this package was that not even a mention of reducing export subsidy found place
in it.
The
ministerial meet at Cancun in Mexico held on 10-14 sep. 2003 raised questions
on the working of the whole apparatus of WTO.
The only
major achievement on the part of the developing countries was that they did not
succumb to the pressures of the developed countries. As expected the Cancun
meet too was focused on agriculture G-5 group countries with India, china,
Brazil, Argentina and South Africa as its members emphasized the urgency of the
need to reduce farm subsidy in the developed countries especially in the USA
and EU countries.
India
played a pro active role in this initiative. It was highlighted that the cotton
export dependent economies of the world like Chad, benign, male and Burkina
Faso have suffered massively due to the farm subsidy that the USA gives to its
25,000 cotton growers.
Even
Australia and New Zealand supported the stand taken by the G-21 group of the
developing countries. The revised draft presented for negotiations was heavily
titled in favour of the developed countries. It required the developing
countries like India to reduce farm subsidy by 70% while EU members and the USA
were required to reduce it by 41% and 36% respectively. The revised draft was a
big blow to the heightened expectation of the developing countries.
At cocoon
the developed countries did not yield much to the outstanding demand of the
developing world but cleverly included issues like investment, competition,
trade facility and government procurement to build pressure on the developing
countries.
Honk –
Kong ministerial conference ended in the same manner. The developing countries,
led by G-5 opposed the proposals of US and European Union on the ground that
they were against the interests of the poor countries. Doha round talks are at
the moment floundering because of the uncompromising stands adopted by players
such as EU, US and G-5.
The
interesting part of the whole thing is not one can be said to be the main
culprits because every Government involvement in the WTO negotiations is
squarely accountable and answerable to its constitution and population back
home, which means among other things, that no commitment can be made which will
lead to weakening of the domestic support base beyond a point.
Politically
the issue of AoA is so sensitive that no government, whether in the developed
or the developing countries, is in a position to compromise with the interests
of farmers in the name of collectivism.
Now the
question arises that what should be Indian’s strategy? As things stand at
present, the provisions of AoA do not appear to have a threatening impact on
domestic support and export subsidy under AoA. The non-product specific support
amounts to 7.5% of the value of agriculture production in India.
Since
product specific support is negative, the Aggregate measure of support to
Indian agriculture is still below the deminimise of 10 percent in terms of the
Uruguay round stipulations. India has already suggested that AMS be calculated
as the sum of the product specific and non-product specific support (WTO 2001).
As the input subsides to resource-poor farmers are exempt from reduction
commitments under WTO (these come under non product specific support), so the
overall level of support given to Indian Agriculture is less than the minimum
of 10% as set under WTO stipulations.
Agriculture
sector in India has responded positively to the launching of macroeconomic
reforms in 1991. With liberalization of exchange rate, the terms of trade for
agriculture have shown a significant improvement. Private investment in
agriculture registered a step rise in the post-reform period. For the first
time since independence India has become a net exporter of foodgrain.
The fear
that liberalization of imports would lead to massive influx of agriculture
imports too has been found to be misplaced. Quantitative restrictions on
imports have been lifted since April 2000. Though import like fruits, ketchup
and meat products have increased, they still account for a miniscule of total
agricultural imports.
Though
there is clearly a need to be constantly vigilant and work in league with other
developing countries and removal of tariff and non-tariff barriers, the major
challenges the developed countries at WTO, we need to take measures which make
Indian agriculture more competitive.
The
fortunes of Indian agriculture which now accounts for about 20% of the GDP and
provides employment to about 60% of labour force crucially depend upon greater
investment, both private and public, in irrigation power, roads and the ability
of agriculturists to access the modern technology specially the yield
augmenting technology. Conditions need to be created for widespread diffusion
and application of this technology by the farm sector.
To
conclude, it can be said that WTO provisions pose no real threat to Indian
agriculture though aspects related to IPR, removal of tariff and non-tariff
barriers and market access need to be dealt with constant vigil and suitable
expertise. Relevant institutional and legal changes (like in patenting) need to
be brought about Equally import is the need to restructure, modify and revamp
our agriculture sector so that it can rise up to the challenges thrown by
growing integration with the rest of the world. The need of the time is to make
it more efficient, modern diversified and competitive. The time to engineer a
second Green revolution has arrived.
