Sample Materials of SSC CGL (Tier -3) Study Kit

Subject: Essay

Topic: WTO & Indian Agriculture

India is one of the founding members of WTO which came into existence on January 0 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 process of 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 contentious 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 derive 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 veeb instances where in the USA farmers have been given subsidies worth millions of dollars to keep their farmland uncultivated. In India 70% of the holdings are not of the economic size, staking 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 and keep the developing countries virtually at the periphery of world market. The salient features of this agreement include three stain provisions which have become effective since 1 Jan, 2000. Under market access all non-tariff barriers like quota will be converted into tariffs. India has already removed quantitative restriction on all her imports. 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 be reduced 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 by 21%. The base period for these cuts is 1986-90 or 91-92 if exports were higher in that period. Over the same period the developing countries are to reduce the value of direct export subsidies by 24% and in 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 within 10 years by developing countries. AoA has classified all subsidies given to farmers into three categories ABER 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 sub­sidy is provided only upto certain limit of production. GREEN BOX subsidies pro­duce no adverse effects either on production or on trade. Direct financial aid to farmers comes under this category. The developed countries have used provisions of AoA to further the interest of their farmers.

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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 quality to be put into BLUE or GREEN BOX subsidies. These countries are constantaly pressuring the developing countries for greater market access for agricultural products 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 matters 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 sustenance of their 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 countres were concerned about food security, proverty elimination and economic growth with respect to the process of globalization. It is alleged by developing countries that the developed world shows only hypocritical concern about these issues. In the farm bill in the USA and the collective farming policy in EU, greater 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 farmers but insisted that agricultural income would still be protected. This is a wily move as it replaces a trade distorting measure like subsidy by protection of agriculture income which will not be treated as trade distroing 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 recousers in the scnce that in the absence of such protection fewer resources would be committed to agriculture protection will serve as an incetive 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 susidy found place in it.

The Ministerial meet at Cancun in Mexcio 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, Agrentina 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, Benin, 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 tilted 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 Cancun 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.

Hong-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 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 culprit because every Government involved 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 India’s strategy? As things stand at present, the provisions of AoA do not appear to have a threatening impact on Indian Agriculture. So India need not lose its sleep over the stipulations to reduce 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 foodgrains. The fear that liberalisation 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 imports 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 like China and Brazil for greater market access into developed countries and removal of tariff and non-tariff barriers, the major challenges to Indian agriculture come from within. To counter the cleverly crafted strategy of 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 India 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, modem, diversified and competitive. The time to engineer a second Green Revolution has arrived.

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