TRADE: Indian Farmers Have Little to Cheer For in WTO Deal

By Ranjit Devraj Reprint | | Print |

Ranjit Devraj

NEW DELHI, Aug 2 2004 (IPS) - Agriculture and trade experts in India – a country with 650 million farmers – are not sharing the euphoria of the government at having, supposedly, pulled off a favourable farm deal at the just concluded World Trade Organisation (WTO) framework negotiations in Geneva.

An official statement released by the Indian delegation at Geneva headed by Union Minister for Commerce and Industry, Kamal Nath, claimed that the revised framework for negotiations adopted by the WTO general council in Geneva late Saturday had met key Indian demands.

”We got what we wanted. We have been able to protect our defensive as well as offensive interests in agriculture,” Nath was quoted by Indian media reports on Sunday.

But the powerful National Farmers’ Coalition (NFC) which represents 75 percent of India’s farmers and has on board political leaders like the Communist Party of India (CPI)’s Atul Kumar Anjaan, thinks otherwise.

”India and other developing countries should understand that they have been had by the complex technical language which now actually allows the United States and the European Union to increase their domestic support (of agricultural products),” said Devinder Sharma, a spokesman for the NFC.

”The exports of these countries can actually be dumped on others,” said Devinder Sharma, spokesman for the NFC.

Sharma told IPS in an interview on Monday that the framework would still work out to have an import substitution effect to the extent that these large domestic subsidies would allow a substantial lowering of prices of agricultural products originating from the U.S. and E.U.

The WTO’s 147-member General Council adopted over the weekend, in Geneva, an agreement that aims to cut subsidies to farmers in wealthy countries and bring down barriers to the multi-billion-dollar agricultural trade.

Two weeks of talks ended with a pact pledging ”substantial reductions” in the tariffs and subsidies by which Europe, the United States and Japan have distorted markets for agricultural exporting nations.

At the same time, the agreement allows countries to protect certain ”sensitive products”, leaving the details to be negotiated.

While Nath claimed that Indian farmers have been ”completely protected as no significant product that would adversely affect our agriculture sector has been allowed access,” Sharma said in practice India like other member countries would be compelled to make ”substantial improvements in market access for all products.”

Sharma said there was a need to look more closely at the ‘market price support’ (MPS) component of these ‘subsidies’. The MPS is the gap between domestic and world prices at the farm gate.

The EU ‘total support estimate’ (TSE) was, according to the last OECD report, 121.890 billion euros (146.9 billion U.S. dollars) in 2003 and the U.S. TSE at 94.076 billion dollars.

”But considering the MPS as a true subsidy implies that it is meaningless to align domestic agricultural prices to world prices. These world prices make no sense – they are highly dumped prices and highly volatile,” said Sharma.

Close readings of the framework by Sharma and other members of the National Farmers Coalition reveals a sleight of hand made possible by playing on the distinction between authorised levels of support and actual applied support.

”These distinctions are commonly misunderstood by non- specialists at trade talks and seem to have happened once again.” Sharma revealed.

There has also been box shifting from amber to blue and then to the green box with misleading interpretations of words like ‘subsidy’ and ‘support’.

The EU has substantially reduced its administered prices (‘intervention prices’) since 2002 and compensated for these reductions by blue and green subsidies.

In WTO terminology, subsidies in general are identified by ”boxes” which are given the colours of traffic lights: green (permitted), amber (slow down – i.e. be reduced), red (forbidden).

In agriculture, things are, as usual, more complicated. The Agriculture Agreement has no red box, although domestic support exceeding the reduction commitment levels in the amber box is prohibited; and there is a blue box for subsidies that are tied to programmes that limit production.

The National Farmers’ Coalition said it would be releasing a detailed analysis of the WTO framework for negotiations and explaining its true impact for farmers in India who have been hit by falling prices and poor returns ever since the country embarked on a programme of liberalisation a decade ago.

Indeed, the defeat of the right-wing Bharatiya Janata Party (BJP) government in the elections between April and May was attributed largely to widespread resentment among farmers in the rural areas that they have been left out of the benefits economic restructuring.

In states like southern Andhra Pradesh – which took a lead in economic restructuring with direct support from the World Bank – farmers have committed suicide as a result of their inability to repay rising debts and costs of farming inputs including electricity.

Farm experts have attributed the suicides to the emphasis laid on unsound crop diversification programmes promoted by the World Bank as part of structural adjustment which also resulted in a shift away from staple foods needed for food security to cash crops that meet luxury requirements.

India’s new Prime Minister Manmohan Singh had , soon after taking office, toured Andhra Pradesh where he announced release of cash payments to farming families deprived of breadwinners by the suicides.

As with other developing countries that have gone in for structural adjustment programmes, India has been steadily dismantling state support for food procurement, withdrawing support to farmers and relaxing land ceilings to enable corporations to move into agriculture.

In contrast with farmers’ bodies, India’s trade and industry chambers have welcomed the WTO framework.

”It is satisifying to see that a number of our concerns have been addressed and reflected in the deal,” said a statement from the Federation of Indian Chambers of Commerce and Industry (FICCI). .

The Confederation of Indian Industries (CII) said it particularly welcomed increased market access in non-agricultural items and according to its president S.K. Munjal provided a ”good basis for further negotiations.