WTO-CANCUN: India Takes Lead in Opposing Farm Subsidies

By Ranjit Devraj Reprint | | Print |

Ranjit Devraj

NEW DELHI, Sep 10 2003 (IPS) - With the support of countries like China that have a big stake in agricultural exports, India can be expected to play an uncharacteristically aggressive game during the World Trade Organisation meeting in Cancun, Mexico this week.

”We are going to be firm on getting a commitment that the European Union to reduce trade-distorting agricultural subsidies. . . we have the support of countries like China and can also count on other countries like Brazil and Australia,” India’s Arun Jaitley, union commerce minister, told IPS before leaving for Cancun.

The fifth ministerial conference of the WTO begins in Cancun on Wednesday and runs until Saturday.

”There can be no movement on reforms unless the developed countries are prepared to accept deeper cuts in agricultural subsidies, ” Jaitley said.

Jaitley’s confidence stems mainly from homework done on trip to Beijing in June when joint strategies at Cancun were high on the bilateral agenda. ”We (India and China) reckoned then that as representatives of a third of humanity we should have a major say in the WTO,” he said.

Jaitley already claims success in helping protect the right of developing countries to resort to compulsory licensing and import drugs cheaply from other developing countries that have such capacities such as India and China.

”India played an important role in the agreement and our interest was not commercial,” he said. According to Jaitley, the fact that India is ranked fourth in the world in terms of purchasing power parity (PPP) while China ranked second made the combination of the Asian giants a formidable bargaining side.

Purchasing power parity is the exchange rate at which goods in one country cost the same as goods in another country and is linked to relative currency strength.

India now leads a group of 20 countries that includes China, Brazil and South Africa that account for some 50 percent of global agricultural production.

Together, the bloc is opposed to a joint European Union-United States proposal for developing countries to lower tariffs while offering to make very little real movement on reducing agricultural subsidies.

For Jaitley’s pains, India is already beginning to gain a reputation as party spoiler. At a video press conference last week, EU Trade Commissioner Pascal Lamy accused India of trying to create an artificial North-South divide.

”I can’t see how India could agree to Brazil’s position on liberalising agriculture,” Lamy said adding that India was merely resorting to tactics by leading the anti-subsidy group. ”We can learn negotiating tactics from them (India)”.

EU’s farming commissioner Franz Fischler, who also figured in the video press conference, said the EU has shown a lot of flexibility on the agricultural issue but ” I have not seen the same flexibility in other camps so far”.

But elsewhere, Fischler has been quoted saying that the EU can be expected to ”vigorously defend our right to support our farmers” and that this was not ”up to the WTO, or to some of our trading partners to tell us to wipe out European agriculture with all the jobs, the environmental benefits and the cultural heritage that our farmers provide”.

If EU negotiators are under pressure from their farmers to fight for their interests, India’s estimated 400 million farmers are also keenly watching what Jaitley and his team will do at Cancun.

Last week, the Swadeshi Jagran Manch (SJM) party, which is closely affiliated to Jaitley’s ultra-nationalist Bharatiya Janata Party (BJP) called for India’s withdrawal from the WTO and explore possibilities for the formation of an alternative trade body.

Addressing a rally of farmers and workers organised by the SJM in the national capital, Dattopant Thengadi, a pro-BJP trade unionist said: ”Developed countries like the U.S. and those in Europe will never give us equal status in the WTO which was formed in the first place to exploit developing countries.”

”India must not allow negotiations on new issues until the deliberations relating to the pre-WTO Uruguay round are complete,” Thengadi said.

Jaitley said what India only wanted to see was a reduction of domestic subsidies and gradual reduction of export subsidies at a defined rate leading up to eventual elimination. ”We cannot reduce tariffs without seeing reduction in subsidies first.”

He said that distortions in agriculture did not begin with developing countries trying to protect their farmers, but with the developed countries providing huge subsidies to their farmers.

But there are many Indian experts who caution that that pushing too hard could prove counterproductive – and among these are Yoginder Alagh, expert on agriculture and minister for science and technology in the mid-90s.

According to Alagh, to start with, Indian agriculture is slowly beginning to lose its competitiveness. Imports have steadily been rising for example in such crops as cotton, where imports now meets a third of the demand, he added. Oilseed production has been on the decline from and the sugar economy is in crisis, resulting in a cash crunch for farmers reflected in reports of mass suicides.

”What we have to do is to protect our interests in trade and compel a strategic movement to trade liberalisation,” said Alagh.

Alagh was also critical of Indian policy of refraining from interventions in agriculture on the grounds of budgetary constraints. ”Selected interventions in some markets in some periods is all that is needed to help farmers,” he said.

Bibek Debroy , director of the prestigious Rajiv Gandhi Institute of Contemporary Studies, wrote from Cancun that India’s proposals have a good chance of being thrown out because it does not have agricultural export subsidies and provides very little domestic support for the sector.

”As we haven’t got domestic agro reforms in place, we are quite happy if nothing much happens in agriculture,” commented Debroy.

So what can India’s negotiators led by Jaitley constructively do at Cancun?

About the best advice on that question comes from T N Srinivasan, a professor of economics at the Yale University of Indian, who said: ”By abandoning its defensive posture and becoming an enthusiastically active participant India can play a major role in preventing a collapse (of the WTO talks) .”