By Chakravarthi Raghavan
GENEVA, Jul 22 2014 (IPS)

The world of today is considerably different from the one at the end of the Second World War; there are no more any colonies, though there are still some ‘dependent’ territories.

In the 1950s and 1960s, as the decolonisation process unfolded, in most of the newly independent countries leaders emerged who had simply fought against foreign rule, without much thought on their post-independence economic and social objectives and policies.

Some naively thought that with political independence and power, economic well-being would be automatic.

Chakravarthi Raghavan

By the late 1950s, the former colonies, and those early leaders within them who yearned for better conditions for their peoples, realised that something more than political independence was needed, and began looking at the international economic environment, organisations and institutions.

In the immediate post-war years, the focus of efforts to fashion new international economic institutions (arising out of U.S.-U.K. wartime commercial policy agreements) was on international moves for reconstruction and development in war-ravaged Europe.

As a result, in the sectors of money and finance, the Bretton Woods institutions [the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) or World Bank], were established – even ahead of agreeing on the United Nations Charter and its principle of sovereign equality of states (one nation, one vote in U.N. bodies) – on the basis of the ‘one-dollar one-vote’ principle.“Within the Bretton Woods institutions, there was no direct focus on promoting ‘development’ of the former colonies; what little happened was at best a side-effect of the lending policies of these institutions and the few crumbs that fell off the table here and there, often to further Cold War interests”

In pursuing their wartime commercial policy agreements, the United Kingdom and the United States submitted proposals in 1946 to the U.N. Economic and Social Council (ECOSOC) for the establishment of an international trade body, an International Trade Organization (ITO).

ECOSOC convened the U.N. Conference on Trade and Employment to consider the proposals; the Preparatory Committee for the Conference drafted a Charter for the trade body, and it was discussed and approved in 1948 at a U.N. conference in Havana.

Pending ratification of the Havana Charter, the commercial policy chapter of the planned international trade body was fashioned into the General Agreement on Tariffs and Trade (GATT) and brought into being through the protocol of provisional application, as a multilateral executive agreement to govern trade relations, i.e., governments agreeing to implement their commitments to reduce trade barriers and resume pre-war trading relations through executive actions subject to their domestic laws.

At Havana, during the negotiations on the Charter, Brazil and India had expressed their dissatisfaction, but had reluctantly agreed to the outcome and the provisional GATT.

The U.S. Senate, as a result of corporate lobbying, was however unwilling to allow the United States to be subject to the disciplines of the Havana Charter and did not consent to an ITO Charter; the result was that the provisional GATT remained provisional for 47 years, until the Marrakesh Treaty which brought the World Trade Organization (WTO) into being in 1995.

Within the Bretton Woods institutions, there was no direct focus on promoting “development” of the former colonies; what little happened was at best a side-effect of the lending policies of these institutions and the few crumbs that fell off the table here and there, often to further Cold War interests.

From about the early 1950s, to the extent that it provided any reconstruction and development loans to the developing world, the IBRD acted in the interests of the United States, its largest single shareholder, and favoured the private sector.

For example, early Indian efforts to obtain IBRD loans for the public sector to set up core industries like steel, which needed large infusions of equity capital that the Indian private sector was in no position to provide, were turned down, based purely on the ideological dogma of private-vs-public-enterprise.

It was only much later that a separate window, the International Development Association (IDA), was created at the World Bank to provide soft loans (with low interest and long repayment periods) to low-income countries.

But the IDA did not function as professed and did not provide loans to set up industries or promote development in poorer countries; in actual practice it acted to advance the interests of the developed countries in the Third World.

IDA loans came with conditionalities to promote structural adjustment programmes, such as unilateral trade liberalisation, resulting in deindustrialisation of the poorer African countries. Even worse, IDA loans came with additional conditionalities to cater to the fads and fashions of the day and the concerns of Northern, in particular Washington-based, civil society.

The IDA “donor countries” dominated its governance and used their clout there to sway IDA lending – initially, the IDA obtained funds from the United States and other developed countries, and there were two or three substantial replenishments thereafter.

Subsequently, the funds from loan repayments and the profits of the World Bank (earned by lending at market rates to developing countries) were used to fund IDA, with small new contributions from the “donors” at every replenishment.

Though developing countries borrowing from the IBRD at market rates thus turned out to be the funders of the IDA, they had no voice in IDA governance, and the developed countries, with very little new money, have maintained control over the IDA and IBRD policies, to promote their own policies and the interests of their corporations in developing countries.

On the trade front, in successive rounds of negotiations at the GATT, the group of major developed countries (the United States, Canada, Europe, and later Japan) negotiated among themselves the exchange of tariff concessions, but paid little attention to the developing countries and their requests for tariff reduction in areas of export interest to them.

The only crumbs that fell their way were the result of the multilateralisation of the bilateral concessions exchanged in the rounds, through the application of the “Most Favoured Nation” (MFN) principle. From the Dillon Round on (through the Kennedy and Tokyo Rounds), each saw new discriminatory arrangements against the Third World and its exports.

In the Uruguay Round (1986-94), culminating in the Marrakesh Treaty, the developing countries undertook onerous advance commitments in goods trade, and in new areas such as ‘services’ trade and in intellectual property protection, on the promise of commitment of developed countries to undertake a major reform of their subsidised trade in agriculture and other areas of export interest to developing countries.

These remain in the area of promises while, after the 2013 December  Bali Ministerial Conference, the United States, Europe and the WTO leadership are attempting to put aside as ‘out of date’, all past commitments, while pursuing the ‘trade facilitation’ agreement, involving no concessions from them, but resulting in the equivalent of a 10 percent tariff cut by developing countries.

In much of Africa, this will complete the “deindustrialisation process” and ensure that the Third World will remain “hewers of wood and drawers of water”.  (END/IPS COLUMNIST SERVICE)

* This text is based on Chakravarthi Raghavan’s recently published book, ‘The THIRD WORLD in the Third Millennium CE’.

Excerpt:

As industrialised countries celebrate the World Trade Organisation’s Bali accord, the developing and the least-developed countries are forced to carry their battle to another day after securing only half-baked results and grandiose promises, said several trade ministers.

“While the agreements reached at Bali are important, it is important to ensure balance in the agreements,” said Rob Davies, South Africa’s trade minister. “We are of the view that there is structural imbalance in which the least-developed countries secured only best endeavor solutions while there is a binding agreement on trade facilitation,” Davies told IPS.

“The developing and least-developing countries secured only promises and best endeavor outcomes while agreeing to a comprehensive trade facilitation agreement,” said Kenya’s foreign minister Amina Mohamed.
In sharp contrast, the United States, the European Union, and other industrialised countries praised the Dec. 3-7 Bali Ministerial Conference for delivering the trade facilitation agreement.

“For the first time in its almost 20-year history, the WTO reached a fully multilateral agreement,” said U.S. Trade Representative Ambassador Michael Froman. “WTO Members have demonstrated that we can come together as one to set new rules that create economic opportunity and prosperity for our nations and our peoples.”

EU Trade Commissioner Karel De Gucht said the breakthrough at Bali in wrapping up the agreement on trade facilitation, and some deliverables in agriculture, were truly significant for the trade body.

“They take the WTO from the darkness of the multilateral era to [shine] light on multilateral action,” commissioner Gucht told reporters. The EU commissioner, however, admitted that there was a lack of balance in the overall Bali agreement.

For over 15 years, the industrialised countries and some advanced developing countries such as Hong Kong, Singapore, South Korea, Chile and Mexico have pushed hard for rapid liberalisation of customs procedures as part of the trade facilitation agreement so as to enable their exports to rapidly penetrate the developing and least developed countries without many hassles.

Proponents say the TF accord is a “good governance agreement” for customs procedures that industrialised countries want the developing and the poorest countries to implement in the coming days and years on a binding basis – failing which the latter can be hauled up at the WTO’s dispute settlement body.

In return, the developing countries managed to secure only best endeavor agreements on some issues of their concern in agriculture, such as an interim mechanism for public stockholding for food security, transparency-related improvements in what are called tariff rate quota administration provisions, and most trade-distorting farm export subsidies and export credits.

The poorest countries as part of the “development” dossier secured another set of best endeavor improvement concerning preferential rules of origin for exporting to industrialised countries, preferential treatment to services and services suppliers of least developed countries, duty-free and quota-free market access for least-developed countries, and final monitoring mechanism for special and differential treatment flexibilities.

Ironically, the Bali accord has weakened the language on issues raised by the developing and the poorest countries as compared to what was agreed in the WTO Hong Kong Ministerial Declaration in 2005.

The Kenyan foreign minister – who was the chair of the WTO General Council at the Hong Kong meeting – spoke about this puzzling change.

“What is the guarantee that the industrialised countries will implement the promises now made in the Bali agreement, particularly the provision of financial and technical assistance to implement the trade facilitation commitments, when they did not implement the commitments that were made eight years ago?” she remarked to IPS.

The Bali package included ten agreements. They comprise a binding agreement on trade facilitation and four descriptive items in agriculture such as general services, public stockholding for food security purposes, understanding the tariff rate quota administration provisions of agriculture products, and export competition.

In the development dossier, the Bali package offered non-binding best endeavor outcomes on preferential rules of origin for least developed countries, organisation for the waiver concerning preferential treatment to services, duty-free and quota-free market access, and a monitoring mechanism on special and differential treatment.

“We have only partly accommodated the concerns of the poorest countries,” said Davies. “The priority out to be on development and implementation issues in the coming days,” the South African minister emphasised.

India steadfastly pushed hard for strong language to ensure that the public stockholding programmes for food security continued without interruption until a permanent solution was arrived at.

Despite opposition from some major industrialised countries, including the United States, and also opposition from some developing countries, India managed to secure an interim mechanism that would last for four years during which there is a commitment to find a permanent solution. If there is no outcome within four years, the interim solution will be extended till members agree to a permanent outcome.

However, there are many notification and safeguard conditions that India and other developing countries will have to implement in order to avail themselves of the interim mechanism for food security. The U.S. said these conditions are essential to ensure that public stockholding programmes for food security in one country do not cause food insecurity in other countries.

The post-Bali work programme has admitted that there are glaring asymmetrical outcomes in the “Bali Package.” “Issues in the Bali Package where legally binding outcomes could not be achieved will be prioritised… Work on issues in the package that have not been fully addressed at this Conference will resume in the relevant Committees or Negotiating Groups of the WTO,” according to the Bali Ministerial Declaration.

In short, the developing and least-developed countries will have to carry their fight as there are no “legally binding outcomes” on any of their issues. That is the message from the Bali Ministerial meeting.

Also, the Bali meeting shall be remembered for the manner in which the developing and the poorest countries remained divided thanks to a grand strategy adopted by the Northern countries.

“Unless the developing world remains united it is highly unlikely that they will make progress on their issues in the next year, and this is even more true in a period when the North is going to push hard its new trade agenda,” said a trade minister who preferred not to be identified.

Second day of the WTO's ministerial conference in Bali, Indonesia. Credit: © WTO/ANTARA

By Ravi Kanth Devarakonda
BALI, Dec 4 2013 (IPS)

The World Trade Organisation’s ninth ministerial meeting at Bali, Indonesia has morphed into a fierce battle between the countries seeking social safety nets for hundreds of millions of poor people and those insisting on having advanced import-facilitation programmes in the developing countries on par with the industrialised nations.

These two narratives openly clashed at the plenary meeting Tuesday. “Millions of people depend on food security and millions of people are going to see what will be done on this vital issue,” Kenya’s foreign minister Amina Mohamed told IPS.

“In Africa there are millions of people who need food security and they are all waiting to see if the ministers in Bali are going to be sensitive as an international community to the livelihood and survival concerns of the most vulnerable people,” she said.

She urged the trade ministers “to come up with a solution to send a message that we heard what you are saying and that we want to support your issue and we acknowledge food security is a vital issue.”

India’s trade minister Anand Sharma said at the plenary meeting that “Food security is essential for four billion people and is an important goal of the millennium development goals.

“Food security is non-negotiable,” said Sharma, maintaining that India cannot accept the current interim mechanism because it fails to provide legal certainty. Public stockholding of food grains to ensure food security must be respected, he said.

In the run-up to the Dec. 3-6 Bali meeting, India along with a group of countries including Bolivia, Cuba, Kenya, South Africa, Venezuela and Zimbabwe pressed hard for improved rules to ensure that their public stockholding programmes for food security are not undermined by flawed trade rules.

The rules in the WTO agreement on agriculture were largely crafted by the European Union and the United States during the 1986-1994 Uruguay Round of negotiations. While the rules insulate mega subsidisers from clear discipline, they are somewhat indifferent to the concerns of countries with large populations. “Dated WTO rules need to be corrected,” Sharma said

More importantly, “any trade agreement must be in harmony with our shared commitment to eliminate hunger and ensure the right to food, which we accepted as part of the MDG agenda,” the Indian minister said.

At issue is whether developing countries like India and Kenya, which have massive public stockholding programmes, particularly procuring food grains from small and poor farmers at minimum support prices, should face legal challenges due to rules that are inconsistent with current global economic realities.

Over the last 15 years, prices of essential food items have gone up by over 250 percent.

India, along with the members of the G33 coalition of 46 developing countries led by Indonesia, made a strong case for changing some parameters in the current WTO agreement on agriculture.

The G33 called for updating the external reference price in the WTO agreement to reflect current global prices. The coalition also demanded that excessive inflation be taken into consideration when assessing the commitments.

The industrialised countries, led by the U.S. and EU, vehemently opposed the G33 demand last year, saying they would never allow any change in the rules. But after sustained sabre rattling and intimidating threats, the developed countries backed down from their initial position, promising a more flexible response.

They offered what is called a “Peace Clause” as part of the Bali package, which would provide temporary respite – for no more than four years – from any trade disputes. But although they agreed to continue the discussion, they did not commit to finding a permanent solution.

In sharp contrast to their opposition to food security proposals from the developing countries led by India and Kenya, the industrialised countries pressed for a brand-new agreement on trade facilitation, which involves comprehensive changes in the customs and import procedures. The new TF agreement calls for a number of changes in the previous WTO rules.

If concluded at Bali, the trade facilitation agreement would save around 441 billion dollars for developing countries, said the EU trade commissioner Karel de Gucht. In fact, the International Chamber of Commerce claimed that a WTO trade facilitation agreement would provide gains to the tune of one trillion dollars for the developing and least developed countries.

WTO director general Roberto Azevêdo has also made similar claims over the last three days to drum up support for the Bali package.

The trade facilitation agreement, said de Gucht, is “essentially a way to help many countries cut red tape at their borders, to become more efficient and effective traders.”

Although the industrialised countries have constantly repeated the mantra that trade facilitation would deliver enormous gains, they have so far offered no conclusive evidence to that end.

“Unfortunately, these figures depend on too many unjustifiable assumptions to be relied on,” wrote Jeronim Capaldo, an academic at the Global Development and Environment Institute at Tufts University near Boston in the U.S.

Inaccurate estimates and unclear gains have become the order of the day. “It is hard to see how uncertain gains and unequal distribution of costs [underlying trade facilitation estimates] can justify diverting resources to trade facilitation from badly needed policies such as the strengthening of social safety nets,” Capaldo argued.

The Bali meeting has brought the simmering conflict into the open. Participants described it as a clash of these two narratives – a food security-plus approach as proposed by India and other developing countries versus a TF-plus approach pushed by industrialised nations and some developing countries.

South Africa’s trade minister Rob Davies cautioned against the imbalances in the Bali package, particularly the tilt towards trade facilitation.

Kenya’s foreign minister Mohamed, meanwhile, said “I agree with India, and we all want a clear solution…I’m hopeful that language will be found to move forward on this issue… I don’t think it is in anybody’s interest to allow this ministerial to send the wrong signal that we cannot come together and that we cannot find language to satisfy millions of poor people. It is important we achieve a concrete result on this at the Bali meeting.”

The fate of the Bali package now hangs in the balance. In the next 72 hours, the world will know whether a solution could be found for addressing the food security issue – or whether the Bali package will be torpedoed due to unbridgeable differences.

The battle lines are clearly drawn. At a time when food security in the developing countries is snowballing into a major trade conflict between the developed and developing countries, what in reality is at stake is the livelihood security of an estimated 1.5 billion small farmers in the majority world.

Food security is simply a smokescreen to provide a cover-up for the global efforts being made to dismantle the very foundations of Third World agriculture.

Numerous U.S. farm groups have written to U.S. Trade Representative Michael Froman as well as U.S. Agriculture Secretary Tom Vilsack objecting to linking food aid with price support programmes.

Devinder Sharma

Not finding anything wrong in legitimate domestic food aid programmes, 30 farm commodity export groups have however expressed concern at the “price support programmes, which have more to do with boosting farm incomes and increasing production than feeding the poor.”

These U.S. farm commodity export groups, which ironically receive monumental federal support every year, have questioned the need to provide any relaxation in current discipline even on a temporary basis. Accordingly, such an exemption will result in more subsidy outgo and result in further damage to U.S. trade interests.

This response comes in the wake of a representation by 15 of the major farmer unions of India, including the Bhartiya Kisan Union (BKU) and the Karnataka Rajya Ryota Sangha (KRRS), to Indian Prime Minister Manmohan Singh: “Forth-seven years after the green revolution was launched, India is being directed at the World Trade Organisation (WTO) to dismantle its food procurement system built so assiduously over the past four decades.

“[T]his ill-advised move is aimed not only at destroying the country’s hard-earned food security but also the livelihood security of over 600 million farmers, 80 percent of them being small and marginal.”

India, a country which lived in the shadows of a ‘ship-to-mouth’ existence – when food would go directly from the ship to hungry mouths – has over the years emerged self-sufficient in food production.

This historic turnaround was possible only because India had adopted the two planks of what I call a remarkable ‘famine-avoidance’ strategy: providing farmers with an assured price support for their produce, and introducing a food procurement system that provided for a guaranteed market and at the same time helped get food to the poor in the deficit regions through a network of ration shops.

Withdrawing the price support for farmers or freezing it at the de-minimis level of 10 percent as applicable under the Agreement on Agriculture will make farmers vulnerable to the vagaries of the market.

Since Indian farmers do not receive any direct income support (as producers do in the U.S./EU), this move alone will destroy millions of livelihoods and force farmers to abandon agriculture and migrate to the cities. Already, with agriculture becoming economically unviable, close to 300,000 farmers have committed suicide in the past 15 years.

As per the de-minimis criteria, Article 6.4 (b) of the Agreement on Agriculture provides for total support not to exceed 10 percent of the total value of production for most developing members (except for China, where it is 8.5 percent as part of its accession commitments).

In India, as per WTO calculations, farmers are getting 24 percent more minimum support price for paddy crop since the base period of 1986-1988. Restricting the farm gate prices at a maximum of 10 percent will only push more and more farmers to take their own lives.

Nor does it make any economic sense. Considering that between 1986-1988 and 2013, the prices of rice and wheat have increased by more than 300 percent, and prices of inputs like fertilisers have risen by 480 percent in the same period –
according to World Bank commodity price data – the base period of 1986-1988 certainly has become outdated.

Instead of asking India to accept the Peace Clause for a period of four years, WTO chief Roberto Azevêdo should in fact be asking the 159-member organisation to look for a permanent solution to the vexed issue.

The best solution would be to change the reference period from 1986-1988 to something more recent, especially after 2007, when the world witnessed a global food crisis that resulted in food riots in 37 countries.

But that is not acceptable to the U.S./EU, which are pushing aggressively to do away with the commitments of ensuring food security to 67 percent of India’s hungry population under the newly enacted food security law.

Still worse, the U.S./EU are openly continuing not only their domestic subsidies but also their export subsidies.

Not complying with the 20 percent reduction in Aggregate Measure of Support, they have very conveniently shifted these subsidies to the notorious Green Box to continue and even increase them without limits.

And as the Indian farmers’ unions said, “the U.S. has more than doubled its subsidy from 61 to 130 billion dollars between 1995 and 2010, while the EU’s subsidy of 90 billion euros in 1995 came down to 75 billion euros in 2002, but rose again
to hover between 90-79 billion euros between 2006-2009.”

According to the U.S.-based Environmental Working Group, the U.S. had paid a quarter of a trillion dollars in subsidy support between 1995 and 2009. These subsidies have not been reduced in the 2013 Farm Bill.

Moreover, the U.S. does not find its own 100 billion dollars in support for its various food aid programmes in 2012 as trade-distorting, but has problems with 20 billion dollars in support that India is expected to provide to feed its 830 million hungry people.

U.S. farm subsidies are therefore unquestionable. These are considered to be non-trade-distorting,
and are not even on the negotiating table at the Dec. 3-6 WTO Ministerial at Bali, Indonesia.

Well, the writing is on the wall. What is at stake at Bali is not food security, but the very future of Third World agriculture. Feeding the hungry is possible by importing food, and that is what the U.S. farm commodity export groups have conveyed.

Putting more income into the hands of Third World farmers is not acceptable, as it makes developing country agriculture economically viable and therefore deals a blow to U.S. agribusiness trade interests.

* Devinder Sharma is a renowned Indian food and trade policy analyst, an award winning journalist, author, writer and thinker, whose incisive analyses makes him a leading voice from the developing world.

(END/COPYRIGHT IPS)

By Martin Khor
GENEVA, Oct 1 2013 (IPS)

A fight taking place in the World Trade Organisation (WTO) negotiations towards the Bali Ministerial Conference shows how the rules on agriculture allow developed countries to continue to shell out huge subsidies while penalising farmers in developing countries.

Food security is one of the key issues now being negotiated at the WTO as part of its preparations for the Bali Conference in December. For developing countries, food security and the livelihood and incomes of small farmers are top priorities.

Reducing and eventually eliminating hunger worldwide is one of the key Millennium Development Goals (MDGs) adopted by governments at the United Nations. In the present negotiations in New York on formulating Sustainable Development Goals in the U.N., food security, nutrition and agriculture make up one of the key clusters of issues.

Against this background, there is a remarkable discussion now taking place at the WTO as part of the preparations for Bali. Developing countries grouped under the G33 are asking that their governments be allowed to buy food from their small farmers and stock the food without this being limited by the WTO’s rules on agricultural subsidies. Some governments plan to provide food to poor households free or at subsidised rates.

Martin Khor

However their proposal is facing resistance, mainly from some major developed countries, especially the United States, whose official position is that such a move would “create a massive new loophole for potentially unlimited trade-distorting subsidies”.

This clash is an outstanding example of how the agriculture rules of the WTO favour rich countries while punishing developing countries, including their poorest people.

It is well known that the greatest distortions in the trading system lie in agriculture. This is because the rich countries asked for and obtained a waiver in the 1950s from the liberalisation rules of the General Agreement on Tariffs and Trade (GATT), the predecessor of the WTO.

They were allowed to give huge subsidies to their farm owners, and to have very high tariffs. This was at the expense of developing countries, which have a comparative advantage in agriculture.

When the WTO was set up, it had a new agriculture agreement that basically allowed this strong farm protection to continue. The rich countries were obliged only to reduce their “trade-distorting subsidies” by 20 percent but could change the nature of their subsidies and put them into a “Green Box” containing subsidies that are termed “non trade-distorting or minimally trade-distorting”.

There is no limit to the Green Box subsidies. And several studies have shown that many of the Green Box subsidies are in fact trade-distorting as well.

With this shifting around, the rich world’s agricultural subsidies have been maintained, or have actually soared. For instance, WTO data show that total domestic support in the U.S. grew from 61 billion dollars in 1995 to 130 billion dollars in 2010.

A broader measure of farm protection, known as total support estimate, which is used by the Organisation for Economic Co-operation and Development, shows that the agriculture subsidies of the developed country members climbed from 350 billion dollars in 1996 to 406 billion dollars in 2011.

The effects of continuing developed-country subsidies have been devastating to developing countries. Food products selling at below production costs are still flooding into the poorer countries, often eating into small farmers’ incomes and livelihoods. Ironically most developing countries are in a situation where they are not allowed to have the same huge subsidies.

The reason is that the agriculture rules say that all countries have to cut their trade-distorting subsidies. So if a developing country has not granted subsidies before, it is not allowed to give any, except for a small minimal amount (10 percent of total production value) known as “de minimis” support. Most developing countries had no, or few, subsidies when they joined the WTO due to lack of funds.

This is where the present WTO controversy comes in. The developing countries under the G33 are asking that food bought from poor farmers and stocked by the government should be considered part of the Green Box without conditions.

The present rule sets an unfair condition. Even if governmental stockholding programmes for food security purposes in developing countries are placed under the Green Box, there is a provision that the ‘subsidy’ element in such a national purchase scheme should be accounted for in the country’s AMS (aggregate measure of
support), which is the main category of subsidies considered to be trade-distorting, and which for most developing countries is limited to de minimis amount.

Other Green Box subsidies, including those that developed countries mostly use, do not carry such a condition.

The unfairness of this condition is worsened by the way the subsidy element is calculated in the Agriculture Agreement, as the difference between the acquisition price and the external reference price.

The problem is that the acquisition price is the current price level, while the ‘external reference price’ is defined as the average world price level in 1986-1988 (during a period when the Uruguay Round that led to the WTO was being negotiated).

Since 1986-1988, global and local prices of food items have increased tremendously. The 1986-1988 price is thus obsolete and much too low to be used to determine whether a developing-country government is subsidising its farmers.

Countries that are in danger of exceeding its AMS or de minimis maximum level include India. Its parliament has just passed a food bill that entitles the poor (two-thirds of the population) to obtain food from a government scheme that buys the food from small farmers.

But the estimated 20 billion dollars the government will spend annually may exceed the allowed AMS and de minimis levels, because India was not a big subsidiser before the WTO rules came into force.

Other developing countries that provide subsidies to their farmers and consumers, such as China, Indonesia and Thailand, may also one day find themselves the targets of complaints.

For rich countries that are paying a total of 407 billion dollars a year in subsidies to disallow poor countries from subsidising their small farmers is really an especially bad form of discrimination and hypocrisy.

Whether this controversy can be settled fairly before the WTO’s Bali Ministerial Conference remains to be seen.
(END/COPYRIGHT IPS)

Excerpt: