Bullying Developing Countries for Profit While Food Subsidies Are Distortion of Free Trade

WTO 11th Ministerial Conference:

Bullying Developing Countries for Profit

While Food Subsidies Are Distortion of Free Trade

THE WTO 11th Ministerial Conference in Buenos Aires concluded on 13 December 2017 without any understanding and failed to issue any joint declaration of any kind. The meet collapsed badly. The Indian Government firmly, and rightly, maintained its position for a permanent resolution that would ensure that farm subsidies not to be capped within 10% of total production of food grains for the developing countries, so that India could continue with welfare measures for the beleaguered farmers as well as the Food Security Scheme. The United States backtracked from its own bipartite agreement on agriculture (AoA) made with India in 2014 (with the Obama administration) regarding farm subsidies. Food Security and Farm Subsidies remained the major bone of contention that eventually led to the collapse of the MC11.

This issue is vital for the developing countries where extreme poverty is widespread, to maintain food security for millions of poor people and ensure minimum support prices for small and marginal farmers. Even though it was not permanently clinched at the last WTO meet held at Bali in 2013, a Peace Clause was adopted for the next 4 years or till a permanent resolution is achieved, which mandated that WTO members will refrain from challenging any breach by developing countries for giving agricultural subsidies beyond the stipulated 10% limit. The deadline set for the permanent resolution was 2015 which is well past long ago.

The Buenos Aires MC 11 was expected to conclude this impasse by finally ratifying the Peace Clause to make it permanent. Had this happened, it would have been a positive step towards maintaining the dignity and sovereignty of developing countries who are in dire need of overcoming agrarian crisis, malnutrition, starvation, and poverty.

The US Trade Representative Robert Lighthizer rejected India's and China's demand for a permanent Peace Clause with respect to farm subsidies, arrogantly declaring that they were among the six richest countries in the world and in no position to claim for developing country status! India's Minister defended the claim for a special and differential treatment in his plenary address. In the end India stated that the meet ended without any substantive outcome due to divergence among the members: “unfortunately, the strong position of one member against agricultural reform based on current WTO mandates and rules, led to a deadlock without any outcome on agriculture or even a work programme for the next two years…India is surprised and deeply disappointed that despite an overwhelming majority of members reiterating it, a major member country has reneged on a commitment made two years ago to deliver a solution of critical importance for addressing hunger in some of the poorest countries of the world. This has the potential to irreversibly damage the credibility of the WTO as a ministerial decision of all countries present in Nairobi has not been honoured." The US Trade Representative on the contrary congratulated the WTO for a successful conference. The WTO director general Roberto Azevedo of Brazil asked member countries to do some 'real soul searching' to find a way forward.

It is said that even without a permanent ratification of the Peace Clause no country will raise a dispute in case of farm subsidies going beyond stipulated limit. So India's food security programmes and the ability to provide procurement at minimum support price to the farmers are protected.

Having said all this, let us be clear that India does not give enough subsidies to its poor and farmers. While subsidies are continuously on a decrease, they never crossed acceptable 10% limit ever in the past and in most of the cases they are as low as below 5% to zero. For all practicalities our fight for a permanent resolution is more a principled theoretical stand than an exercise resulting in tangible reliefs to our farmers.

Agricultural subsidies have been a major bone of contention between developed and developing nations since the inception of the WTO. It is an irony that rich nations have arbitrarily defined subsidies to the poor farmers as 'trade distorting' which have to be done away with within a decided time frame. To ensure food security to poor, to give farmers minimum support prices, procuring food grains by the government at MSP to save farmers from the vagaries of open market controlled by the private players, is considered 'trade distorting' by the WTO and rich nations, while giving direct support in cash, no matter how much, is not considered a 'trade distorting' support!

US gives cash subsidies to its farmers and has increased these many times over since WTO came into being. These are Green Box subsidies. Many nations including European Union and Australia take more benefits through Blue Box subsidies which too is a kind of direct cash support to their farmers. It is a proven fact that such direct cash transfers are quite unfeasible in case of poor farmers with small and marginal land holdings in developing countries like India. They are damaging to the cause of women's empowerment and child health. Moreover, such cash transfers are not likely to reach all deserving farmers owing to corruption and highly problematic land management where sharecroppers and tenants who make up the majority are not even recognised and recorded as such by the state.

Subsidies that are most needed by the people of the third world – such as food subsidies and minimum support price for farmers – are classified in the Amber Box which means that every country has to compulsorily get rid of them in spite of the fact that the majority of their population will as a result be rendered vulnerable at the hands of big corporates and imperialist forces. And, ironically, the ruling classes of these countries including India have duly agreed to do so. This makes WTO a highly unequal trade platform where poor countries have no say. Apparently, richer nations are successfully able to manipulate them using various tactics ranging from tacit intimidations to doling out short term favours.

While India has taken a consistent position in WTO with regard to MSP, food procurement, and other welfare measures, it is also a signatory to Nairobi outcomes which binds it to "completely eliminate subsidies for farm exports" by 2018 along with all developing countries. The same meeting also decided on Public Stockholding for Food Security Purposes asking members to engage constructively in finding a permanent solution. Under the Bali Ministerial Decision of 2013 developing countries are allowed to breach WTO's domestic subsidy cap until a permanent solution is found by the 11th Ministerial Conference in 2017. That permanent solution could not be reached this time again and now there is an impasse.

It is quite paradoxical to commit to eliminate subsidies and then ask for a mechanism like Peace Clause as a reprieve for exceeding the domestic subsidy cap. The answer actually lies in what is being implemented on the ground. In spite of heavy opposition and resistance by various movements, the Indian government is gradually, and effectively, moving towards a cash transfer mechanism to replace food subsidies. With the agrarian crisis deepening amidst increased incidents of suicides, farmers are on the streets agitating against the government's policies. After brutal repression and killings of farmers in Mandsaur, a nationwide movement has emerged. The Madhya Pradesh government took this as an opportunity to declare direct cash payment to farmers for the difference in the market cost of the farm produce and the declared MSP. This measure perfectly satisfies WTO-mandated conditions irrespective of how many of our farmers really benefitted. The scheme has utterly failed to give needy farmers the expected reprieve.

Pilot projects are on in various parts of the country for launching direct cash transfers under the Food Security Act. PDS shops have permanently been replaced in Chandigarh and Puducherry with direct cash transfer scheme.

India has informed WTO in July 2017 that its subsidies in agriculture are well below the imposed limit, and those on fertiliser, irrigation and electricity were reduced to $22.8 billion in 2014 from $29.1 billion in 2011. The other Green Box subsidies were also reduced heavily from $24.5 billion to $18.3 billion in the same time period.

The pace of reduction in subsidies is now faster in Modi Raj.

A recent report published in the Down To Earth magazine correctly states that "Once this subsidy to farmers and to common people for food security is replaced under WTO with subsidy to the open market through cash transfers, then prices will shoot up in India because the markets will dictate the prices of food grains, pulses, oil seeds and other agricultural products, in the same way as the prices of petrol and diesel is dictated by the market and not the government." (DTE, 9 November 2017)

Thanks to the WTO-dictated policy framework, Indian farmers are having to struggle for minimum support and remunerative prices to overcome their losses incurred due to exorbitantly high input costs. International prices of wheat, rice and other agricultural commodities fall too short to meet even the cost of production for Indian farmers. Moreover, with too high subsidies being given in developed countries, farmers of those countries are in a highly advantageous position compared to small producers of the third world. In 2015 US was exporting agricultural commodities at prices much lower than the cost of production thanks to its Green Box subsidies. The wheat, cotton, corn, and soybean were exported at prices below 32, 23, 12 and 10 percent respectively of the costs of production.

WTO and the 'Strategic Partnership' of India and US

India's ruling establishment continues to boast of its 'strategic partnership' with the US. It is entirely subjugated to US schema of Islamophobia and the so-called 'War on Terror.' In WTO the US has always been an adversary to the domestic economic interests of India. US has opposed India's positions on different occasions even to the extent of going to WTO Disputes Resolution Body. India lost its cause many times in this body resulting in diktats against our national priorities and interests. When India tried to take a preventive measure against the epidemic of Avian Flu by banning the import of chickens, the WTO Disputes Body ruled in favour of the US complaint, making it binding on India. India decided to expand its solar power capacity by 2022 and reserved only 5% of that capacity for the national bidders in national interest. But this is against WTO rules as every global bidder enjoys 'national' status, the US raised this in Disputes Body and won the case against India.

The Challenge and the Intent

The cost of production of India's farm products are higher than the global prices owing to very high amounts of food subsidy in developed nations. Indian governments are withdrawing subsidies, forcing small and marginal land-holder farmers to leave agriculture. This is evident in its policy of land grab, corporatisation of agriculture and marketing of the produce through APMC Act etc. This is a kind of reverse land reforms being enforced, which tacitly affects the lives and livelihoods of two-third of country's population.

The total number of cultivators in India is on the decline for the past two decades. This trend is going to continue if we consider recommendations that the NITI Aayog has given from time to time. The NITI Aayog is vehemently against small land holdings, and seeks to make them of a 'viable size' by macro level policy reforms. This undermines the reality that losing subsistence farming means leaving crores of citizens hungry, vulnerable to the exploitative labour market, and forced to join crores of other already pauperised by the current policy paradigm. The government is attempting to replace Minimum Support Prices with 'price deficiency payments'; food security with cash transfers; land reforms with land leasing; bypassing Land Acquisition Act of 2013 by suggesting state governments to incorporate provisions of Land Conversion and Leasing; and many more overt and covert methods which farmers may not be able to instantaneously recognise and confront.

India is in dire need of overcoming its agrarian crisis, ensuring food security to its millions, and ensuring a job market that can employ a huge unemployed workforce. This needs a complete shift in the policy paradigm which must go against the vested interests of big corporates, multi-national companies, and rich nations in WTO. Even the acceptance of a permanent Peace Clause is not going to serve our national interest, instead our government needs to fight for the complete exclusion of issues related to farmers' livelihoods, food security and employment from the purview of WTO negotiations. 

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