The United Progressive Alliance government will seek a vote of confidence in a special Parliament session that starts 21 July. On the same day, a World Trade Organization?(WTO)?ministerial dialogue on the Doha Round starts.
A key issue that will be discussed is agriculture. India has a view on this that represents and protects its own interests and that of other developing countries and it has emerged a vocal and strong leader of a group of such nations. But things are different now. The government is pushing ahead with the Indo-US nuclear deal and whether it will compromise its stance at WTO under American pressure on at least some key issues that affect million of our farmers is something that will become clear only when the trust vote is over.
A weak government without a political majority may not play the role it has been playing in recent years in ensuring a better bargain for farmers in developing countries. These concerns have attained serious dimensions in the context of global food inflation and the resultant farm crisis in many countries. This ministerial meeting is a final effort to clinch the deal before the present US government’s term ends. With growing concerns about the US economy, there is a genuine fear that the next US president may take a protectionist stand.
The passing of the US farm Bill—which increases farm subsidy by more than $20 billion (Rs86,400 crore) along with restrictive trade practices—by two-thirds majority in the US Congress despite a presidential veto is an indication of the return of protectionism in developed countries. Ironically, even though the present round is called the Doha Development Round, the focus is on opening up free trade that will benefit developed nations, sometimes at the cost of developing ones.
The text of the draft agreements on agriculture as well as non-agricultural market access was released on 10 July. A preliminary reading of the text on agriculture does not suggest anything more substantial than drafts released in May and February. The real issues that stalled the negotiations are the special products and special safeguards mechanisms sought by developing countries to protect their small farmers, and the subsidy enjoyed in developed nations by large farmers and companies into agriculture.
Developing countries have demanded that special products should either be subject to no tariffs or very small reductions. However, special safeguard mechanisms would allow a temporary increase of relevant tariffs in response to increase in import volumes, or decline in price levels. The essential argument for the use of both these instruments is to increase the policy space available to developing countries in managing livelihood concerns, while continuing to integrate into the global economy.
The reasoning behind these measures is the reality that small and marginal farmers in most developing nations, including India, lead an exceedingly precarious economic existence and are not positioned to compete effectively in relatively open agricultural markets, particularly given the levels of subsidies enjoyed by agricultural producers in developed countries. Apart from the fact that such a strategy is required to protect the livelihoods of the rural poor, the special exemptions sought have to be seen in the context of shrinking policy space available to developing countries in helping small and marginal farmers cope with import competition, particularly so when direct production subsidies are not permissible in the WTO framework.
On this issue, there is some forward movement in conceding the demand of the developing countries. According to the proposed formula, “Developing country members shall be entitled to self-designate special products guided by indicators based on the criteria of food security, livelihood security and rural development. There shall be 10-18% of tariff lines available for self-designation as special products19. Up to 6% of/no lines may have no cut. The overall average cut shall, in any case, be 10-14%.”
However, developing countries had demanded 20% of their tariff lines to be designated as special products.
On the second issue of subsidy reduction by developed nations, there is almost nothing on offer. Bound by the European Union’s common agricultural policy (CAP), there is no possibility of additional subsidy reduction other than what is part of CAP. However, the US has already increased farm subsidy through the farm Bill, despite this being condemned by WTO director general Pascal Lamy. The targets for elimination of export subsidy are virtually unchanged.
Even on the issue of opening up their markets, developed countries have stuck to their position. But even these minimal concessions by developed countries are linked to better access for their manufacturing goods in developing countries. Given the present draft text, it is difficult to see the negotiations concluding in this ministerial meeting. Developed countries are ever increasingly taking protectionist stands, while expecting developing countries to open up their markets. If the recent experience of global food inflation and vulnerability of developing countries to international price volatilities is any indicator, opening up of international trade may not be the best option for developing countries.
Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi. Farm Truths looks at issues in agriculture and runs on alternate Wednesdays. Respond to this column at firstname.lastname@example.org