BackOpinion | It’s high time we got a better trade deal for our farmers
Agriculturalists keen on exports need all the help they can get to fight unfair world trade arrangements
PremiumThere are three types of trade negotiators. The first represent strong economies and have the means and muscle to extort the best deals for their people. Bringing up the rearare countries that have neither, and cannot drive a hard bargain. The second category accounts for most countries, caught between colonial pasts, new trade rules and blocs and national ambitions, all pulling in different directions. India is in the second slot.
Nothing, absolutely nothing underscores the unfairness of international trade rules like those on cotton and textiles, which have never been freely traded in international markets. India produces cotton at $0.95 cents a kilo, among the cheapest in the world. If logic ruled, Indian exports should rule the world. There is, however, little logic to international trade rules, which are now as fiercely fought as wars.
At the time of writing, more than 150 countries are talking about international textile trade under the aegis of the world’s free trade cop, the World Trade Organization (WTO) in Geneva, where 7 October was observed as World Cotton Day, an initiative of the so-called Cotton Four (Benin, Burkina Faso, Chad and Mali), supported by the WTO and a few United Nations (UN) organizations. The week began with an invocation to Mahatma Gandhi and his spinning wheel that has come to symbolize stoic determination and sacrifice today, as it did during India’s freedom struggle. Some of that respect is earned. The rest is wasted.
The harsh reality is a story of one of the longest trade distortions in multilateral trade history. It is called the Multi-Fibre Agreement (MFA), a system under which rich countries have imposed quotas for over six decades on imports from developing countries like India to shield their own mills. The MFA derogated from the free-trade rules of the General Agreement on Tariffs and Trade (GATT), the precursor to the WTO. In need of the world’s markets, New Delhi assumed that if it gave in to the US on new issues (patents, for example), it could win on textiles and other exports. It didn’t. The framing of the Geneva event this week revealed an intention—an unabashedly top-down effort to manage trade and use the same ruse that has been used to keep poorer countries in a permanent state of dependence on foreign products and services. The rules of colonization are now jointly negotiated, but with developing and developed countries playing dumb charades, it seems. India has shown good faith by joining the effort, but trade talks rarely work on faith.
Take the WTO’s Agreement on Agriculture (AoA), which has a classification system of the support and subsidies that governments give farmers. Under the AoA, countries can aid domestic farmers with product-specific or general subsidies by way of an Aggregate Measurement of Support (AMS), considered trade-distorting, but allowed up to a limit. The US gives $19 billion a year of AMS to its farmers; this turns Indian cotton uncompetitive there.
Under the AoA’s de minimis rules, AMS cannot exceed 10% of the value of a developing country’s agricultural output, while the limit is 5% for a developed economy. One trade negotiator said this amounts to a “double whammy" for India, which finds itself in a “heads we win, tails you lose" trap when it comes to trade in cotton and textiles. Indian cotton farmers, unlike their counterparts in the West (mainly the US), receive no subsidies, making it virtually impossible for them to capture large markets abroad. India’s history and economics intertwine to make a bad situation worse.
This sector is important not only because of World Cotton Day, but also because it betrays intentions in Western capitals and their partners elsewhere. A 10-year phase-out of the MFA began on 1 January 1995, when European, American and other rich-world importers transferred 16% of their textiles and clothing trade away from the MFA and placed it under the WTO’s general rules banning quotas. In three stages further, all quotas were supposed to go. When the clock struck 12 on 31 December 2004, textile trade would be free.
Or so went the theory. What was placed in the free-market basket ranged from parachutes and seat belts to women’s petticoats and floor coverings. There was worse. The WTO, unlike GATT, was a single entity. Countries could not pick and choose products they wanted to keep out, which resulted in plenty of cross-retaliation: If you don’t buy my steel, I will block your mangoes.
The fudge and trudge continues, aided in part by Delhi’s own math. Add to this the new romanticism woven around cotton farming, with farmers from poor countries, including India, thanking fashion shows in Western capitals for wearing modern khadi.
Cotton and textile exports from India are considered the poor cousins of patents and information technology in the fight for free trade. There are many khadi and cotton initiatives in the country that fail to distinguish between the variables of cost and price. Hence, one often hears words like “It costs only $5" for a product that retails at 10 times that figure on Europe’s high streets or in Delhi’s posh shops. India needs to break out of this. We should begin by discarding the word “cheap". Cost and price have as much in common as chalk and cheese. Countries around the world value their national products and treat them as national treasures. Khadi is associated with India’s freedom struggle. Why, then, are we still struggling under the world’s current rules on trade?
Chitra Subramaniam is an award-winning journalist and author
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