WTO NORMS AND INDIAN AGRICULTURE

WTO NORMS AND INDIAN AGRICULTURE by L.S.N PRASAD

There are a number of articles in the WTO’s provisions that are useful to developing countries. There is a hue and cry against the World Trade Organization or the WTO.This is because interested politicians, intellectuals and sections of the media have been focussing on some negative aspects of the WTO’s rules and regulations. Earlier, there were others countries too which opposed the WTO including the USA and countries in the European Union. But they were successful in achieving their objectives to a large extent. There are a number of articles in the WTO’s provisions that are useful to developing countries. Among these are: Article XI: General elimination of quantitative restrictions on member states. Article XII: Restriction to safeguard the balance of payments of the member countries. Article XVI: Subsidies granted by the State. Article XIX: Emergency action on imports of a particular product. Article XXIV: Territorial application of frontier traffic and customs and free trade areas. Article XXVII: Modification schedule for tariff reduction. Article XXXVI: Trade and development. These articles are meant to curb the exploitation of one member by another. Unlike earlier GATT negotiations agriculture was introduced in trading negotiations because of the huge subsidies given by the European Union. There is an erroneous view in our country that the Uruguay Round (of GATT) forced our country to cut back the subsidies on agriculture and that by this agreement we were also forced to move away from food grains to large scale commercial crops which has no market domestically.

Agriculture Subsidies

Due to the Agreement on Agriculture (AOA), India can no longer remain aloof from the rest of the world. It had to join the WTO. This AOA has established a number of generally applicable rules with regard to agriculture and trade related matters. Most of the developed countries are providing huge subsidies to the agricultural sector. In these countries not more than 10% of the population is dependent on agriculture. The below table gives the information about the subsidies that are being given to agriculture by different countries and the percentage of the population depending on agriculture India provides only 2.33% subsidy to agriculture. It is very small when compared with other countries. The Aggregate Measure of Support (AMS) to agriculture will be 10 percent in India as against 5% in the developed world. The total subsidy on agriculture in the developed world works out to $150 billion and in the developing world $19 Billion. If the AMS exceeds 10 percent in any country, it has to reduce by 13% by 2004. According to the WTO the AMS in India, product subsidies is 7.5% and subsidy on non-product is minus 38.5%. So there is no question of losing any thing in our agriculture by accepting the AOA.

Subsidies to Agriculture

Country Subsidy per hectare %subsidies Population dependant on agriculture EEC $82 37% 8% USA $32 26% 5% japan $35 72% 4% China $30 34% 24% South Africa $24 60.67% 18% india $14 2.33% 60% Source: Compilations from WTO reports

Tariffs

The tariff on agricultural commodities have been consider-ably restructured to comply with WTO requirements. India is committed to reduce tariffs on 686 agricultural products. The average tariff on agricultural commodities was 115% before the agreement. After the agreement it has been reduced to 35%. Along with 686 commodities the tariff on 587 other commodities is on an average 50% less than the negotiated tariff. Only on 10 commodities is the tariff rate more than the negotiated tariff rate. We must recall, in this context that two decades ago India agreed at an international meeting to reduce the tariff either to zero or to a minimum level on the import of dairy products. In other words, India had accepted in principle the import of agricultural products many years ago. In the case of edible oils we agreed (binding) to impose a tariff of up to 150 percent but the bounded duty at present is ‘0’. With a duty reduction on edible oils as low as 25%, hundreds of oil mills have closed down, groundnut farmers are unable to get a minimum price and even compelled to dispose of their product at huge losses. Pulses were imported under OGL (Open General License) at zero interest rates. In July 1999 the Government of India sought to renegotiate the tariff on pulses. But the international community has not yielded.

The Challenge

Investment: Indian agriculture needs a lot of investment to have large-scale production. By this we can reduce production costs. But the problem is that large scale agriculture displaces persons who are dependent on agriculture. Instead of criticising WTO we have to think of an alternative system. Corporatisation of agriculture is seen to be inimical to social justice. Redistribution of land to the landless poor through the various land ceiling acts leads to fragmentation which will be a hurdle to improved production as well as productivity. Patent System: Plants such as neem, turmeric and products such as Basmati (scented rice) are patented or about to be patented by American companies. It is strange that in India these have been household plants used in cooking and for medicinal purposes since ancient times. The system of Ayurveda has existed since times immemorial. All medicinal products based on plants and plant products must be patented by Indian companies. Conceding the patent rights to an American based company is ridiculous and we have to take this up with the WTO’s Dispute Settlement Board (DSB) at Geneva.

Fishing in Indian Waters

There is another problem that has arisen as a result of our accepting WTO norms. Every country has to allow fishermen of other countries to catch fish in its territorial waters. India exports special grade fish (Tuna and Prawns) to other countries and earns substantial foreign exchange. Around 10 lakhs people are dependent on fishing. Deep sea fishing leads to exhausting not only fish resources, but also displacement of our people in fish catching, processing industries etc. This too is an issue that needs to be discussed at the appropriate WTO forum.

Conclusion

India is a reasonably efficient producer of agricultural products. But the problem lies with the employment of people who are displaced in agriculture. In this case instead of finding fault with international law we have to think how best to apply that law in our interests The problem identified in the existing agreement on patents, anti-dumping duties, subsidies, trade and textiles indicate that the developing countries are waking up to the need to ensure that India has to take the lead in ensuring the WTO regime is used to maximum advantage to protect the interests of developing countries. India can increase, in fact triple subsidies on agriculture without violating any international law. Fight in the DSB for the patenting rights of some of the medicinal plants Fight for plant breeder’s rights Restrict foreigners from fishing in our territorial waters to the extent possible. We can also increase our catch by importing the appropriate technology to fish in deep sea waters Use the articles in the WTO Constitution to fight the exploitation of one country by another in international trade. Dr. L. S. N. Prasad is an Economics Lecturer in Guntur College in Andhra Pradesh. He is the Secretary of the Indian Liberal Group, Andhra Pradesh.

MOST FAVOURED NATION STATUS IN WTO

 Most-favoured-nation (MFN): treating other people equally      Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.

This principle is known as most-favoured-nation (MFN) treatment (see box). It is so important that it is the first article of the General Agreement on Tariffs and Trade (GATT), which governs trade in goods. MFN is also a priority in the General Agreement on Trade in Services (GATS) (Article 2) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Article 4), although in each agreement the principle is handled slightly differently. Together, those three agreements cover all three main areas of trade handled by the WTO.

Some exceptions are allowed. For example, countries can set up a free trade agreement that applies only to goods traded within the group —   discriminating against goods from outside. Or they can give developing countries special access to their markets. Or a country can raise barriers against products that are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate. But the agreements only permit these exceptions under strict conditions. In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners — whether rich or poor, weak or strong.

Government Budget 1 in flowcharts

Government Budget

Fiscal Policy in flowchart