Clarifications sought : Shri Arun Jaitley from Shri Anand Sharma, Minister of Commerce

Clarification sought by Shri Arun Jaitley, Leader of Opposition, Rajya Sabha from the Hon’ble Minister of Commerce & Industry Shri Anand Sharma on his statement on the 9^th Ministerial Conference of the WTO held at Bali

 

Background of the negotiations:

The agricultural sector in India is still to be reformed. Over 60 percent of India’s population is dependent on agriculture for livelihood and employment. The contribution of agriculture to the GDP is only about 15 percent. Thus, in comparison to the Manufacturing and Services sector, those involved in agriculture are vulnerable.

The global distortions in agricultural trade are not because of trade barriers. They are on account of subsidies given by the developed countries like the United States and the European Union to their farmers. The net effect of these subsidies, which include the Green, Blue and Amber Box subsidies is over USD 400 billion. In the earlier ministerial at the WTO, an effort was made by the developing countries to alter the agenda of the WTO. The changed agenda inter alia required that unless trade-distorting subsides are eliminated, a fair global trade cannot emerge. It is only then that the developing countries can be expected to give market access. However, the present agenda as envisaged by the Draft Ministerial decision of December 6, 2013 indicates that the changing agenda has been abandoned and developed countries have had their way.

There is already a distortion in the Agreement on Agriculture, which came into force in 1995. The AOA permits 10 percent de minimis subsidies as measured at 1986-88 base. In the past 27 years, there is a huge price increase in agricultural products, as a result of which the net effect of the of 10 percent de minimis is reduced to a miniscule if the inflation in the food prices is factored in. To that extent, the agreement of December 6, 2013 becomes a victory for the developed nations.

My objections to the said decisions and the questions arising out of the same are following:-

1. What is the direction of the agreement?

In India the government supports the farmers through a system of Minimum Support Prices(MSP). The Indian farmer, who is predominantly subsistence, cannot compete with the subsidized farmers. The Government agencies procure the food grain from farmers at pre-determined prices and it is sold at cheaper prices to those who require the subsidized food grains. It is the substance of India’s food security programme. The effort of this agreement/agenda is that the purchase at the MSP prices should be paralyzed in the long run and subsidized foodgrains of international farmers may be made available for India’s Food Security Programme.

2. Does this not adversely affect the Indian Farmers?

This would deprive the market available to the India farmer thereby leading to the collapse of prices, and increase in suicides. Is it that while entering into this interim arrangement, there is no assurance as to what the nature of the final agreement would be? If the final agreement is to be in the same direction it would spell disaster for the Indian farmer.

3. Outsmarted in Drafting:

Paragraph 2 of the Agreement dated December 6 uses the word “Existing as of the Date of this decision”. Thus only those Food Security programmes would be allowed which are existing on December 6, 2013. The rollout of National Food Security Act has still not commenced. Does that get excluded from the ‘Peace Clause’ protection in the agreement dated December 6, 2013.

4. Inspection

Paragraph 3 of the Agreement clearly states that we have opened our entire food security programme for international inspection. Thus India’s bid to procure food grains from its subsistent and other farmers to be distributed to people below the poverty line would now be subjected to international inspection.

5. The Restraint

The only Restraint currently is that with regard to existing food security schemes, there would be no challenge made before the dispute redressal forum. However, would it not be open for developed countries to contend that a particular support is outside the Food Security Programme and challenge that before the International Dispute Redressal Forum. Thus the rollout under the Food security Act would be a subject matter of challenge under this Agreement since that can arguably fall outside the ‘Peace Clause’.

6. Challenge of Anti-Circumvention/Countervailing Duties:

Even though the Peace Clause prevents a challenge in relation to existing schemes, it does not stop an aggrieved country from challenging on the ground of Anti-Circumvention/Safeguards. The basis of the challenge is in-built in Paragraph 4 of the Agreement Dated December 6. It is now incumbent on a developing nation to ensure that food grains procured under the Food Security programmes do not distort trade or adversely affect the food security of other members. Originally, the onus of proving that a particular programme is trade- distorting was on a member alleging distortion. In the present Agreement, the onus has been shifted to the member granting subsidies. It is easily arguable that a support programme of a country distorts trade for the reasons that agricultural produce of another member does not find a market access in a developing country. Similarly, it is possible for another member to contend that the Food Security programme of a developing state prevents it from importing food for its people. On both these occasions, Anti-Circumvention/Countervailing Duties or Safeguard measures can be invoked by the aggrieved members. India’s trade would be adversely affected because such duties could be levied on all products being exported out of India.

7. Breach of the de minimis limit is inevitable now

India prima facie exceeds the de minimis limit. The 10 percent de minimis limit available for developing countries would be breached very easily by India. India’s food security programme is for an amount of Rupees 1,25,000 crores. Besides this, fertilizer subsidy, power subsidy and transport subsidy are available to the Indian farmer. The total quantum of subsidies would always be much higher than 10 percent of the value of agricultural production of 1986-1988.

8. Trade Facilitation:

India has not achieved anything positive at Bali. It has deferred the permanent solution by four years and agreed to onerous conditions on the interim solution. Additionally, we have agreed to the issue of trade facilitation, where the developed countries were always the demanders. The Singapore Ministerial had insisted on Trade Facilitation as one of the four Singapore issues. These were suspended by the European Union at the Cancun Ministerial. At Bali, additionally, the developed countries have got trade facilitation as a binding agreement. If we were agreeing to trade facilitation, India had to get a cost in return which we have failed to do. Trade facilitation is a part of single undertaking by which issues of market access and subsidy elimination had to be jointly tackled. Regrettably, the same has not been done.

The Declaration at Bali is adverse to India. Instead of accepting this harsh reality, the Indian delegation has proclaimed this as a victory.(The End)

(R K SINHA)