Farm talks at WTO continue to undermine Indian farmers

MSP & PDS face existential threat if India caves in to rich nations

Business

March 9, 2021

/ By / New Delhi

Farm talks at WTO continue to undermine Indian farmers

In India over 800 million people depend largely on farming for livelihood (MIG Photos)

March 10 will see yet another round of negotiations on the contentious issue of agriculture at the World Trade Organisation. Historical and recent blunders by developing nations like India have distorted the negotiations’ focus. It is time for the developing world to revisit the errors of the past and force WTO to adopt not just new and fairer trade rules but also rebalance the agenda bringing the developing countries’ concerns in the negotiations whose pace and issues are currently set by the rich nations.

On March 10, the agricultural negotiations committee of the World Trade Organisation will undertake yet another round of discussion on numerous contentious issues that have been lined up for discussions by the Geneva-based trade regulator. These talks are significant for several reasons. First, they concern agriculture, which is the largest source of livelihood for an overwhelming majority of humanity as close to 70 pc of people, mainly in the developing nations, depend solely on farming for survival.

Second, these talks would be the first ones since the WTO has a new director-general who brings with her two radical elements, marking a first in the history of the WTO. On March 1, Ngozi Okonjo-Iweala of Nigeria became the first African and the first woman to head the WTO. This ought to put the focus of the WTO and its negotiations back where they belong – on the vast majority of humanity that is poor and lives in the developing world, instead of being driven by the handful of rich nations who have so far dictated terms to the WTO and their fellow nations, profiting from their economic heft as well as developing countries’ lack of technical expertise and broader understanding of the harmful impact of global trade rules.

It was under this situation that way back in the 1990s, the developing world had succumbed to the rich nations by agreeing to the highly unfair conditions that keep out of any future negotiations practically all the subsidies that the rich countries like the United States or the European Union pay to their farmers, by putting them in the so-called ‘Green Box’. At the same time, the developing countries allowed their own subsidies, which pale in comparison with the amount that the rich countries spend on farming, on a total as well as a per capita basis, to be classified in ‘Amber Box’ and hence up for negotiations.

Realising the blunders committed by the developing nations in handing over the farm talks on a platter and due to the rich countries not fulfilling most of their own obligations under the Doha Development Round of negotiations, India had successfully blocked negotiations on other issues that were important to the developed world and also on contentious parts of agriculture like export subsidies and food stocks. In a sudden turnaround during the Ministerial Meet in Nairobi in 2015, the then commerce minister Nirmala Sitharaman agreed to launch talks on agriculture. That blunder has since come to haunt India even though there is little doubt that both on a per capita basis as well as in terms of the absolute amount of subsidies, the rich countries spend many times as much subsidising their farmers than the developing countries.

Just about 32 developed countries have more than 90 pc of global Aggregate Measure of Support entitlements amounting to nearly USD 160 billion, translating into tens of thousands of dollars of subsidies per farmer, while a developing nation like India gives a measly USD 260 per farmer per year, about 100 times lower. Many experts have asked that elimination of the rich country subsidies should be the starting point of negotiations rather than subsistence subsidies given by most developing countries.

An assessment of farm supports in 54 countries by the Organisation for Economic Cooperation and Development (OECD), a rich country club, shows that in 2017-2019, the net transfer to the agriculture sector in these nations was USD 619 billion per annum. OECD countries supported agriculture to the tune of USD319 billion annually. Of this, 72 pc went directly to the producers. This amounts to 17.6 pc of a farmer’s gross farm receipts. In the case of emerging economies including, but not limited to India and China, the total support is USD 295 billion per year and 71 pc of it went to producers directly. This amounted to 8.5 pc of a farmer’s gross receipt.

In view of several such reports, leading a coalition of 47 developing nations called G33, India has said that an effective way to ensure food and livelihood security of the poor would be by eliminating the historic asymmetries in AMS entitlements in the Agreement on Agriculture and addressing growing hunger through effective food security programmes.

There is no comparison between an Indian farmer or his European or American counterpart, beginning with the sheer number of people or the proportion of the population that depends upon farming as the principal source of livelihood. There are hardly 10.5 million farmers with 12 million people dependent upon them across the entire EU. In the United States, just over 2 million farms employ 2.6 million people, while in India over 800 million people depend largely on farming for livelihood. Indian farmers also have the dubious distinction of being the smallest landholders in main farming countries. The average landholding for an Indian farmer is just 1.15 hectares while an average farming family in the US holds 180 hectares and its European counterpart 50 hectares.

The EU and the US, pretty much like any other major developed nation, splurge generously on their farmers, one of the most pampered sections of developed nations. Even though the average American farmer had an income of USD 72481, about 15 pc more than the national average, the US government spends close to USD 65 billion every year in farm subsidies and is extremely protective of its producers from cheaper imports and the EU over Eur 50 billion a year even though the average farm income is well over Eur 36,000 a year.

Need to move from colour coded to colour blind subsidies

In view of such stark disparities between the fate of the rich and poor country farmers, it is crucial to review the entire negotiating framework. As the new director-general hails from the largest African nation, and one of its poorest, with a large farming community, it may be time for the DG to nudge the negotiations towards addressing the historical imbalance in the negotiations and reset the agenda by bringing on the table subsidies per capita, which is the only fair measure of subsidies that each government provides to its farmers.

It would be important to put all subsidies into a colourless box and begin with the rich countries to fix their farming subsidies. The developing countries ought to get a fair amount of time, typically a decade or so before they even begin to address the subsidies and that too with adequate protections in place as no developing country is likely to become rich within a decade and just on the back of farm subsidies.

The point was evoked earlier in another round in February where domestic support remained high on the agenda. Both developed and developing nations also focused on food security as many developing countries reiterated their demand for progress on food security, including reaching a permanent solution on public stockholding programmes and allowing them to use a special measure to counter import surges and price drops in food commodities and cotton.

During the talks, it was evident that the WTO members do not even agree on where the trade-distorting support starts and how to regulate it. The developing nations repeated demand for support in per capita terms to be taken into account while calculating the support.

India needs to take PDS out of crosshair at WTO

Public Distribution System is another hornet’s nest that is set up to be stirred over the coming months. Four rounds of meetings have been scheduled on this highly contentious yet crucial element as the lives of billions of people depend on this. The meetings will review how the negotiations should address members’ food security challenges while balancing the need to prevent market distortions or adverse effects on others’ food security. They will also focus on notifications and transparency, anti-circumvention/safeguards, monitoring and implementation. Public distribution is key in most developing countries as it is the only way in which the poor around the world access food. India has frequently been challenged for its large food stocks with the rich nations calling them trade distortionary. India needs to be firm in this regard as the PDS is already the lifeline for over 850 million beneficiaries, who even with the PDS struggle to get two square meals a day.

PDS and MSP have both been the subjects of heated debates with the US and Canada opposing these programmes and alleging that India ‘substantially underreported’ the market support price for 5 pulses.

The situation is certain to have become even more critical due to the pandemic and its disproportionate, but catastrophic impact on the poorer sections of Indian society with over 120 million persons losing their jobs.

The pandemic has seen most countries around the world, including 35 countries and the European Union (EU), provide financial support schemes for farmers to face the Covid-19 pandemic. This is according to the annual Agricultural Policy Monitoring and Evaluation, 2020 by the OECD. In contrast, India has continued to provide little more than lip service to its farmers despite the enormous hit due to the pandemic. Even before the pandemic, over 10,000 farmers were pushed to their deaths every year. The data is almost certainly going to be far worse in 2020 due to the economic crisis.

There is yet time for the Indian government to learn from its errors and reset its own priorities vis a vis the WTO negotiations. It may not make Narendra Modi very popular with his counterparts in the developed nations, but he will at least be doing what is expected of any national leader – thinking of the nation and its people first.

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