Too much for too little

After protracted negotiations, the general council of the WTO finalised an agreement on the Doha Work Programme earlier this month. At the core of the parleys in Geneva was the agreement on agriculture. The conditions and the economy of agriculture lack any global uniformity. The number of farmers in the EU and the US are relatively few but they are highly subsidised. India has the largest farm population in the world, with more than 600 million people dependent on agriculture for a livelihood. A very large number of them are subsistence and resource-poor farmers. Our economy does not permit high levels of agricultural subsidies. Consequently, there is no perfect competition in agriculture.

The high subsidies given by the US and the EU have distorted global trade in agriculture. Their farm exports are subsidised through export subsidies and export credits. The more their farmers export, the more they benefit from the government. They benefit from the Amber Box subsidies to produce more, from Blue Box subsidies that give incentives to limit production, and from Green Box subsidies doled out in the name of environment and livestock protection. The total subsidy given by the developed world touches $ 1 billion each day.

The subsidised farmers of Europe and the US compete with the resource-poor and subsistence farmers of countries like India. Our farm products are costlier as we can’t subsidise them adequately. Consequently, we can’t compete with subsidised products in global markets. Our surplus produce flood the domestic markets and depress prices at home. The subsidies given by the developed countries depress global prices and prevent Indian farmers from getting remunerative returns.

The EU and the US are now seeking market access for their farm products in developing countries. They want their subsidised products to compete with the produce of our non-subsidised farmers. It is an uneven competition that will pauperise, if not destroy, the Indian farmer. It is these aberrations that India’s negotiating strategy at the WTO must seek to correct.

At the Doha ministerial meet, the Indian delegation led by the late Murasoli Maran showed determination even in the face of isolation. Maran, then in a fragile state of health, stuck to his viewpoint even when global pressures mounted on India to yield. Maran was regarded by the US and the EU as a ‘fall guy’. But due to his grit, India’s presence could no longer be ignored. The ministerial meet at Cancun became a turning point in WTO history.

The emergence of G-20 was an important trade development. The big five among the G-20 — Brazil, India, Argentina, South Africa and China — lent weight to the voice of the developing world. Their argument was that unless trade distortions are removed by those who created them in the first place, fair trade is not possible. The deadlock was unfortunate but inevitable. The draft Cancun declaration could not be adopted since the developing and the least developing world had joined hands to protest against it. Yet, Cancun marked a shift in the balance of power in the WTO as the G-20 left an imprint on the WTO agenda. Reduction and eventually elimination of trade-distorting subsidies had now become the primary agenda.

It was from here that India and the developing countries had to consolidate the gains at WTO. In this backdrop, I am unable to hide my disappointment with the Draft Declaration approved by the general council. The WTO has never been a forum which has appreciated moral arguments. It is a bazaar where you pay for what you get and you charge for what you give. So did we get enough for what we gave?

The underlying principle behind export subsidies is that those who export more will be subsidised more. However, for the decision, developing countries don't have to pay an additional price because the Geneva Declaration is a reaffirmation of the Doha mandate which called for “reduction of, with the phasing out, all forms of export subsidies”. Having already paid a price for this at Doha, no additional concessions are to be made for this reaffirmation.

On September 13, 2003, speaking at the ministerial meeting, I said: “Not only are the distortions prevalent today being perpetuated but a slew of new measures to increase such distortions are being proposed. The continuation of the Blue Box in an enlarged form without any promise of any significant reduction and phasing out of future is a case in point. To give comfort to major subsidising countries distorting provisions in the Amber Box are sought to be continued. Both these measures will result in subsidising exports in many of these countries. Instead of ensuring discipline on the Green Box, we have been reduced merely to reviewing the criteria of Green Box measure”.

I concluded by observing: “We have so far constructively engaged in the post-Doha process in the hope that this is a development round. We wonder now whether development here refers only to further development of the developed countries”. Little did I realise that a few months later, the agreed declaration would still be disappointing. The Blue Box has now been legitimised. Over and above what was rejected at Cancun, Paragraph 1 now speaks of additional criteria to be added to the Blue Box. The Blue Box of permissible subsidies would be bigger than the existing Blue Box. The declaration now legitimises the Blue Box by observing, “Members recognised the role of the Blue Box for promoting agriculture reforms”.

We have now also accepted the Green Box as non-trade-distorting. The Green Box would not be subjected to any future reduction of subsidies. In fact, if the subsidies in the Green Box are even increased, we lose our right to challenge them. Most existing subsidies in the US are in the Green Box. The review of the Green Box is intended “to ensure that the basic concepts, principles and effectiveness of the Green Box remain and take due count of non-trade concerns”. We have painted ourselves in a corner by legitimising the existence of Green Box and the Blue Box. We have not only hurt ourselves in the Doha round but accepted a principle that will continue to haunt us in future rounds.

There is an element of optical delusion in the draft. We can rejoice that there would be a capping on the expanded Blue Box and an overall reduction. The developed countries can feel relieved that the Green Box is wholly outside any reduction commitment and jugglery of box-shifting would effectively prevent any reduction in the quantum. The colour of subsidies may change but will the quantum be substantially reduced?

My objections to the draft on domestic support are:

The writer is former Minister of Commerce and Industry