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Is India's stance at the WTO justified?

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Business Standard New Delhi
Last Updated : Jun 14 2013 | 3:22 PM IST
Bharat Krishak Samaj

For a country like India, where 320 million people suffer from hunger and malnutrition and approximately 70 per cent of the population is directly or indirectly engaged in agriculture, there could not have been a more realistic stance and line of negotiation than the one adopted by the Indian delegation led by Commerce and Industry Minister Kamal Nath.

Major contentious issues "" tariff, domestic support, export subsidy and the provisions of the special safeguard "" have remained unresolved since the Uruguay round. The failed negotiations until now have proved disadvantageous to developing countries.

Developed countries have twisted distortions in the Agreement on Agriculture (AoA) in their own favour to boost the export of their agricultural commodities and to substantially enhance domestic support to increase production for export.

At the same time, the provisions of the "green box" (non-trade distorting domestic support) and the "blue box" (mildly-distorting domestic support) subsidies have not put any obligation on the developed countries to reduce them.

In addition to this, the provisions of the special safeguard are available to the developed countries to protect their farmers against any adverse effect from the increase in import and a fall in prices. India's apprehensions and its concern on these matters have been unambiguously expressed at Geneva. The good news is that India's stance won immediate support from the G-20. In the face of the uncompromising attitude of the developed countries, it is reassuring that the G-20, led by India, China, Brazil, South Africa and Argentina, has agreed to stand united and exert pressure on developed countries to relent and realise their folly in widening the gulf and creating a situation where the negotiations were close to a dead-end.

Developing countries find it extremely difficult to compete in the global market. In the face of highly-subsidised farming in developed countries, even their own domestic markets are gradually becoming out of bounds for agricultural commodities. The US Farm Bill, 2002, provides for an additional $ 180 billion as federal support for just 9,00,000 farmers over the next 10 years.

In contrast, the agro-rural situation in India is alarming. Underdeveloped infrastructure, rising cost of inputs, unremunerative prices of agricultural produce, squeezing access to market, calamitous situations arising due to floods and drought in addition to tough global competition have made agriculture, the major source of subsistence and livelihood in the country, unrewarding. The poor condition of agriculture has led to an unending exodus of the rural masses to the cities in search a living.

India will drift further at its own peril if it does not adopt a tough stance at the World Trade Organisation (WTO). Heavily subsidised farm produce and commodities of developed countries and the removal of quantitative restrictions have turned India into a virtual dumping ground of unwanted imports.

For a predominantly agricultural country like India, policies, programmes and projections should be focused on providing food security to the people. Therefore, there should be greater emphasis on making agriculture economically rewarding and globally competitive. Post-WTO, this effort requires the unambiguous assertiveness of India's position at the WTO meets.

The developed countries are reducing the green and amber box (highly trade-distorting domestic support) subsidies and shifting them to the blue box. This is a sinister ploy to mislead the developing countries.

The infamous "Derbez draft" floated during the Cancun ministerial "" notoriously called the blended formula "" that found concurrence with the US and the European Union was misleading and a trap to induce developing countries to lower their tariff and open up their markets to competition. However, the blended formula had to face stiff criticism from the G-20, the G-33 and the Cairns groups because these groups realised that agreeing to the draft meant that they will have to cut tariff proportionately much lower than the developed countries.

Unless the Quad and OECD group of countries phase out and substantially reduce subsidies, refrain from attempting to shift subsidies to the blue box, lower domestic support for agricultural exports and proportionately cut down high tariffs, we should not feel obliged and coerced and give way to political pressure for opening up or widening our market at the cost of ruining our agriculture sector.

RAM UPENDRA DAS
Fellow,
RIS*

The conflicts over economic interests among countries have been going on for quite some time, if one goes by the developments, or "lack of developments" at the World Trade Organisation (WTO). The major problem areas of agriculture, implementation, Singapore issues and so on are nothing but a manifestation of a lost vision for global welfare, despite the recent breakthrough at Geneva. The global macroeconomics of today has missed taking cognisance of asymmetries in the stage of development as adequately as it should have.

One the other hand, those who believe in Vasudhaiv kutumbakam (the world is a family) seem to have traversed towards microeconomic pursuits of developmental concerns without situating them in the broader macroeconomic context.

The magnanimity inherent in the concept of macroeconomic cooperation at the global level is getting substituted by loosely defined regional, national and sectoral interests. The time has come to remind ourselves that developing countries cannot overlook the imperatives of their vast populace that is living in abject poverty. Conversely, developed countries cannot overprotect their affluence, that too at the cost of the developmental concerns of developing countries. At the same time, developed countries have to meet their own challenges such as unemployment.

Against such a backdrop, and given the gap in perceptions in WTO, it is evident that such a situation only compounds the problems, and solutions are hard to come by. Yet, solutions have to be found. Efforts would have to be made at three levels, at least. First, there is a need to revisit the development economics at the theoretical and conceptual level since it does not take into account the essence of global interdependence.

Neither the new trade theories nor the new growth theories have been able to contribute effectively to understanding the new, global economic realities. A new development theory aimed at global welfare is needed "" one that blends the insights of international trade, foreign direct investment, global technology flows, information exchange and so on in a comprehensive manner.

Further, accommodating global asymmetries and interdependence simultaneously poses a major challenge at the conceptual level, especially when global welfare has to be attained through maximising national welfare with economies at different levels of development.

A theory of achieving global welfare and development through global institutions with the help of globally-accepted economic policy instruments needs to be evolved. This would be crucial in providing policy impetus to the global flows of factors of production such as capital and labour as well as goods, services, technology and information.

Perhaps the crisis at the analytical level in development economics is finding expression in the diametrically-opposite negotiating stances during the WTO deliberations, as also in common problems of unemployment in both the developed and developing worlds.

Second, since at no point of time can all countries be on an equal footing economically, reaching an optimal path of global development may prove to be illusive. This would require evolving an optimal approach towards solving complex and diverse economic problems in an international economic forum like the WTO. The need of the hour is to lay down the contours of an economic middle path to deal with global and WTO issues.

Middle path would mean flexibilities in thinking and attempts to see the world from others' points of view. There should be a special and differential treatment to all the WTO issues at a philosophical level to begin with. Inherent in the concept of global economic welfare through an optimal approach, treading on the middle path is protection of national economic welfare for all countries, whether developed or developing or the least developed.

Third, a better understanding of global economic realities through a new theory of economic development for attaining global welfare and adopting middle path towards negotiations on global economic issues as those of the WTO must be reflected at the level of implementation. The greatest assistance of the global community to the impoverished would be in terms of honouring the commitments made in the WTO. It is better not to commit than to falter on commitments.

The upshot is that a new vision is necessary to take the WTO process forward because WTO needs to evolve as a forum to reduce global economic asymmetries. This must come first at the level of each nation and subsequently, in the spirit of international economic cooperation at a multilateral level. Let all move towards the middle-path but the developed countries need to travel more, because they are developed.

*Research and Information System for Non-aligned and Other Countries
(The views expressed here are personal)


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First Published: Aug 04 2004 | 12:00 AM IST

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