State of play - Export Subsidy

RUN-UP TO HONG KONG/ WTO SPEAK: RS Seshadri, Tilda Riceland Pvt Ltd

RS Seshadri

Tilda Riceland is the world's largest Basmati brand and India's largest Basmati exporter to the EU

The third pillar in the agricultural negotiations consists of three issues "" export credits, state trading enterprises and food aid. Negotiations have advanced most on this front and World Trade Organisation members have agreed on the elimination of export subsidies, though the time frame is yet to be decided.

There is also an agreement that all export credits or insurance programmes, with repayment period of over 180 days, be phased out.

G 20

While pressing for the elimination of export subsidies within five years, it has favoured phasing out export credits with repayments of over 180 days. It also wants to ensure that repayments of under 180 days be permitted without any hidden subsidies.

The G 20 is seeking special and differential treatment for developing countries regarding State Trading Enterprises (STEs) but supports disciplining them.

It also supports food aid in cash and wants aid to be extended through multilateral agencies.

UNITED STATES

It has proposed the elimination of export subsidies by 2010. The US has been aggressive in demanding the elimination of STE monopoly, especially by WTO members like Canada, China, Australia and New Zealand.

The world's largest trader has defensive interests on food aid and wants the present dispensation of granting food aid 'in kind' to continue.

European Union

The 25-country Union supports the elimination of export subsidies. It favours the phasing out of export credits or insurance programmes with repayments of over 180 days and wants the scope of officially-supported export financing schemes to be narrowed.

The EU has proposed that all statutory privileges and regulatory benefits, which are available to STEs, and have trade-distorting effects, should be discontinued.

The EU supports 'cash-only' food aid programmes and has suggested that 'in kind' food aid be restricted only to exceptional or emergency situations.

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What's at stake?

For fair trade, a duty reduction, especially in the EU, is required. For basmati, the duty cut will open the EU market to other players in India and Pakistan.

What should Kamal Nath do?

The government is not dropping its guard. It is working towards a total duty reduction and is protesting the high tariff and non-tariff barriers in the EU.

LEXICON

Export subsidies: Cash payments to local firms to boost exports when the domestic price is higher than the international price.

Export credits: A tool used by a government to underwrite the cost of doing business on commercial terms. For instance, the US will pay a company to ship wheat to Malawi and Malawi will pay the US government at discounted rates.

Sensitive products: Special and differential treatment given to agricultural products of developed countries for political, social or cultural reasons. These products are subjected to lower tariff and domestic support cuts.