Life After WTO Pacts

 - Dasu Krishnamoorty

From 1st April 2001 there will be a seachange in the pattern of our foreign trade as a result of the ground we conceded to developed countries at Marrakesh in 1994 where we signed the WTO agreements. Around 715 items so far covered by quantitative restrictions will now gain access to domestic markets because what are called QRs will disappear from 1st April 2001. Fears about a consequent surge in imports are justifiably fuelled by the silence of media and the central government on what routes the latter is exploring to ensure that the exit of QR regime does not hurt domestic industry and agriculture. Increasing these fears, the west has given evidence of its stridency and duplicity in anticipation of the expiry of 31st March deadline, peeved by India's successful entry into the global foodgrains export market. The USA and Canada, two major players in world wheat trade, have raised trade-related objections in WTO alleging India is subsidising exports of wheat through a state-trading agency.

Does Canada remember that just a week ago, its own minister for international trade told the Hindu (22 March 2001) that India should assume a 'leadership role' in evolving rules governing world trade and that 'we do not want concerns of just a few developed countries reflected in the agenda of the next round' and that India's subsidy is lower than and is a minuscule fraction of the massive western subsidisation of their food exports? Our target (remember, it is only a target) of fifty lakh tonnes of wheat export is peanuts compared to the actual world trade in wheat of 10.5 crore tons.

Economists and media have failed, as is their wont, to see the connection between the rising graph of suicides by farmers in the country, symbolic of the unprecedented crisis gripping the Indian countryside, and our accession to WTO agreements. India Today (5 March 2001) reports: "Unfolding in the last few months is the largest and most enigmatic agriculture crisis faced by independent India. Largest, because it engulfs every state from Punjab to Kerala, and Gujarat to Assam, afflicting every crop from foodgrains to oilseeds to fruits. Enigmatic, because it is a crisis that has built up amidst an unprecedented 12 successive normal monsoons and is marked by falling (or stagnating) output and falling prices." The left parties have asked the government to come out with a white paper because "a serious crisis had enveloped the agricultural sector with prices of all commodities falling." Throughout the country, farmers are agitating for better prices for their products and suicides have become a common symptom of despair in the rural areas, where 70% of the country's population depends solely on agriculture and allied operations.

Foodgrain prices are rapidly dropping. The price of rice was Rs. 968 per quintal in 1998; it fell to Rs. 805 in 2,000. The price of wheat per quintal was Rs. 759 in 1998; in 2,000 it dropped to Rs. 605. Price of pulses per quintal was Rs. 2,380, which fell to Rs 1,400 in 2,000. If we open our doors to foreign foodgrains and edible oils, which are heavily subsidised (developed countries' subsidies for an agricultural export is around Rs 1,57,500 crores a year), our own farm output will have no takers in our country. Finance Minister Yeshwant Sinha, who pleaded with the WTO to permit the country to continue with its QR regime for some more time, practically did nothing to reflect this concern for the farm crisis in his budget.

The country's subsidy to agriculture is a measly 3%. As Jairam Ramesh says "the level of farm subsidy in India is negative and hence we can afford to increase it. The WTO uses a concept called the aggregate measure of support (AMS). For India, this AMS has been calculated at minus 31.1% of the value of agricultural production for the year 1995-96 as compared to a plus 3.1% for the US, 32.5% for Japan and 22.9% for EU (European Union). The minus sign for India simply shows that our farmers receive output prices that are below global prices. Many farmers' organisations would agree to subsidy cuts if Indian farmers get world prices."

The country has to argue for a provision in the Agreement on Agriculture, which is now under review, to impose QRs if unhindered imports destroy domestic markets or prices of farm commodities continue to fall. There is no point in agreeing to bind ourselves by agreements when developed countries invent backdoor strategies to obstruct imports from developing countries. The QR regime, at a level sufficient to provide cover to our agricultural products, is a must and the government must find ways of negotiating a reprieve. The Chinese are dumping not only foodgrains but also consumer goods such as electronic and telecommunication gadgetry and, now, motorcycles. Edible oils accounted for 70% of our farm products imports in 1,999-2,000 at a cost of Rs 8,100 crores. In the first six months of last year pulses costing Rs. 70 crores were imported. Fruit imports increased by more than 20 times in terms of cost. Despite health hazards like the foot and mouth disease, we continue to import meat. The AoA provides for QRs in the case of danger to animal and human health. We must take advantage of this provision to stop importing meat from the west. It is also difficult to understand what prevents the Finance Minister to raise import tariffs on agricultural products to the level of the West, which is permitted by the WTO ?

It is some solace to know that the country is now seeking a meaningful review of implementation issues before agreeing to new responsibilities and this may be completed before the ministerial conference in Qatar in November. We have also asked developed countries to reduce their tariffs on agricultural products during the WTO negotiations to provide easier market access to developing countries. In a paper submitted jointly with several other developing countries, India proposed a 50% cut in import duties from the level existing on 1 January this year. Even after such a cut, our exports to the developed world will cost more than the domestic products in the West because of the heavy direct and indirect subsidies they enjoy. The paper points out that many products of export interest to developing countries will continue to face high tariffs as the Agreement on Agriculture commitments envisages cuts mostly on items in which there is little trade. The paper quotes a WTO-UNCTAD study which found that tariff peaks in the OECD countries reach 350% and above in extreme cases for some products of interest to developing countries. In the European Union, for instance, the out-of-quota tariff for bananas is 180%; in Japan the tariff ranges between 460 to 600% for dried beans, peas and lentils and in the US groundnuts in shell attract a tariff of 164%. Such manoeuvres like green and blue boxes in AoA and high tariffs in violation of WTO agreements have ensured a one-way flow of liberally subsidised farm products from the north to the countries of the south which have been let down by their negotiators.

The negotiating process in WTO is not democratic though theoretically each member has one vote and decisions are taken by consensus. Developing countries, however, are handicapped by behind-the-door parleys that take place among the countries of the North before consensus is achieved. WTO structures are so complicated and knowledge-intensive that the developed countries have always an advantage in making use of them. For example, how can 30 negotiators from 134 poor countries match the wits of an American army of 250 negotiators? According to Dr. M.S. Swaminathan, eminent farm scientist, the text of the WTO agreement has a dominantly Western bias. This could be the result of frequent changes in our negotiating teams and the consequent lack of continuity enabled the Western teams to turn the document to their advantage. Apart from this, our negotiators do not have a commitment to the country and are easily intimidated by Western teams. Many of them get busy, looking for sinecures with UN agencies or MNCs in return for favours done or promises of future favours.

But what are green and blue boxes? These boxes are mentioned in the WTO agreement of 1994, which, according to Dr. Swaminathan, was an unjust, and unequal trade bargain. The experience of the last six years has shown that poor countries have yet to realise the expected share of the markets of the developed countries. Market access in the West has been limited by both tariff barriers and sanitary and photo-sanitary measures while developing countries were tricked into wide-opening their markets to goods from the west. According to Dr. Swaminathan, developed countries made several exemptions in the original agreement on agriculture from the calculation of domestic support. They created two categories of exemption known as the green box and blue box. The green box protects policies, which provide services or benefits to agriculture or the rural community, stockholding for food security, domestic food aid, investment subsidies, and agricultural input subsidies for low income and resource-poor families. The blue box exemption includes direct payments to farmers under production-limiting programmes. That is, farmers will be paid for not producing. Added to this are unconscionably high tariff barriers on imports like Japan's 2,000% import duty on rice. These boxes have taken care to deny markets to food imports from developing countries.

Dr. Swaminathan says that since 70% of our population derives their livelihood from crop and animal husbandry, forestry & agro-forestry, inland & marine fisheries and agro-processing & agri- business, we should press for a livelihood box which permits us to impose quantitative restrictions on the import of agricultural commodities, where dispassionate analysis indicates that such imports will kill livelihood opportunities for small and marginal farmers and landless agricultural labour, as well as for those involved in small-scale agro-processing and agri-business activities. Food security in our country, says Dr. Swaminathan, is best expressed in terms of lakh person years of jobs, rather than in lakhs of tons of foodgrains. Therefore, jobs/livelihoods for Indians should be the bottomline in our trade negotiations. A livelihood box may be needed for the next 15 years by which time, Swaminathan hopes we can improve the productivity of our agriculture and the adequacy of our post-harvest and agro-processing infrastructure.

It is not that the WTO bulldozer is irreversible. Before embarking on the so-called 2nd generation reforms, the economic establishment will do well to pause and assess the damage Narasimha Rao reforms have done to the poor and wretched of this country. What has happened in Philippines has begun to happen in India. The small farmer who is the backbone of the country's agriculture will disappear as a result of hunger or suicide. Kevin Watkins of Oxfam writes: "Silently, relentlessly and away from the glare of the world's media 'free trade' is displacing communities and destroying their livelihoods with all the ruthless efficiency of a civil war." In the Philippines, in the past, import restrictions protected domestic food producers in order to bolster rural employment and national food self-sufficiency. A recent Oxfam reported that average household incomes of maize farmers in Philippines will be reduced by as much as 30% over the six years as cheap imports from the US drive down prices in the local markets. The report estimates that in the absence of trade restrictions, US maize could be marketed at less than half the price of maize grown on the Philippines island of Mindanao, and the livelihoods of upto 5 lakh Filipino maize farmers (out of the total 12 lakh) are under immediate threat.

The Finance Minister has left the agriculture sector to the mercy of the market forces in his anxieity to accelerate the 2nd generation reforms. The central government is trying to wriggle out of its commitments to farm development. NABARD will hereafter assume this responsibility, mobilise funds from the market, and lend to states at manageable rates of interest. Whatever farm development that has taken place so far has been due to central funding, though agriculture is in the states' list. With the clipping of the wings of the Food Corporation of India, farmers will have nowhere to sell their surpluses but the clutches of middlemen. Several economists maintain that there are provisions in the WTO agreement which permit the country to restore balance in our trade relations with the developed world and turn it to our advantage. In their public service function, national media owe it to the country to explore and show alternatives to a totally inequitable trade regime inflicted on developing countries not only by the west but by their own netas.

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