TWN Info Service on WTO and Trade Issues (Nov18/10)
15 November 2018
Third World Network
   
US unveils new negotiating strategy on counter-notifications
Published in SUNS #8794 dated 13 November 2018

Geneva, 12 Nov (D. Ravi Kanth) - The United States has unveiled a new negotiating strategy at the World Trade Organization by circulating counter-notifications based on erroneous methodologies to pit one developing country against other poor countries, trade envoys told SUNS.

In its latest counter-notification (G/AG/W/188) issued on 9 November, the US claimed that the market price support provided by India for cotton breached global trade rules, implying that the four West African countries - Benin, Burkina Faso, Mali, and Chad - which have been demanding sharp reductions in the cotton subsidies provided by the US and other developed countries must take up their cudgels against India, said a trade envoy who asked not to be quoted.

Following the counter-notification issued against India over New Delhi's market price support programs for rice and wheat several months ago, the US has now tabled the second counter-notification, this time on India's MPS (market price support) program for cotton.

Challenging India's notification of domestic support program for cotton that New Delhi had issued for the marketing years 2011 to 2017, the US says in its counter-notification that it is "providing this information to other Members in the interest of promoting transparency surrounding India's MPS policies."

The US says that the counter-notification "is limited to the specific issues of India's MPS for cotton."

The US has maintained that it "does not attempt to identify the full value of India's Current Total Aggregate Measurement of Support (AMS) or even the full amount of product-specific domestic support provided for cotton."

"The limited scope of this document does not suggest that no additional product-specific support was provided for cotton in the relevant years, that MPS or other types of product-specific domestic support was not provided for other commodities, or that India did not provide non-de-minimis non-product specific domestic support during the covered years," the US has argued.

Washington has claimed that India "appears to be providing significant MPS both in terms of absolute value and as a percentage of the value of production (VoP), for cotton."

During the years between 2011 and 2017, India's MPS for cotton ranged between 53.7% and 67.9%. For example, India's MPS for cotton was 53.7% in the marketing year 2010/11, 55.9% in 2011/12, 78.9% in 2012/13, 70.9% in 2013/14, 81.4% in 2014/15, 80.9% in 2015/16, and 67.9% in 2016/17.

Citing the data compiled by the UN Food and Agriculture Organization, the US has alleged that India is the world's second largest agricultural producer.

The US points out that "India is a major agricultural exporter. India's agricultural exports were valued at USD34 billion in 2016, making India the world's ninth largest agricultural exporter."

"India is a particularly significant and growing player in the international market for cotton," the US has maintained.

"Since 2006, India has been the second largest cotton producer, behind only China, and during that time production has nearly doubled by value and volume. India has also been the second largest cotton exporter since 2007, with peak exports in 2013 of more than 2.0 MMT," the US has claimed.

The US, which continues to be the leading provider of farm-distorting subsidies, particularly now because of its trade war with China, says that India is "also a major provider of agricultural domestic support."

The US alleges that while "India provides a variety of domestic support to its producers, input subsidies and minimum support prices (MSPs) appear to be the primary support mechanisms."

Significantly, input subsidies are exempt for developing countries under Article 6.2 of the Agreement on Agriculture (AoA).

Since India did not take any AMS [aggregate measurement of support or most trade-distorting domestic subsidies] commitment, New Delhi can only provide 10% de minimis, the US has suggested.

Further, it has argued that, according to the AoA, "market price support" in favour of basic agricultural products is a form of non-exempt domestic support and must be included in a Member's AMS calculation.

The US has alleged that India paid trade-distorting subsidies to its cotton farmers well in excess of the limit of 10% for developing countries.

"It appears that India provides MPS for cotton vastly in excess of what it has reported to the WTO," the US said in its nine-page counter-notification that will be made public on 12 November.

Washington's latest counter-notification, which is the second of its kind after a similar notification on India's rice and wheat several months ago, says: "India's apparent MPS for cotton appears to have been between 53% and 81% of the value of production in each of the covered years (2010-2017)."

"India appears to be providing significant MPS both in terms of absolute value and as a percentage of the value of production (VoP), for cotton."

The US has questioned India's notification on cotton, which was submitted a couple of months ago, saying that it has been "dramatically" under-reported .

"For example, India's notification for MY (marketing year) 2015/16 showed a value of support, converted from US dollars, of Rs.1,176.48 million for cotton ... By comparison, the United States estimates that India's MPS was Rs. 504,150 million for MY2015/16 for cotton."

At a time when the US is working overnight against filling vacancies at the Appellate Body (AB) and preparing the ground for its final termination, Washington quoted approvingly the AB's judgment in the Korea beef case as to how the market price support needs to be calculated.

But the US did not mention the AB's cotton verdict that struck down the American cotton subsidy payments.

It has sharply disagreed with India's notification, saying it appears "to reflect only volumes actually purchased pursuant to the MPS programme."

However, India's notification for MY (marketing year) 1995/96, "relied on total production as India's eligible production for similar MPS programmes," the US alleged.

The US has admitted that while "India has acknowledged this change in methodology, it has not provided a specific explanation for this change, as seen in India's response in the WTO Committee on Agriculture."

But India had all along opposed the methodology adopted for arriving at the MPS. India, along with more than 45 countries of the G-33 farm coalition, had demanded that the MPS must be calculated by using an external reference price of a recent period instead of 1986-88, which was built into the equation following the Uruguay Round of trade negotiations.

The US and other erstwhile farm trade-distorting countries such as the European Union, Japan, Norway and Switzerland, vehemently blocked India's efforts for changing the methodology.

"The US wants to paint India with a dark brush as a culprit for global distortions in cotton trade in which the US is presented as a main victim, along with the four poor West African countries - Benin, Burkina Faso, Mali, and Chad," said a trade envoy, requesting anonymity.

A senior Indian trade official, also requesting anonymity, said: "The US' counter-notification is a cut-and-paste job of what Washington previously did on India's rice and wheat and it is based on a flawed and erroneous methodology."

India will categorically dismiss the notification on cotton when it comes up for consideration at the special negotiating session, the official added.

Moreover, the US has used the rupee for calculating the market price support, while India calculates in dollar terms, which makes a tremendous difference, said an analyst on global farm trade.

Also, the US was wrong to use total production for the calculation of MPS as opposed to India's calculation based on the procured production. Further, the Cotton Corporation of India does not procure more than 1% of the total production of cotton, the analyst said.

In crux, the US wants to name and shame India before the four West African countries so that they wage a war against India instead of against the US, the analyst suggested.

The US remained silent about the strictures passed by the Appellate Body against a range of subsidies provided for its cotton producers. Each American cotton producer gets a hefty subsidy of more than $50,000 as compared to less than $200 subsidy received by an Indian cotton farmer.

Worse still, India has the highest number of suicides by cotton farmers in the world. Annually, thousands of cotton farmers in India committed suicide because of the massive debts that they had incurred for their cotton production.

In conclusion, the US is now using the transparency and notifications route to circulate counter-notifications for pitting one developing country against other developing countries, said a trade envoy who asked not to be quoted.