TWN Info Service on WTO and Trade Issues (Feb11/10)
22 February 2011
Third World Network

Dear friends and colleagues,

Please find below a report on a recent seminar organised by the Centre for WTO Studies, the Ministry of Commerce and Industry and the Federation of Indian Chambers of Commerce and Industry.

Hope you find this useful

With best wishes,
Third World Network

Studies Point towards Less Discussed but Massive Concessions for Developed Countries in the Doha Round on Agriculture

28^th January, 2011

Ranja Sengupta, New Delhi

At a recent seminar organised by the Centre for WTO Studies, the Ministry of Commerce & Industry and the Federation of Indian Chambers of Commerce and Industry (FICCI), the findings from two discussion papers brought out by the Centre were shared with industry representatives, NGOs and the media. At the seminar, held on the 28^th of January, 2011, the first paper presented was on ‘Doha Development Agenda for Developed Nations: Carve- Outs in Recent Agriculture Negotiations’ while the second presentation was on ‘Cotton Production, Exports and Price: A Comparative Analysis of India and USA’. The seminar was held to seek feedback from the participants on the analyses.

Mr. D. Mittal, outgoing Additional Secretary, Department of Commerce, Ministry of Commerce and Industry, Government of India, addressed the room at the beginning of the session and during the question hour. He emphasised that while India is “eager and interested, it is not desperate” to conclude the Doha Round. However, he also mentioned that India is committed to the multilateral process and said that the “Doha Round will go through”.  He also said that subsidies and tariffs are two sides of the same coin and therefore both pose as trade protectionist instruments. On Non Agricultural Market Access (NAMA) subsidies, he raised a question as to how developing countries were supposed to shift production to the secondary sector in the absence of any allowed subsidies in NAMA.

Mr Rajeev Kher, Joint Secretary, Department of Commerce and Ms. Anu Mathai, Additional Economic Advisor, Department of Commerce were also present during the seminar.

The first paper, written by R. S. Ratna, Abhijit Das and Sachin Kumar Sharma, attempted to quantify the ‘carve outs’ which are proposed in the December 6 Text on Agriculture (Document No. TN/ AG/ W/4/Rev.4). The Report showed that the developed countries had several carve outs for themselves in the December Text. USA had 8, while the EU had 4, Canada 1, Switzerland 3, Norway 3 and Japan had 2. Some of these, for example, allow flexibilities in base year, and sometimes allows extra 2 years to delay application of product specific Aggregate Measure of Support (AMS).

Most of the US carve outs relate to the domestic support that USA gives to its producers, and seek additional flexibilities that increase allowable limits of product specific AMS and also involves box shifting from the AMS to the blue box (Para 35 for USA). The USA will also be allowed much higher blue box support under the special carve outs in Para 40, 41, 47 and Annexure A.

Similarly Para 39, included exclusively for Norway, increases its allowable blue box subsidies.

“This study clearly shows that the developed countries will be able to delay opening their markets and would be able to control the prices of agricultural goods through these carve-outs. At the same time, the carve-outs and their quantitative effects clearly indicates that the proposals are in favour of developed countries. These carve outs also indicate that the Doha development agenda is for developed nations, not for the developing countries,” concluded the paper.

Mr. R.S. Ratna of the Ministry of Commerce and Industry made the second presentation, and analysed the impact of the US subsidies in cotton vis-à-vis its links to slumps in global prices in the context of India’s cotton economy and that of the Cotton 4 group of countries. This group of countries, consisting of Benin, Burkina Faso, Chad and Mali, have faced declining exports and production, leading to severe livelihood concerns due to US subsidies. 

The paper argued that US subsidies had clear and significant correlation with world prices. Though India and China are more efficient producers in terms of prices, US subsidies undercut these prices and pulled down global prices.

In comparison to the US system of subsidies, India has no AMS for cotton, and it has minimum support price only for domestic procurement. However, there are duty exemptions on exports and export of cotton is controlled by the government. While India is competitive in terms of farm gate prices, it is not so in the global market due to the continuation of US subsidies.

The Report argued that the demand in world market has not fallen, and nor has US exports. It made the strong case that India’s export promotion policy is much less trade distorting than US subsidies. India should in fact support the Cotton 4 and become a party to the discussion as it had an active interest in the negotiations and quit being a fence sitter.

It was evident from the two presentations and the discussion that followed, that not only were US subsidies counter cyclical, the US is actually trying to get such counter cyclical subsidies approved and extended through the WTO. This was indeed a worrying trend for developing countries.

The presenters as well as Mr. Mittal, however, did not suggest how they plan to take the findings of the two papers forward in terms of WTO negotiations. Questions related to strategies were not encouraged on the ground that it was a later step and that this seminar was mainly to discuss the analyses, findings and implications of the two studies. However, there are indications that India will invite a wider discussion on these issues among the developing countries and seek their opinion on how to counter these processes.