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Centad organised a national consultation in New Delhi on July
22, 2005, called 'Off the Starting Block to Hong Kong: Concerns and Negotiating
Options on Agriculture and NAMA for India'. The subjects covered were:
- India's concerns and negotiating options on agriculture and non-agricultural
market access (NAMA).
- Agricultural subsidies in the WTO.
- Tariff
negotiations in agriculture.
- Agriculture and the WTO.
- Tariff
negotiations in NAMA.
- Negotiations on non-tariff barriers in NAMA.
- Tariffs
and non-tariff barriers and Indian industry.
- India's future course of
action -- the road to Hong Kong.
Dr Samar Verma, Regional Policy Adviser,
Oxfam GB, explained that the purpose of the seminar was to provide a forum for
discussion on agriculture and NAMA, to safeguard India's national interests in
future trade negotiations. The challenge of globalisation is to ensure that the
process does not leave behind the poor, and addresses issues of poverty eradication.
Global trade is still unbalanced and the WTO meet in Hong Kong in December is
the last opportunity to redress this balance. A panel of experts presented
their views on the negotiating options for India and other developing countries
in agriculture and NAMA. Inaugural session In his
keynote address, 'India's Concerns and Negotiating Options on Agriculture and
NAMA', Gopal K Pillai, Additional Secretary, Ministry of Commerce, New Delhi,
stressed that the current negotiations represent a window of opportunity to increase
market access with the G10 and the US. India, he said, has little influence
in negotiations since it accounts for less than 1% of global trade. It must, therefore,
collude with like-minded countries such as those in the G20 and G23 for favourable
terms. As it stands, there are more than 35 outstanding issues with respect to
Blue and Green Box subsidies. Since there was a global consensus on NAMA, it was
of no major concern. However, in agriculture we are only on the second round of
negotiations. Speaking on the same subject, Professor Muchkand Dubey, President,
Council for Social Development, and former Foreign Secretary, Government of India,
pointed out that though the value-added share of agriculture to GDP in India has
fallen to just 26%, agriculture is still a crucial sector in the Indian economy.
However, agricultural exports are only $ 4 billion per annum. This paltry figure
points to poor developmental policies over the last 50 years. These have resulted
in low productivity, poor connectivity, poor harvesting practices and low agricultural
incomes. Dubey said India's poor performance in agricultural exports looks
especially stark given the export growth of countries such as Thailand, Argentina
and Brazil. Export amounts are modest, and, given that production is below the
marginal cost level, reducing subsidies will not be advisable. It was hoped
that the Uruguay Round would have benefited Indian agriculture. However, developed
countries not only increased subsidies, they have been slow to open up their markets.
Dubey encapsulated India's negotiating stand in calling for increased access
to developed country markets, elimination of Blue Box special measures and a merging
of the Green and Amber Boxes, with substantial reductions in the Amber Box. India
wants special production safeguards especially for sensitive products. In
order to make headway in these and other areas, India must maintain the unity
of the G20. It could encourage more south-south trade and create policies to enhance
its FDI inflows. The next round of negotiations offers an opportunity for India
to de-licence and take advantage of the post-MFA era, especially in the field
of textiles. India can afford to open up its economy and acquire better technologies
through trade.
Session II -- Agriculture
The
second session was introduced by Dr S Bala Ravi, Adviser (Biodiversity), M S Swaminathan
Research Foundation, Chennai. Ravi emphasised that any discussion on agriculture
must be understood in the context of development. Nearly 70% of India's population
rely on the land for their livelihood, and most have holdings of less than an
acre. Any policy should therefore focus on domestic needs rather than on exports.
He warned that opening India's markets to cheaper commodities could make our goods
less competitive. At the same time, India must make the most of any increase in
market access; China's exports have grown four-fold, whereas India still remains
a small player. In his presentation 'Agricultural Subsidies in the WTO:
Are Developed Country Subsidies Hurting Indian Agriculture?', Dr Ramesh Chand,
Acting Director and Principal Scientist, National Centre for Agriculture Economics
and Policy Research, New Delhi, said that agriculture in India is in a transition
stage. Public investment has been decreasing, as is Green Box support. India cannot
afford to take a strong stand against the Green Box, he said, but it recognises
the need to cap such initiatives. The EU, Japan and the US are causing severe
distortions in global trade by their high levels of support, particularly to those
goods that Least Developed Countries (LDCs) tend to export, such as sugar and
cotton. The July Package failed to address such malpractices and did not subject
the Blue Box to any cuts. India must demand that developed countries phase
out their distorting tariffs, such that international commodity prices rise. This
would boost Indian export revenues in a manner that increased farmer incomes.
Further, there should not be competition with developed countries on subsidies,
as such a policy would only hurt India and cause fiscal deficits. In her
presentation 'Tariff Negotiations in Agriculture: What is the best way out for
India?', Anjali Prasad, Joint Secretary, Ministry of Agriculture, highlighted
the unfair tariff regime. In India, she said, subsidies account for only 5% of
the level of the EU. Seventeen per cent of developed countries' tariff lines are
greater than 120%. For perishable goods, tariffs are low, but for processed goods
they remain high. India exports processed goods and limited market access affects
its export revenue. Moreover, during periods of declining prices, developed countries
provide higher protection by using specific and complex tariffs. This further
dampens international prices and hurts LDCs. The process should focus on reducing
such duties, as well as moving towards ad-valorem taxes. Yet, given that we stand
to lose longstanding preferences and TRQs are not transparent, tariffs remain
the only protective policy instrument. Prasad said that while India would
ideally want to adopt a linear cut approach, based on the Harbinson formula, global
consensus has moved towards a non-linear approach based on the Swiss formula.
Therefore, the Girard formula would be the next best option. India should ensure
that special provisions are available based on livelihood, food security and rural
development. In 'Agriculture & WTO: Where are we heading?', Professor
V P Sharma, Chairman, Centre for Management in Agriculture, IIM Ahmedabad, dwelt
on the unfair farm subsidies that developed countries provide their agricultural
producers and exporters. OECD nations have reneged on commitments to lower subsidies,
he said. The EU is allowed $ 60 billion in spending on Blue Box measures, but
spends close to $ 80 billion. The US spends $ 50 billion, whilst being allowed
only $ 19.1 billion per annum. These unfair trade practices distort the global
balance and affect international prices. Compounding the problem is the
fact that bound tariff rates on lines of export importance for LDCs are still
high in developed countries. The producer support equivalent (PSE) is $ 279 billion
(2004), representing a severe distortion. Green Box subsidies must be collapsed
or capped; export subsidies must be reduced and phased out by some credible date.
However, LDCs must maintain their level of special and differential treatment.
They must be allowed to protect lines that relate to developmental needs, or food
security. The Swiss formula is to be rejected at all costs, for it is especially
harsh on those countries with high tariffs, such as India. There is a consensus
on ad-valorem equivalents (AVE), but as of now no agreement has been reached.
Session III -- Non-agricultural market access (NAMA) The
session was introduced by Rajeet Mitter, Joint Secretary, Ministry of Commerce.
He said the key issues centre around Mandate 16 of the Doha Round, calling for
a reduction or elimination of high tariffs and non-tariff barriers (NTBs). The
two main components of this are bound tariffs -- about 70% are bound in the Indian
industrial sector -- and special and differential treatment and sectoral agreements. Prabhash
Ranjan, Research Officer, Centad, focused on the method of tariff reduction in
his presentation 'Tariff Negotiations in NAMA: What are the options for India?'.
The simplest approach would be to reduce average tariff rates based on a linear
formula. However, consensus is moving towards a non-linear approach, focusing
on a line-by-line reduction. Such an approach would be dangerous for developing
countries. India realises that the linear approach is not feasible, but flatly
rejects the Swiss formula. Together with Argentina and Brazil, India has proposed
the Girard formula. Here, the rate of reduction varies according to the level
of the coefficient 'B'. Some developing countries as well as certain Latin American
and Caribbean countries oppose this approach. The Pakistan proposal calls
for two different coefficients: a rate of B = 6 for developed countries and B
= 30 for developing countries. LDCs will be excluded from any such formula reduction.
This could lead to steep cuts for countries with high average bound tariff rates
such as India, and does not take into account the existing tariffs. India should
bargain for the sectoral initiative, ie, reduction for certain identified sectors.
India should resist demand for a 100% binding of its tariffs, with any binding
taking into account the existing average tariffs. Dr Rajesh Mehta, Senior
Fellow, Research and Information System for Developing Countries, spoke on 'Negotiations
on Non Tariff Barriers in NAMA Negotiations: India's concerns and options'. The
Doha Declaration, he said, calls for the elimination of NTBs and tariffs. In reality,
44% of India's exports face NTBs in the US. The US maintains such measures to
ensure safety and quality. Yet there are no agreed upon minimum standards globally.
The challenge is to create an effective domestic legal and administrative framework
that enforces domestic standards and ensures capacity building. Secondly, any
negotiations should include the condition of NTB reduction under a fast-track
approach. In 'Negotiations on Tariffs and NTBs and Indian Industry', Manab
Majumdar, Director, WTO cell, FICCI, said that given the stance of developed countries,
India has to go along with the non-linear solution. The entire exercise will be
a balancing act between the offensive and defensive positions. There are increasing
signs of growing convergence that the simple Swiss formula is going to be adopted
with dual coefficients. This seems more likely given the Caribbean opposition
to the ABI (Argentina, Brazil, India) formula. India should therefore focus on
a desirable level of coefficient 'B'. If this turns out to be impossible, the
Pakistan formula should be adopted with a very high value of coefficient. The
US's "critical mass" initiative is a trap for developing countries and
should be resisted at all costs.
Session IV -- Looking ahead
In
'India's Future Course of Action: The Road to Hong Kong', Gopal K Pillai summed
up India's negotiating position. India's future course of action, he said, is
by and large based on the following unresolved issues: - Conversion of
ad-valorem tariffs.
- Most developed countries decrease their tariffs on
an AVE basis.
- Discussion on more than 35 issues on agriculture still pending.
Unless
these issues are resolved by the time the Hong Kong Ministerial is held in December,
this will be a recipe for disaster similar to Cancun. Pillai stressed the
need to adopt the right tariff-cutting formula. Any agreement will likely be on
a Swiss formula, or variations of it. The ABI proposal is a breakthrough and represents
the current mandate for India. More recently, the EU and US have suggested various
tariff bands, but the bands suggested offer little flexibility to developing countries
and should be resisted.
Another issue to be resolved is that of Blue Box
subsidies under which US farmers get subsidised the difference between reference
and market prices. This means it is in their interest to suppress prices to receive
a bigger subsidy. The US has refused to discuss the issue. Secondly, sectoral
approaches should not be discussed unless other issues are resolved. Other outstanding
issues include services, with 63 countries submitting their reports. Lastly, there
is a specific need to refocus on development issues such as anti-dumping and MFN
status. The most important is to get an agreement on agriculture and NAMA.
(We acknowledge the contribution of Richa Maurya and Sawan Sabharwal, Delhi School of Economics, in preparing the report)
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