This article originally appeared in The Financial Express (July 12, 2006). The author is with Centad.
The views are personal.
Despite the fact that both global trade rules and trade flows are currently imbalanced in favour of developed countries, negotiations in agriculture are marked by doublespeak. The central contradiction lies in the fact that developed countries are unwilling to scale down the unacceptably high levels of domestic subsidies while pushing aggressively for developing countries to liberalise their domestic markets with a vastly reduced safeguard mechanism.
It needs to be remembered that after the dismantling of the quantitative restrictions in agriculture, tariffs and special and differential treatment provisions by way of sensitive products, special products (SPs) and special safeguard mechanism (SSM) are the only protective devices against the predatory developed country agriculture exports.
The current impasse in agriculture is mainly on account of the fact that countries like India rightly refuse to play by the formulae and approach with the intentions of ‘you liberalise’ while ‘we subsidise’. The brinkmanship on display in Geneva, especially relating to the renewed pressures applied on developing countries for further dilution of protective safeguards in agriculture and emptying it of its development content, does not augur well for poor and marginal farmers in countries like India.
In July 2004 and thereafter at Hong Kong, WTO members agreed to a framework agreement, which sought to accommodate concerns, like sensitive products, SPs and SSMs. Under the framework agreement, developing countries were asked to self-designate an appropriate percentage of agricultural products as SPs on the criteria of food security, livelihood security and rural development needs. SPs were mandated to be exempt from the tariff reduction commitments.
While this approach apparently seemed to take care of development interests, the catch lay in the numbers. While the G33 group of countries, which included India, advocated for at least 20 per cent of the tariff lines to be designated as SPs, the proposal has run into stiff resistance by the developed countries. The US proposal has called for only five tariff lines to be so designated as SPs.
It is important to understand that even the G33 proposal on SPs would entail significant adjustment costs on the agriculture sector in India. It is not difficult to understand as to why this is so. There exist vast differentials in terms of crops, commodities, farm sizes dominated by small and marginal farmers numbering over 60 per cent, marked by those who are completely dependent on agriculture for their subsistence. The tremendous implication on poverty and welfare is clearly manifest.
Significantly, cheaper imports are likely to thwart domestic efforts to enable agriculture to move to high-end processed products and the fledgling agri-business industries. The current agrarian crises and distress spread across India is a telling reminder to policy makers to provide adequate policy and time space to its farmers.
As per NSSO estimates, more than 48 per cent of farm households are reported to be indebted. The incidence of indebtedness has been recorded as highest in Andhra Pradesh (82.0%), followed by Tamil Nadu (74.5%), Punjab (65.4%), Kerala (64.4%), Karnataka (61.6%) and Maharashtra (54.8%). Moreover, Haryana, Rajasthan, Gujarat, Madhya Pradesh and West Bengal each had about 50% to 53% farmer households indebted.
Keeping in view the development interest of food security, livelihood and rural development, an analysis was carried out by Centad (Centre for Trade and Development), which found out that there are close to 57 per cent tariff lines as special, and holding the strictest level of scoring based on the development indicators it was found there are at least 21 per cent lines that are special.
Developed countries have been pitching for 1%-2% of sensitive tariff lines and there has been stiff opposition to any reduction or tariff quota expansion. This has to weigh in the context that developed countries have only around 4 per cent of the population dependent on agriculture and these percentages match well with their pattern of agriculture.
It has been reiterated time and again that unique agriculture interests cannot be sacrificed to trade interests. Export interests cannot be the basis of designation as most small farmers in developing countries have a high level of subsistence and livelihood concerns that cannot be forfeited at any cost.
In any case, it can be said that the average applied duties in India are lower than bound duties and, therefore, the measure is purely protective in nature.
Another issue to be borne in mind is that SPs are the only long-term protective tool available in the Agreement on Agriculture. SSMs, which by all counts are difficult to operationalise in practice, can only take care of a surge in imports. However, it would not be able to protect critical farming decisions in view of the short-term nature of these measures.
Clearly, an appropriate percentage of SPs, which should certainly not be less than 21 per cent, as the Centad study demonstrates, are the only credible option in such a scenario. There should be an additional flexibility for switching lines in the period of implementation. This is critical if an SSM measure cannot be applied on SPs.
The designation of SP product is one of the crucial development instruments in trade negotiations for developing countries. For Indian farmers, it is the fundamental trade safety net which will go a long way in providing the much-needed legitimate time and policy flexibility to adjust to the multilateral trading framework. |
