Towards a Cancun harvest

What suggestions do we have for our negotiators at Cancun? It is not enough to prepare the terrain in terms of the arguments used by our int...

What suggestions do we have for our negotiators at Cancun? It is not enough to prepare the terrain in terms of the arguments used by our interlocutors in trade policy discussions 8212; particularly since most arguments made in academic debates in India, apart from those of the unilateral trade reform lobby, are now part of India8217;s policy stance.

India8217;s stance is now very different from what it was a few years ago when it was more or less of the view that we tax agriculture in the net and so domestic policy is not under threat and we must be strongly 8212; according to some, unilaterally 8212; for free trade for this would open up our export prospects. We are still 8212; correctly 8212; of the view that our agriculture is on a level playing field, it is strongly competitive and we argue for removal of restrictions. But at Doha we negotiated 8216;8216;special and differential8217;8217; treatment for us, obviously as a transitional strategy, and have made food security and livelihood security issues our planks. What concrete issues remain?

There is a group of economists, at home and abroad, who argue India is unrealistic in its demands. Indian agriculture is competitive, imports have not risen on the net and in any case budgetary compulsions dictate that we stay away from a 8216;8216;strong8217;8217; policy intervention line. Also we will not have 8216;8216;options8217;8217; when the chips are down, according to experts like Jagdish Bhagwati and Arvind Panagriya. It is true net agricultural imports have been almost constant and Indian agriculture is largely competitive. But imports now meet a third to a fifth of India8217;s cotton demand; not many years ago it was a net exporter. Production went up from seven to around 10 million bales in the 8217;80s, to 14 million bales in the mid-8217;90s, now it is around 10 million bales. Oilseeds production rose from around 10 million tonnes to around 25 million tonnes and is now less than 20 million tones. The sugar economy is in a crisis. Consequently, cash incomes and employment are down in the farm sector. India8217;s competitiveness in cotton has not gone down, although we could be more open to biotechnology, but global subsidy has gone beyond 300 billion. Ditto for other commercial crops. Reversal in diversification means more poverty. Not just the volume, but the composition of trade is important. We just have to protect our interest in trade. India has to compel a strategic movement to trade liberalisation.

The argument that India not intervene in agriculture due to 8216;8216;budgetary8217;8217; restrictions is specious. It is true that more fine-tuned intervention would make matters better. For example, delicensing cannot by itself go very far, if state advised prices and zonal prices are artificially imposed. To compound matters, global competition is being enforced. The foreign seller is not handicapped by this kind of price intervention. However, in many other cases, policy is and can be effective. In agricultural markets, intervention is not required all the time. Selected intervention in some markets in some periods is all that is needed. It is this area we must protect, giving up ineffective policies. The commerce minister is not well advised to say that we cannot intervene in agricultural markets on account of budget restrictions and therefore his task is easier.

Special and differential treatment of developing countries has to be an integral part of our WTO negotiations. The Stuart Harbinson modalities draft provides for special and differential treatment for tropical products and diversification away from narcotics. We should press for flexibility to declare some agricultural products strategic products with respect to food security, rural development, etc, and designate these products as 8216;8216;SP products8217;8217;. Incidentally, internally we should set up the required mechanism quickly to decide questions like the nature of strategic products for 8216;8216;SP8217;8217; status and evolve tariff policies on that basis.

On the development side the only major concession the Harbinson draft makes is support to farmers, producers and cooperatives in rural development infrastructure. It provides the following measures in developing countries. Members shall be exempt from domestic support reduction commitments to the extent that these commitments would otherwise be applicable to such measures: investment subsidies which are generally available to agriculture, agricultural input subsidies generally available to low-income or resource-poor producers, subsidies for concessional loans through established credit institutions or for the establishment of regional and community credit cooperatives, transportation subsidies for agricultural products and farm inputs to remote areas, on-farm employment subsidies for families of low-income and resource-poor producers, government assistance for conservation measures, etc.

It is not fair to say that India will not matter in the WTO. This time the game is not what it was before Marrakesh. Our preparation is better. We have to show the world, as also friends like Prof Bhagwati and Panagriya, that we can provide a leadership role.