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Much to lose

Even as India’s negotiators argue its case at the WTO, government must speed up domestic subsidy reform

By: Express News Service |
Updated: December 15, 2015 12:04:42 am

Several obituaries have been written of the Doha Development Round of the World Trade Organisation. But the three-day ministerial conference in Nairobi, which starts today, points to signs of life.

Representatives from the 162 member countries will meet yet again to search for a consensus that has eluded since 2001. For long, India, along with China, South Africa and several other developing countries, has tried to push for “special and differential treatment”. The developed countries, led by the US, the EU and Japan, have tried to prise greater market access for their domestic producers. Not for the first time, things came to a head during the Bali ministerial in 2013, when India put its foot down on its sovereign right to give production subsidies to its farmers. The leverage, of course, was the Trade Facilitation Agreement (TFA) involving relaxed customs duties. The TFA was a demand by the developed countries and it provided developing countries, especially India, with a bargaining chip. Last year, India let go of that chip when it agreed to the TFA without any commitment from the developed world on farm subsidies. The question, then, is: What is at stake for India in Nairobi?

Plenty, evidently. For one, India must still protect its right to provide subsidies to its farmers. Two back-to-back droughts have sharpened rural distress. Complying with WTO regulations at the present juncture would raise input costs for farmers already reeling from depressed crop yields. Moreover, it is not just a matter of India’s sovereignty alone, the principle of equity is at stake. Western economies provide their farmers with massive subsidies. For instance, the new farm bill in the US allows for even more trade-distorting subsidies than in the past. The other issue has to do with the special safeguard mechanism (SSM). The SSM allows India to ramp up tariff barriers in order to protect poor and marginal farmers from surges in imports. Here, too, developed countries have been trying to constrain developing countries, including India, to use the SSM provision only when agricultural imports surge over 40 per cent (year-on-year) in a sustained manner. India has long insisted on using the SSM if imports rise by 10 per cent.

For India, at the WTO, there is little to gain but much to lose. So while the negotiators wrestle it out in Nairobi, the government must realise that it is time to speed up reform of India’s unsustainable and inefficient subsidy regime. Shifting to direct income transfers will not only make such subsidies WTO-compliant but also reduce the strain on the Central exchequer.

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