Focus on the Global South- India - Sign-on letter to the Prime Minister

The WTO Ministerial in Hong Kong in December 2005 is coming closer and the developing countries are facing extreme pressure from the developed countries to reach to an agreement. Keeping in view the deep agrarian crisis in India, every concerned Bharatiye is quite apprehensive about India’s position on Agreement on Agriculture (AoA) and what would be our gain and where we would loose in the ongoing negotiations on the Doha development agenda. Even though the UPA government claims about transparency and accountability to the people of the country, yet no attempt has been made by the government to make public its proposals for the Hong Kong Ministerial.

WTO Minus LDCs
Agriculture is the key issue in WTO and has the potential to make or break the Doha Development round. In this round, India’s role is quite crucial in protecting the interest of the small and marginal farmers of not only India but of the third world. India had played a strategic role during the cold war as leader of the third world while taking along the nonaligned nations, but in the current WTO era we find India deserting its third world partners in aligning with rich nations as a key partner in “Quad groups” to strike a deal on the AoA. There appears to be a discontent among the developing countries and Least Developed Countries (LDCs) who are being ignored in the recently concluded negotiations in Geneva, Paris and Zurich. The democratic and transparent ideals of the so-called democratic institution of the WTO is being floated even by India to please US and EU in formulating modalities through the undemocratic means for the Hong Kong conclave. This process puts at stake the food sovereignty of the millions of people and livelihood of small and marginal farmers in the third world including India.

Does India Gain Anything
For the last one decade, India has been passing through a serious agrarian crisis, witnessing an spate of farmers indebtedness and suicide by scores of small and marginal farmers. According to National Sample Survey Organisation (NSSO) of May 2005, out of 89.35 million farmer households in the country, 43.42 million (48.6 percent) are reeling under debt. During this WTO era there has been a depression of world’s agricultural price resulting in surge of subsidized agricultural imports, causing decline of farmgate prices in India. This is a direct result of the WTO’s Agreement on Agriculture (AoA) that protects subsidies in the developed countries and allows them to dump cheap commodities in countries such as India. Despite this India’s position towards the WTO Hong Kong Ministerial in December 2005 does not reflect the concerns of the Indian farmers.

The capital-intensive, agribusiness-driven, export-oriented, peasant-insensitive domestic agricultural policy of the Indian government is based on the AoA paradigm to further liberalise the Indian agriculture sector at the cost of the small farm based, subsistent agriculture which supports livelihood of more than 60% of a billion plus Indian population. The ‘sustenance agriculture’ with ‘local market’ is being replaced by the ‘corporate agriculture’ for ‘international market’. The Indian government expects that our small and marginal farmers with an average landholding of 2-5 acres compete with the highly subsidized ‘corporate’ farmers with the average landholding of 1000 acres in the developed world. The changes in domestic agriculture policies are being brought introduced as WTO compliant even through it has no relation with the WTO, e.g. the Seeds Bill, 2004, the reversal of the land reforms for MNCs and agro-businesses, the setting up of the private mandis by ITC and Cargill, the free import of seeds and plant materials. The autonomous liberalisation is going much ahead of what we need to liberalise under WTO.

So far there is no breakthrough in the agricultural negotiations. There is a great deal of differences between developed and developing countries on the issue of market access and lowering of tariff, trade-distorting domestic support and eliminations of all subsidies, besides expansion of blue box, elimination of export subsidies, special products (SPs), special safeguard mechanisms (SSM), and the special and differential treatments (S&DT). This indicates that in the forthcoming General Council in October, the developing countries would face extreme pressure from the developed countries and the WTO itself to make a deal for the success of the Ministerial in December. They would be forced to accept developed countries demands in lieu of trifle gains in GATS and NAMA.

The Indian civil society is quite perplexed to know India’s gain in the ongoing negotiation. We believe that Indian is doing the fire fighting to minimize the losses in agriculture and NAMA due to lowering of tariff and increased market access to developed world. Allegedly, the only gain for India would be in getting more access for its IT professionals through increased H-1B visa quota by the US. But even this seems to be a distant dream in view of the US Congress opposition to USTR proposal for this concession.

But this nation of more than 65 million farmers would loose a lot and would result in disastrous consequences for Indian agriculture with lowering of import tariff and increased market access for agricultural goods from the West. Apparently, Indian negotiators are seems to be ready to sacrifice Indian agriculture and livelihood of millions of small and marginal farmers for a few thousands more H-1B visa in the US under Mode 4. The lust for increased H-1B has blinded the Indian negotiators that they are soft on the issue of benchmarking and ‘complementary approach’ in the services negotiations as well as agreeing on ‘line by line’ instead of ‘product by product’ approach and binding of tariff in the NAMA negotiations. The present negotiating position of the Indian government gives an impression that they are lobbying on behalf of the IT corporations, oblivion of its consequences in agriculture, NAMA and services. The bureaucrats and negotiators are selling out Bharat for insignificant gains for a miniscule minority of Indians.

Market Access for whom?
On the Market Access, the G20 proposal remains the basis for ongoing negotiations. However, being a developing country, India would need to make a cut on the bound duties on agricultural items which would be a four band formula with a threshold from 0-30, from 30-80, from 80-130, and above 130. The recent (10th October ’05) G-10 Market Access proposal advocates for a four band formula for both developed and developing countries, and a threshold from 0% up to 30%, over 30% up to 70%, over 70% up to 100%, over 100% for the latter. In both the proposal, in each of these bands a linear formula of tariff reductions will be negotiated. This means that for e.g., in the highest bands all tariffs that fall into this band will be reduced by a percentage x (e.g. 50%), for the second band another percentage etc.

Since most of India’s tariff lines falls under last higher band, including all processed products and edible oils, a 50% cut in higher band would be a blow to the upcoming processed foods industry in India. The impact of the 50% linear cut would also be disastrous for edible oil industry which is already facing a deep crisis as a result of low applied tariff. This has resulted in the change in consumption pattern, a shift from traditional oil to low priced imported oil e.g. Palm oil and Soyaban oil. The surge in imports of cheap edible oil has also led to closing down of thousands of traditional ghanies (cold pressed expellers) and the rest would face closer with further reduction in tariff rate.

When our bound rates are cut to half under four-band formula or with the capping of the tariff at 150% (G-20 proposal), India would renounce its right to raise tariffs beyond that level. When we would reduce our bound rates under the market access formula, we would subsequently reduce the margin between the applied and bound rates, thereby limiting our ability to freely change the tariffs. Lowering tariffs may very seriously jeopardise our future ability to promote industrialisation of those industries, diversification away from primary commodities and products with little value added, and ultimately, their development. Moreover it would jeopardise our self-sufficiency of those commodities, increase our dependency on imports and would affect the production.

Accepting a formula for tariff reduction by the Indian government would take away the right of the future governments to increase tariff in case of surge in imports and destruction of local economy.

However, the cut in bound tariff under the four bands for developed countries would not affect them much since they maintain a very high tariff lines on the products of interest to the developing countries besides a plethora of non-tariff barriers. For instance, the US, EU, Japan and Canada maintain tariff peaks of 350 to 900 per cent on food products such as sugar, rice, dairy products, meat, fruits, vegetables and fish. Further, the developed world are also using Special Safeguard measures (SSG) to restrict imports from developing countries – Canada reserves the right to use SSG for 150 tariff lines, the EU for 539 tariff lines, Japan for 121 tariff lines, the US for 189 tariff lines and Switzerland for 961 tariff lines. On the other hand only 22 developing countries can use SSG.

Domestic Support till 2013
India as member of the G-20 is trying hard to get a deal on the reduction of subsidies (domestic support) by the developed world. But there approach is fraught with fallacies. It is well known that agricultural subsidies given by the EU under the CAP (Common Agricultural Programme) will continue till 2013 and cannot be withdrawn before that. Moreover US subsidies under the 2002 Farm Bill is for a period of 10 years i.e. till 2012. So irrespective of the G20’s heroic rhetoric, there will be no reduction in subsidies at least till 2012. Even the G20 demand on export subsidies grant developed nations 5 years for elimination. This means that upto 2011 (from January 2006), export subsidies will continue. Since there will be no reduction in subsidies of the developed countries at least till 2012-13, there is little justification for negotiating market access at this stage, which would come into force by 2007 and only facilitate subsidized exports from the developed countries. Even if the developed countries do not wriggle out of their subsidy reduction commitments as they have done in the past, once the developing countries lower their tariff barriers, the cheap, subsidised imports from the developed countries could devastate the developing countries in these 5 – 6 years.

So far India and Brazil, as representative of the developing countries in Quad Group or in FIPS have succeeded in preventing US from its agenda for expansion of Blue Box. The expanded Blue Box will turn the promise of substantial reduction in trade distortion into a lie and would lead to continued dumping. The July Framework, boasted by Indian Commerce Ministry as big gain for developing countries, includes a USTR proposal to alter the WTO Agreement on Agriculture to allow U.S. counter-cyclical farm payments into what is known as the Blue Box. Last year, a WTO dispute panel ruled that counter-cyclical payments must be classified in the Aggregate Measure of Support under the Amber Box, which is capped. In the new US proposal of 10th October 2005, the USTR seeks to shift counter-cyclical payments from Amber to Blue Box to continue current U.S. agricultural trade policy.

Even the G-20 demands for operationalising the instrument of Special Products (SP), as a protective measure to check import surge will not be useful for the biodiversity rich countries like India. For example India cultivates hundreds of crops in a year whereas Europe does not grow more than 25. It will be possible for Europe to get a dozen or so products classified as sensitive. But it is well nigh impossible for India and other biodiversity rich developing countries to get this status for over 100 crops. Hence this would not render any protection to small farmers from import surges. The G-20 along with the G-33 (coalition on Special Products and SSM) should demand complete flexibility to declare any products as SP and use SSMs whenever they feel threatened with import surges and dumping.

India should persuade the G-20 to demand that if the developed countries continue with the Green and Blue Box subsidies, developing countries like India will use QRs to protect their domestic markets from such subsidised exports from the developed countries. The Indian negotiators argue that QRs are inconsistent with the GATT/WTO approach and agreements. However, the Agreement on Textiles and Clothing show how QRs have been an integral part of the WTO system. Moreover, the developed countries have provided for themselves a quota system in the name of Tariff Rate Quotas (TRQs). If the protection of the decrepit textile industry in the developed countries could justify imposition of QRs for six decades and if safeguarding the external financial position of the developing countries can justify resort to QRs, then the paramount need to safeguard the livelihood of millions of peasants in India world certainly provides a sound and compelling justification for reinstating QRs.

As the countdown begins to the Sixth WTO Ministerial in Hong Kong, several protests are being organised by agitated farmer unions to express their flight and distress during the one decade of WTO era and to warn the Indian government to protect their interest during the ongoing negotiations in Geneva and the forthcoming Ministerial in Hong Kong. They are quite disturbed with the hidden agenda of the government to trade off agriculture for gains in Mode 4. On 2nd October a massive protests was organised in Mumbai by several farmers unions and they demanded to “Keep Agriculture out of the preview of WTO”. On 29th September, the left oriented farmers unions also held “Rasta Roko” and “Rail Roko” all over India against the government pursuing anti-peasant and anti-labour policies dictated by global financial institutions, multinationals and the WTO.

a. The Government of India must issue a White Paper on India’s current position on AoA and NAMA
b. There should not be any movement in negotiation on AoA unless EU and US bring down their subsidies under different boxes, stop Box Shifting of subsidies, block expansion of Blue Box and completely phase out export subsidies
c. The Government of India must not give up agriculture for some concessions in other areas e.g. NAMA And GATS
d. The Government of India immediately reinstates Quantitative Restrictions (QRs) to check the surge in imports. This will be an effective measure to serve as a special safeguard mechanism to protect rural livelihoods.
e. The Government of India must not reduce agricultural tariff and bind the agriculture tariff at the current applied rates.
f. India should not sabotage the interest of the farmers in the G-20 and other developing countries and come out of the Five Interested Parties (FIPs)
g. Indian government must demand for the fisheries sector to be taken out of the NAMA negotiations and out of the WTO
h. The government must protect farmers’ income by state support on products for domestic consumption, but not on products for export or products that ends up on the world market (and thus function as hidden or indirect dumping of food).