WTO and Indian Agriculture: The End Result Is Zero

By Devinder Sharma

It is now official. Five years after the World Trade Organisation (WTO) came into existence, the anticipated gains for India from the trade liberalisation process in agriculture are practically zero. And yet, undaunted by the negative fallout from the implementation of the WTO's Agreement on Agriculture, the Ministry of Agriculture is aggressively pushing for the second phase of reforms.

At a recent meeting of the political parties, farmers' representatives and voluntary agencies in New Delhi, the Ministry of Agriculture admitted that the hopes from an international regime that talked of establishing a fair and market oriented agricultural trading system have been belied. Such is the growing dismay that Mr Balram Jakhar, a former Minister for Agriculture, and in whose time the WTO accord was pushed through, lamented how politically incorrect he was in accepting the free trade agenda for Indian farmers. "It is now clear to me that we are fast heading towards economic re-colonisation."

Balram Jakhar is not the only senior politician to have realised the mistake. Maharashtra's political stalwart and a former Congress leader, Sharad Pawar, too is critical of the global trading system which is hitting the sugarcane growers, tea producers and even grape farmers. Former Prime Ministers P.V.Narasimha Rao, V.P.Singh, Chandrashekhar, H.D.Deve Gowda and Inder Kumar Gujral have at different platforms already expressed their anguish at the visible assault on Indian farming community. Punjab's chief minister, Prakash Singh Badal, Haryana's Om Prakash Chautala, and Bihar's former chief minister Laloo Prashad Yadav are some of the other political heavyweights who have been crying hoarse over the WTO's hidden agenda.

Politics apart, it is time draw a balance sheet of the gains and losses that accrued from the implementation of the WTO's Agreement on Agriculture. After all, politicians are known to be speaking different languages at different times. But what about the economists, who didn't leave any stone unturned to force the nation to believe that WTO was in the interest of the Indian farmers? Isn't it strange that the Ministry of Agriculture should still continue to back its analysis and recommendations on the advise of the same breed of discredited economists?

Let us first try to understand what went wrong and where. WTO's Agreement on Agriculture had incorporated three broad areas of commitments from member states, namely in market access, domestic support and export subsidies. The underlying objective being to correct and prevent restrictions and distortions in world agricultural markets. Five years later, it is now established that these measures have only protected the farmers and the farming systems of the developed countries. On the other hand, the trading regime has ensured that developing countries take time-bound initiatives to open up their domestic markets for cheap and highly subsidised imports of agricultural commodities.

Market access: A recent FAO study concludes that there has been hardly any change in the volume of exports. Tariff peaks continue to block exports from the developing countries. Tariffs still remain very high, specially in case of cereals, sugar and dairy products. Sanitary and phytosanitary measures continue to be a major barrier in diversifying exports in horticulture and meat products. Selective reduction in tariffs by the developed countries have also blocked the exports from developing countries. And on top of it, only 36 countries (all developed) have the right to impose special safeguard provisions if agriculture imports distort their domestic market !!

India was forced to either phase out or eliminate the quantitative restrictions (QRs) on agricultural commodities and products latest by April 1, 2001. India has, therefore, opened its market and in turn made the farming community vulnerable to the imports of highly subsidised products. Already, cheaper imports of skimmed milk powder, edible oils, sugar, tea, arecanut, apples, coconut etc have flooded the market.

Domestic support: Clever manipulation of their subsidy reduction commitments has in reality increased the support to farmers in the developed countries. In the United States, subsidy to a mere 90,000 farmers has increased by 700 times since 1996. In the past one year, US has provided an additional US $ 26 billion dollars to its farmers. In absolute terms, the farm support in the OECD countries increased by 8 per cent to reach the staggering figure of US $ 363 billion in 1998. In India, we are being told that our Aggregate Measure of Support (AMS) being negative we can still raise our subsidies to farmers. In reality, India is committed to do away with agricultural subsidies under the Structural Adjustment Programme of the World Bank and the IMF. In any case, India provides only one billion dollar worth of indirect subsidies to 550 million farmers !

It was anticipated that due to reduction in domestic support in developed countries, cereal production would shift from developed countries to developing countries. Empirical evidence, however, shows that such a trend is not at all visible. Moreover, with such massive subsidies intact, and with the QRs being lifted, India is sure to be inundated with food imports.

Export subsidies: The kind of export subsidies that need to be pruned are not provided in India. Whereas, WTO enables only 25 countries to provide export subsidies for their agricultural products and commodities. India is, however, keen to support the Cairns Groups (food exporting countries) which demands the elimination of export subsidies not realising that joining such a group will invite problems on various other fronts.

The Ministry acknowledges that despite the rules being defined, the expected gains have eluded the developing countries. It was expected that with the removal of trade distorting measures, agricultural exports from the developing countries will increase. This did not happen. In fact, India has on the other hand seen a massive increase in the imports of agricultural commodities and products — from about Rs 50,000 million in 1995 to over Rs 2,00,000 million in 1999-2000 — a four-fold increase. Nor has the so-called fair trading system helped efficient producers in realising a higher price for their products. On the contrary, prices of most agricultural commodities are declining in the world markets.

Don't say you were not warned. In a critical analysis of the WTO paradigm and its implications for India's food security, later published under the title GATT to WTO: Seeds of Despair, I had, like a few others, concluded that the entire effort of the free trade initiative is to destroy the foundations of food self-sufficiency so assiduously built over the years. After all, with food production increasing in the US and in the European Union, the focus is only on how to find bigger and reliable markets for exports. In the US, for instance, food production is slated to multiply in the years to come. And incidentally, agricultural exports are the second biggest export earner for America.

It still does not mean that the Ministry of Agriculture has learnt any plausible lessons from the debacle on the agriculture front. It continues to express confidence in the studies and analysis from the National Council for Applied Economic Research (NCAER), Centre for Monitoring of Indian Economy (CMIE), Institute for Foreign Trade (IIFT) and the Rajiv Gandhi Foundation. Despite holding s series of public hearings, the Ministry's focus remains very clear. It has already constituted a task force, under the chairmanship of a known votary of the free trade paradigm, Sharad Joshi, to submit a report on the implications of WTO's Agreement on Agriculture on Indian agriculture by February next. India's march to complete dependency on food imports, therefore, is no longer a hidden agenda.