National Journal's Congress Daily | April 7, 2004
NEW DELHI, India -- Government and business officials in developing countries are so sick of powerful foreigners telling them what to do, while the United States, the European Union, Japan and other developed countries continue to subsidize their farmers, that farm subsidies and food-import restrictions have become more of a political symbol than an economic factor in the slowdown of the Doha Development Round of trade negotiations.
That was the inescapable conclusion after a week listening to an array of Indian officials and private sector leaders explain why developed countries should agree to cut their subsidies before developing countries such as India even consider reducing their tariffs and opening their markets. The Indians' views on these subjects are of great importance to world trade leaders, since India joined last year with Brazil and other developing countries to form the G-20 group -- which has said the developed countries should be required to cut their agricultural subsidies and open their markets, but the developing countries should not.
U.S. trade negotiators and farm leaders have said that increased market access for U.S. agricultural exports is vital to the trade round. India's applied tariffs on agricultural products average 60 percent, the highest in the world according to the U.S. government.
In almost all countries there is a debate over the structure of agriculture -- whether farms should be big or small, whether they should be family-run or organized as corporations and whether some farmers should be encouraged to leave the land or encouraged to stay in rural areas. But Indian government, business and academic leaders agree that India must remain a country of small farmers for the foreseeable future. Easing agricultural imports, particularly subsidized imports, they argue, is dangerous because cheaper imported food might force farmers off the land and toward the cities, where there are no jobs for them.
"India must feed 1 billion people and employ two-thirds of the population" in rural areas, said Rajiv Mehta, secretary of India's Commission for Agricultural Costs and Prices.
While the Indian high-tech industry makes a lot of headlines, it's a tiny part of the Indian economy compared with agriculture, which still comprises 25 percent of India's gross domestic product. Of India's 1 billion people, 115 million are farmers and a total of 659 million people live in rural areas and are dependent on agriculture. Seventy-eight percent of land holdings are less than two hectares (1 hectare = 2.47 acres). A large farm is 10 hectares, and only 1.6 percent of the land is in farms that large.
Owning a farm is still a precious privilege in India. Shortly after gaining independence from Great Britain in 1947, India passed land ownership ceiling laws to put farmland in the hands of the people. The laws were not aimed as much at the coffee, tea and rubber plantations established by the British as at the holdings of Indian princes and other large landowners. The law was "anti-feudal, not anti-British," said Suman Sahai, a U.S.-trained plant geneticist. "Land was what you could distribute." Over time, as the children of the original landholders and their descendants have inherited the land and subdivided it, the farms have gotten smaller rather than following the world trend of increasing in size.
India has other reasons for wanting not to be dependent on foreign food. Food self-sufficiency was an ideal of Mahatma Gandhi, who led the long battle for Indian independence. The U.S. Food for Peace program saved India from starvation in the 1950s and 1960s; Indians still remember the humiliation when President Johnson cut off food aid in 1966. As one Indian business leader recalled, Indians said, "We will eat grass for a thousand years, but we will develop a nuclear weapon."
Instead, India imported the famed Green Revolution of better seeds and became a food surplus country. India today grows more wheat, rice and sugar than it can consume, although it still has to import some oilseeds and legumes. Indians believe that if developed countries would stop subsidizing farmers, India's exports would beat out agricultural products from the developed world.
The problem with that theory is that no one in India has done a single study to show how India would fare in world competition -- with Brazil, for example -- if the developed countries eliminated their subsidies and markets were free. When asked about this, officials refer vaguely to World Bank studies and one by the Minneapolis-based Institute for Agriculture Trade and Policy. But the ITAP study said subsidies are not the problem and noted that after Canada and Australia ended subsidies, they increased production, adding to the glut of agricultural commodities. ITAP advocates supply control to raise farmers' prices.
Rahul Bajaj, a Harvard Business School-trained past president of the Confederation of Indian Industry, said it was true that the "proper studies" had not been done. But he added that the World Bank had "preached" free trade for so long it's time "to do the right thing" and end the subsidies. "It's unimportant who benefits how much."
If the free trade scenario ever comes to pass, it will be interesting to see if Indian farmers agree. By Jerry Hagstrom, who recently traveled in India as part of a group of agricultural journalists sponsored by the German Marshall Fund of the United States.National Journal's Congress Daily:
