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WTO And Indian Agriculture

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WTO And Indian Agriculture

With the operationalization of the provisions of the World Trade Organization (WTO), the process of globalization commenced in the major parts of the world—the non-member countries, in the coming few years, also started negotiating for entry into the club. There has always been an air of confusion among the members and the non-members of the WTO in assessing the pros and cons of globalisation on the health of their economies. The sector which has created the highest number of deliberations in the WTO, as well as views and counterviews, has been agriculture—an area of utmost concern for the developed and the developing worlds alike. India is no exception to it, better say it has been among the few countries in the world spear-heading the campaign against the biased provisions of the WTO concerning agriculture.

India was skeptical about the issue even before joining the organization, but once it became a part of it, it started assessing the situation objectively and moved towards crisis mitigation. Globalization as such opened unlimited prospects for the economies, but at the same time brought several challenges too. Yes, the challenges were different in nature for the developed and the developing countries. We need to enquire the prospects and the challenges brought by the WTO for Indian agriculture.

Had the agriculture of the leading and politically vocal developing economies not be of subsistence level, the course of the world would have been completely different. It is the biggest hurdle in the process of globalization and the success of the World Trade Organization. Yes, the process of converting the sector into an industry has already started in most of the leading developing economies amidst tough resistance from the farmers, political parties and the NGOs alike.

The Prospects

The oldest and the first document regarding the impact of the implementation of the provisions of the WTO, Uruguay Round (1995–2005) was prepared jointly by the World Bank, the GATT54 and the OECD55. According to the joint document, the WTO provisions were supposed to have the following positive impacts on the world trade:

(i) By 2005 there will be an addition of $745 billion in the world merchandise trade.56
(ii) The GATT Secretariat provided a full break-up of the above-projected trade increase in the following way:
(a) The clothing sector to have a share of 60 percent.
(b) The agricultural, forestry and fisheries products to have a share of 20 percent.
(c) The processed food, beverages and drinks to have a share of 19 percent.

It means that due to the implementation of the WTO provisions, there will be only one percent increase in the trade of all other goods excluding the above-cited sectors. It was a highly inflated view and became a matter of debate around the world. But the areas which were projected to have a very high increase in their trade were not mere projections either. Member countries went home and started going for their own studies, estimations, and projections—India being no exception. We must see the assessment of India:

(i) The products which were projected to have a maximum increase in their trade, India had a traditional great export potential in them. It means the WTO has a great prospect for agriculture in store as maximum goods fell in the agriculture sector. Assuming that India’s share in the world exports improves from 0.5 percent to 1.0 percent, and India is able to take the advantage of the opportunities that are created, the trade gains may conservatively be placed at $2.7 billion extra exports per year. A more generous estimate will range from $3.5 to $7 billion worth extra exports.

(ii) The NCAER (National Council for Applied Economic Research) survey of the WTO on the Indian economy is cited as the best document in this area. The survey had all important things to say on this issue:

(a) The exports of agricultural products will be boosted by the WTO accepted regime.
(b) Only the foodgrains trade that too of wheat and rice were projected to be around $270 billion.
(c) The survey also pointed out that almost 80–90 percent of the increased supply of foodgrains to the world is going to originate from only two countries China and India as they are having the scope for increasing production.
(d) But the survey painted a very wretched picture of the preparedness of the Indian agriculture sector to exploit the opportunities. It concluded China to be far better than India in this matter.
(e) It suggested almost every form of preparedness for the agriculture sector (at a glance we may have been on the Second Green Revolution in India—basically the revolution is modeled on the findings and suggestions of the survey).
(f) Lastly, the survey ended at a high note of caution and concern that if India fails in its preparations to make agriculture come out as a winner in the WTO regime the economy will emerge as the biggest importer of agricultural products. At the same time, the cheaper agri-imports might devastate Indian agricultural structure and the import-dependence may ruin the prospects of a better life for millions of poor Indians.
(g) Even if India does not want to tap the opportunities of the globalizing world it has to gear up in the agriculture sector since the world market will hardly be able to fulfill the agri-goods demands of India by 2025. It means, it is only India which can meet its own agri-goods demand in the future.

There is no doubt that the WTO has brought probably the last opportunity to make our masses have better income and standard of living via better income coming from agriculture. But provided we go for the right kind of preparation at the right time. There are enough prospects, undoubtedly.

The Challenges

If the WTO brings high prospects for Indian agriculture, it also brings in some hard-boiled challenges in front of it. These could be seen as individual challenges of similar economies as well as joint challenges of such economies. The first category of challenges pertains to the area of relevant preparations, investment, and restructuring of agriculture. And the second category of challenges is nothing less than a revision in the very agricultural provisions of the WTO itself (around which today revolves the success and failure of the organization itself). We may take a look at the challenges before the Indian agriculture:

(i) Self-sufficiency of Food: Due to the inflow of cheaper foodgrains from the world it would not remain economically viable in India to produce them and farmers might incline in favour of the profitable agriproducts. This will make India heavily dependent upon the world market for its food supplies, marring its achievement of food self-sufficiency. This will have serious political and ethical outcomes for India.

(ii) Price Stability: Dependence on the world the market for the supply of agricultural products and especially for foodgrains will never be safe for India. As the international market for the products is highly speculative and full of variations (due to natural factors) the price stability will be always in danger—fluctuations hamper the producers and consumers of agri-goods in India. It would be very tough to fight the dumping of surplus agrifoods from other countries.

(iii) Cropping Pattern: The cropping pattern of agriculture might take a very imbalanced shape, which will be highly detrimental to the ecology at large61 as the farmers will always be in favor going for the crops and commodities which have the comparative price advantage.

(iv) Weaker Sections: The benefits of globalization may not be neutral to areas, crops, and people. There will never prevail a certainty as to which area/region or crops or the people are going to benefit from globalization in which year. At the same time, globalization is a process where profits can be made, but it is a market-based concept. Those who are unable to produce due to lack of capital, investment and entrepreneurship will have no gains from it. They will be net consumers or buyers. Since India has a vast population of the weaker sections (as other third world countries have) this population will neither be able to increase its income nor be able to purchase the agri-goods having no price stability.

It means that the weaker sections of India might miss this chance of growth and development. We need to make the benefits of globalization reach these people, too. This could be done by a timely and society-oriented public policy which is a big challenge.

(v) WTO Commitments: There are certain time-bound obligatory commitments of India towards the provisions of the WTO in the area of agriculture, which are highly detrimental to the people and the economy. We may see this challenge from two angles-

(a) According to the agricultural provisions, the total subsidies forwarded by the government to the sector must not cross 10 percent of the total agricultural outputs. At the same time, exemptions to farmers are to be withdrawn—hampering the public distribution system badly. India’s subsidies are still far below this limit, but commitments pose a threat to the sovereign decision making.
(b) The subsidies (with different names) to agriculture which are forwarded by the developed countries are highly detrimental to Indian agriculture and they are very high, too.

None of the above-given challenges are easy to fight. These are not to be fought by India alone, but almost all developing countries are to face it. Once the WTO comes into operation, many experts from India and abroad have provided ways to fight these challenges, which may be summed up in the following way—

(i) To fight the challenges related to self-sufficiency in food, the price stability and the cropping pattern a judicious the mix of suitable kind of agricultural and trade policies will be the need of the hour. To the extent agricultural policy is concerned, India has a limited level of freedom. But the WTO regime does not allow the member countries to impose higher tarrif or tarrif itself to ward off cheaper agri-goods from entering the economy—this is the main reason behind the above challenges. It means it is essential to modify, change or revise the provisions of the WTO.

Similarly, the issue of agricultural subsidies (the Boxes) need to be equitably defined so that they do not look biased. Here also the provisions of the WTO need revision.

To fight out this typical challenge, experts suggested that the WTO is not God-given. Its provisions may go in for change if concerted efforts are made by the member countries in this direction. Like-minded nations who face the same kind of crises should come together and go for a joint effort, from inside the WTO, for the revisions or relaxations in its provisions. Morality related and ethical issues might be used as eyeopeners and a handy tool to have the attention of the developed nations and the WTO alike.

Prima facie this suggestion looked as a preach easier said than done. Post-1995 saw a polarisation of like-minded countries inside the WTO that finally culminated into the failure of the Seatle Round of the WTO deliberations. The most powerful country in the world failed to convene a meeting that too in its most distant region Alaska)—a moral triumph of the poor over the rich. This incidence while indicating a possible failure of the WTO itself, boosted the morale of the developing countries to go for stronger groupings and even sub-groupings under the WTO.

After the Doha Round, the USA had hinted to forget multilateralism and indicated its intentions towards bilateralism. The European Union had the same intentions, but it did not show it as openly as the USA. The year 2002 came as a watershed period for the WTO when the EU in its new diplomatic move announced to hear the agriculture-related issues of the developing nations. The USA announced the intentions a few days after the EU announcement—just a few days before the Cancun Meet of the WTO. The Hongkong deliberation of the WTO, though it did not give anything concrete to the developing world, provided enough hope, there is no doubt in it. The real picture emerges in the next meet for which the different pressure groups had serious deliberations on alternatives of bargaining power.

The second level suggestion to India was in the area of preparedness for the WTO regime. India was required to set new and internationally best standards in the area of production by boosting areas such as—research and development, biotechnology, information technology, health and phytosanitary matters. This will make Indian goods and services compete in the international market.

WTO And Agricultural Subsidies AMS

The subsidies provided by the government to the agricultural sector (i.e., domestic support) is termed by the WTO as Aggregate Measure of Support (AMS).66 It is calculated in terms of product and input subsidies. The WTO argues that the product subsidies like minimum support prices and input subsidies (non-product) like credit, fertilizers, irrigation, and power will cut production cost of farming and will give undue advantage to such countries in their access to the world market— such subsidies are called to cause ‘distortions’ to the world trade. Such subsidies are not permitted in one sense as they have a minimum permissible limit de minimis under the provisions which is 5 percent and 1percentnt of their total agricultural output in the case of developed and developing countries, respectively.

PS : How to prepare Indian Economy for UPSC ?

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