Current Affairs

U.S. farm lobbies call for action over India, China subsidies

Big developing countries such as China and India are routinely breaking international trade rules on agriculture and the U.S. government should take action to stop them, representatives of U.S. corn and rice growers said on Thursday.

"It's time for action," Robert Cummings, chief operating officer of USA Rice Federation, told Reuters in Geneva, home of the World Trade Organization.

"We've had enough years of non-compliance and it's time for that non-compliance to be made known here and also made known to the U.S. government, and that a response be forthcoming, if the WTO is going to remain viable."

Shannon Schlecht, vice president of policy at U.S. Wheat Associates Inc, said a reality check was needed as the WTO enters the next stage of global trade talks, when some trade diplomats expect the United States to be under pressure to make concessions on agriculture.

"We want to see compliance and there are some ways to get that," he said.

Cummings and Schlecht were speaking at the offices of King & Spalding in Geneva, a law firm specialising in international trade law and disputes at the World Trade Organization, a day after addressing around 40 trade diplomats at the WTO.

Their assertions were based on a study of five leading developing nations, China, India, Brazil, Turkey and Thailand, by agricultural trade lobbying firm DTB Associates, LLP.

DTB's founder Craig Thorn, a former U.S. agricultural trade negotiator, said the five countries had rapidly increased their minimum support prices for crops and breached the maximum "aggregate measure of support" that they are allowed to provide.

"To the extent that these countries have notified their policies, they have in our opinion in every case cheated on their notifications," Thorn said.

Recent WTO negotiations have been dominated by India's demand for developing countries to be allowed to stockpile subsidised crops, an amendment that allows them to break the normal WTO rules, provided they meet certain conditions.

But no country was likely to invoke that exemption unless there's some danger of them being sued, Thorn said, and even then they would find it difficult to show the subsidies did not distort trade, as was required.

"We're pretty confident that the trade price effects of these policies are huge and measurable," he said.

Earlier on Thursday, Thailand filed charges against its former prime minister for her role in a rice subsidy scheme that has cost the state billions of dollars.

Cummings said that if any of Thailand's stockpiled rice made it into the export market at a price less than acquisition, Thailand would be automatically in violation of the WTO rules.

"We're putting the facts on the table here, and we're also putting the facts on the table for our government back home," he said. "It's probably fair to say that we're getting a more favourable reaction as time goes on and as we're bringing more facts to the U.S. government."

Background:

WTO

AoA classifies subsidies into two parts:

Green blue and Amber subsidies

Just like traffic signal has three colors: green (GO), orange (caution) and red (STOP).
Similarly, WTO classifies DOMESTIC AGRICULTURE subsides into three categories: green (GO), blue and amber (reduce).
There is no “RED” box meaning WTO doesn’t wish to completely STOP subsides, because it is impractical anyways!

Amber box: De Minimus limits

Q. Explain De-Minimus limits in WTO’s agreement on agriculture. Why is India opposed to it? (200 words)

Under WTO’s agreement on agriculture (AoA), domestic-subsidies are classified into three groups: Green, Blue and Amber.
Amber box subsidies create trade distortion because they encourage excessive production e.g. fertilizers, seeds, electricity and irrigation subsidies.
Therefore, WTO wants to limit the amber box subsidies.
De Minimus is the Minimal amounts of Amber box subsides permitted by WTO, even though they distort trade.
De minimus limits are calculated on the agriculture production of the given member state in 1986-88.

Why is India opposed?

INDIA FEARS IT’LL HAVE TO CUT DOWN ITS FOOD SUBSIDY TO COMPLY WITH WTO’S DE-MINIMUS LEVEL

1. In 1986: USA agriculture production was far ahead of India. So, their 5% De-minimus quota will be far bigger than our 10% quota (in absolute figures).
2. Input costs have skyrocketed in these decades. But, De-minimus doesn’t consider inflation factor.
3. So, if India has to limit its (Amber box) agro. subsides to a non-inflation adjusted 86’s production, we cannot continue the MSP to farmers or food security to poors. 4. These subsidized foodgrains are meant for feeding the poors only, they do not distort international trade.

What is Bali summit and Peace clause?

Q. What is hell is “Bali Package” and “Peace clause”? (200 words)

December 2013: 9th WTO ministerial conference held at Bali, Indonesia
“Bali Package” is the collection of three prime outcomes of this summit.

as per the original Agreement on agriculture (AoA), the developed and developing countries have to keep their Amber box subsidies within De-minimus level i.e. 5% and 10% of their agriculture production in 1986-88 respectively.
India opposed this base year and limits, because it’d make impossible to implement the food security programs for the poor and MSP for the farmers.
Therefore, as a measure of temporary relief, Bali summit enacted a “peace clause” for the AoA

Salient features of Peace Clause

No member, can drag any developing country to Dispute settlement mechanism of WTO.
for violation of De-minimus limits in AoA
Provided that the said developing country

1. is paying subsidies for staple foodcrops

for public stockholding program
For food security purpose.

2. is providing annual information of its food security Program to WTO.
3. Permanent solution will be taken no later than 11th ministerial conference i.e. at December 2017.

What is Trade Facilitation Agreement?

Q. Write a note on the salient features of Trade facilitation agreement (200 words)

Under TFA, Every member:

1. Will have to publish a detailed list of procedure for import-export, fees, inspection rules, penalties etc.
2. Minimize the proof documents and clearance required for customs clearance.
3. Make all the information available on INTERNET to foreign traders, governments and interested parties
4. Provide electronic payment of fees, duties, taxes.
5. Setup a single window mechanism to help trader submits all documents at a single point- preferably online.
6. Trader should be notified immediately, If goods are detained at customs.
7. Provide faster customs clearance to perishable goods (Fruits, veggies, flowers).
8. Member must not ask foreign traders to compulsorily route their applications/fees via local customs brokers/middlemen. 9. Give Advance ruling, as and where applicable.

Least developed countries

They’ll get financial and technical help to comply with above rules.

Benefits of TFA:

A simplified customs clearance mechanism will boost international trade, and thereby it will

Why Modi opposed Trade Facilitation Agreement

Q. Why has India refused to sign Trade Facilitation agreement? (200 words)

WTO’s Trade Facilitation agreement (TFA) aims reduce the redtape and bureaucratic hassles in customs clearance and thereby facilitate international trade.
But, TFA maintains that it doesn’t “diminish” the rights and obligations of members under other agreements of WTO.
For example, under the Agreement on Agriculture (AoA) if a developing country is giving Amber box subsidies beyond 10% of its national agriculture production (base year 1986), THEN other members will be justified in putting trade sanction or WTO-complaint against the said country.
2013: In Bali Summit, the then UPA Government agreed to sign TFA, after WTO “Peace clause”, which gave temporary exemption to developing countries from 10% de-minimus provision until 2017.
2014: Change of regime,

Modi Government has refused to sign TFA before deadline (31st July 2014), because:

1. Once India has signed TFA, the developed countries may stonewall her demands for a rational change in base year and ceiling limits on agro. Subsidies.
2. Then India will have to cut down agro. Subsidies in MSP and food security programs, else they’ll put sanctions on us, soon as Peace-clause “temporary” deadline is over in 2017!
3. And yet, we’ll have to keep giving them easy customs clearance because we signed the TFA!

Therefore, Government has decided to use TFA signature as a “Bargaining Chip” for a permanent solution of food subsidies issue.

WTO & Doha Round:

Doha Round-Issues, Implications & Challenges

Trade ministers from about 35 countries met in Delhi recently to give impetus to the Doha round of trade talks. This article covers in a condensed form the background of the stalled Doha round of Trade negotiations, understanding the issues of the developing countries and challenges ahead.

What was the Objective of Delhi Meeting?

The objective of the Delhi meeting was neither to focus on negotiations on specific topics nor to reach an agreement .The objective was to concentrate on working on a timetable for the talks. India’s foreign trade minister, Anand Sharma had invited the leaders to get some momentum into the negotiations.

The Echo of the Issues

The core issues were echoed in G20 summits in Washington in November and London in April as well as the G8+ summit in L’Aquila in July apart from a meeting of farm exporters in June at Bali and again at the Organisation for Economic Cooperation and Development (OPEC) in Paris and in July at a meeting of the Asia-Pacific APEC grouping.

Is America taking too much Interest?

United States is key to any deal is expected by many other countries to start engaging in the negotiations; however the key focus of Obama Administration seems to be upon economic crisis and health care besides to be able to point to new opportunities for U.S. business.

What is Emphasis of Developed Countries?

Developed countries emphasize the big emerging countries like China, India and Brazil to open their markets and not make excessive use of special arrangements for developing countries in a Doha deal to shield their industries from competition.

What are the Issues & Challenges?

There are gaps and unresolved issues on agriculture and non-agriculture market access (Nama). The center point of talks involves efforts to open up trade in agriculture and industrial goods.

The involves rich countries to open their protected markets for agriculture produce and cutting their heavy subsidies they provide to their farmers & agro exporters , as they are able to wipe out the farmers in poor / developing countries out of the market.

The richer developing countries will also cut industrial tariffs in return so that it opens up their markets for industrial goods to do business with both rich and poor countries.

Outcome

There seems to be a more of a split between the developing and the developed nations