WTO and Indian Agriculture: An Over View (ABSTRACT)

(This "Abstract" is submitted to the International Conference on “WTO, TRADE AND AGRICULTURE: ISSUES AND CHALLENGES FOR DEVELOPING AND LEAST DEVELOPED COUNTRIES: 20-21 October 2016, New Delhi”).  

-*Dr. S. Vijay Kumar

             Trade is an engine of economic development. The establishment of W.T.O is an important landmark in the history of international trade; it is much wider in scope and coverage. India is one of the founding members of WTO which came into existence on January 01, 1995 replacing GATT (General Agreement on Tariffs and Trade) and promising the herald of new era in the rule based system of governing and promoting international trade concomitant with the needs of the on-going processor globalization. WTO provisions related to international trade are now similarly applicable to agriculture which was brought within the fold of GATT in the Uruguay Round (1986-93) of Multilateral Trade Negotiations (MTNs). Application of WTO provisions on agriculture involves many contentions issues and is an area of serious concern for developing countries which are primarily agrarian economies. Moreover, the world, despite growing interdependence and integration, is highly heterogeneous with regard to levels of development. This heterogeneity is very much noticeable when we compare the agricultural sector of developed and developing countries. Indian agriculture is labour intensive, nearly 60% of its population is dependent on farming, most farms are rain fed and millions of farmers derive their livelihood from agricultural, it is still a way of life and not an occupation they have chosen for themselves. Indian farmers are mostly involved in subsistence farming with very little or no marketable surplus. On the other hand, the developed countries like the USA, Japan and EU countries heavily subsidize their agriculture with high quality standards and aggressive marketing practices. These countries hold 72% share of world trade in agricultural products are keep the developing countries virtually at the periphery of world market. In USA, farmers have been given subsidies worth millions of dollars to keep their farmland uncultivated. In India 70% of the holding are not of the economy size, making application of modern technology difficult and unaffordable for the farmers.

Objectives of the Study:

1). Brief review of literature

2). To study the impact of WTO on Indian Agriculture

3). To study the Issues and Challenges of Indian Agriculture in the context of WTO

4). To give suggestions

Methodology: The present study is based on secondary data. The data will be collected from books, journals, reports and websites.

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*Head (Retd.), Department of Economics, Kakatiya Govt.  (UG&PG) College (NAAC “A” Grade), Hanamkonda (Kakatiya University), Warangal, Telangana State. The author ex - member, Board of Studies, Kakatiya University, Warangal.

Brief Review of Literature:

Agreement of Agriculture (AoA): AoA of WTO recognizes free and market-oriented trading system in agriculture. It has the following main features:

Tariffication: It means conversion of all non-tariff barriers on trade such as import quota into tariffs. Tariffs bindings are to be reduced under this agreement. Developed countries were to reduce their tariff bindings over a period of six years (1995-2000). Developing countries are to reduce their bindings over a period of ten years (1995-2004). Least developed countries are exempted from tariff reduction. There are many issues under the AoA which are considered against the interests of developing countries like India. Firstly, the minimum access for import of primary goods flouts the basic rule of promoting free trade under WTO agreement. Secondly, distortions emerge from inequity in domestic subsidy discipline due to different base positions. The developed countries are heavily subsidized countries and are allowed to retain up to 80 per cent of their subsidies but developing countries can subsidize their farmers not more than 10 per cent of the total value of agricultural production. Thirdly, India argues that for low income countries, market access and domestic support discipline should be such that their food requirements are met from domestic sources. The volatile international market can get transmitted to the domestic economy and can affect the prices of food grains and food entitlement of the poor. Fourthly, developing countries face highest tariff rates which include the major agricultural staple foods, cereals, meat, sugar, milk, butter, cheese as well as tobacco products and cotton. The Indian proposals have been by and large well received and endorsed by most of the developing countries as well as some of the developed countries.

         i) Green Box Support: It is given on items which have minimal impact on trade, e.g., pest and disease Control, market intelligence, it is an exempted support.  ii) Blue box support: It is product-limiting subsidy and pertains mainly to the developed countries. It is exempted from reduction commitment under WTO. iii) Special and differential treatment box support: It includes investment subsidy to agricultural sector for farm development work like land leveling, shallow wells etc. 

          WTO member countries are obliged to reduction commitments of their direct export subsidies. Developed countries are to reduce the volume of subsidized agricultural exports by 21 per cent and the value of subsidies by 36 percent of the average base period 1986-88 within six years. Developing countries are to reduce the same by 14 per cent and 24 per cent respectively within ten years. The developed countries have used provisions of AoA to further the interest of their farmers. For example, they have remodeled AMBER BOX subsidies in such a way that these qualities to be put into BLUE or GREEN BOX subsidies. These countries are constantly pressuring the developing countries for greater market access for agricultural product but are not willing to bring down the level support that they provide to their own farmers. Developing countries like India are being discriminated in matter like tariff on food imports into developed countries. For example, in the name of mutual access, the Organisation for Economic Co-operation and Development (OECD) countries impose very low tariff on imports from fellow members while similar imports from developing countries are subjected to higher tariffs.   

The Threat WTO poses to Indian Agriculture: India’s two major concerns are food security and farm subsidies. Narendra Modi told in India-Africa Forum Summit in New Delhi: “We should achieve a permanent solution on public stock holding for food security and a special safeguard mechanism in agriculture for developing countries.” But the WTO director general Roberto Azevedo has been openly batting for the US/EU position of capping the Minimum Support Price (MSP) for Indian farmers as well as the need to limit input subsidies being given for fertilizer, seed, pesticides and irrigation to the present level, he is also literally threatening a “doomsday” scenario if the developing countries fail to accept the demand of the rich industrialized countries.

In this backdrop this paper attempts to study the impact of WTO on Indian agriculture, issues and challenges and some suggestions will be made at the end of this paper.