Dumping by rich countries destroys farm livelihoods in developing countries

Pic courtesy: internet

It was in 2003 that the Heads of State of four West and Central African countries – Benin, Burkina Faso, Chad and Mali – wrote a joint proposal to the World Trade Organisation (WTO) asking for scrapping the massive cotton subsidy support being given in the US/EU, which depresses global prices. At the same time, in a signed letter published in the New York Times, these leaders had said: “Your subsidies kill our farmers.” An international uproar erupted, and it virtually led to the collapse of the Cancun WTO Ministerial Conference.

This particular incident, in lot many ways historic, is an important lesson to learn from in the context of the ongoing debate on whether Minimum Support Price (MSP) being paid to farmers is much higher compared to international prices. Also, it allows us to understand there is nothing sacrosanct about international prices. As the West African challenge to the rich developed countries on the contentious issue of cotton subsidies clearly demonstrated how easily market prices were manipulated hitting the livelihoods of farmers in another part of the world.  

Several studies, among them from Oxfam International, the International Food Policy Research Institute (IFPRI) and the Catholic social justice organisation CIDSE, had analysed the issue in depth. Accordingly, the US had spent $ 14.8 billion in just four years, between 1998 and 2002, to subsidise a cotton crop valued at $21.6 billion. Some other news reports showed how, in addition, the US provided a subsidy of $ 1.7 billion every year to the textile industry to buy the subsidised cotton. This brought down the global prices pushing cotton farmers in West Africa to suffer economic losses.

If these cotton subsidies were to be removed, studies showed that nearly 25,000 cotton growers in the US (at that time) would have incurred an average loss of $ 871 per acre. On the other hand, imagine the economic loss for the four West African countries (better known as Cotton 4) which had only 4 per cent of the global cotton area but relied heavily on exports. Lower international prices meant lower price realisation for the African cotton growers. What impact the artificially low international prices had on cotton growers from the developing and least developing countries is provided by another World Bank study which worked out that a 40 per cent drop in cotton prices leads to a 21 per cent reduction in farm income. Drop in farm income in turn results in a 20 per cent rise in poverty.

Subsequently, in a case filed by Brazil against the US cotton subsidies, the WTO Dispute Panel in 2005 did acknowledge that some of the cotton subsidies indeed reduced global prices.

In another interesting study, Sophia Murply and Karen Hansen-Kuhn  of the non-profit Institute for Agriculture and Trade Policy (IATP) had worked out the cost of ‘dumping’ agricultural commodities on the global markets for five major crops America exported – wheat, corn, soybean, rice and cotton. This interesting research project, initiated by Mark Ritchie, IATP’s founder, has certainly made a significant contribution in understanding how ‘dumping’ influences global trade. Accordingly, in 2017, the US was dumping wheat at an export price that was 38 per cent less than its cost of production. Similarly, cotton was exported at a price that was 12 per cent less (despite the West African challenge), corn at 9 per cent, and soybean at 4 per cent less. The authors also observed a consistent pattern that America followed in dumping these commodities for over two and a half decades, barring a few years in between.   

Whatever be the ‘dumping’ size, what emerges clear is the role these subsidies, often hidden, have on lowering international prices. In 2018, the OECD countries, comprising the richest trading block, provided agricultural subsidies to the tune of $ 246 billion. Along with unfair trade practices, these subsidies have always played a significant role in protecting developed country farmers against price volatilities. Cotton being a classic case.

More recently, another IATP study entitled ‘Milking the planet’ explains how in a bid to remain competitive, European dairy corporations are dumping cheap dairy products and in turn pushing small dairy farms out of business in developing countries. Along with EU, the US too has been heavily subsidising milk and milk products. In a joint representation before WTO in 2017, India and China have said that dairy (and also for sugar) continues to be in receipt of a high product-specific support in America for over a decade. Similarly, the EU provides a product-specific subsidy support of 71 per cent of the value for its production for butter and 67 per cent for skimmed milk powder (SMP) thereby pulling down global prices.

How the fob prices actually hide the massive subsidies is better illustrated by a careful look at the wheat subsidies being provided in America. As per the non-profit Environmental Working Group (EWG), the US has given a subsidy of $ 47.8 billion to wheat growers between 1995 and 2019 (there are 29 heads under which these subsidies on wheat were given, a few of these may have discontinued now). These subsidies actually encourage over production thereby reducing market prices. The big trading agencies gain in the process. Also, what needs to be understood is that if markets were offering a higher price to wheat growers in America, I see no reason why the US should have provided such a huge subsidy support to wheat growers over the years.  

If the US/EU/Canada and other big players can subsidise exports of agricultural commodities or export at prices which are actually below the cost of production why Indian farmers should be penalised for it? International prices should therefore not be treated as a benchmark for fixing MSP for domestic farmers. India must ensure that regardless of the global prices domestic farm incomes grow in the same proportion as other sections of the society. To begin with, make MSP a legal right for farmers, as the Commission for Agricultural Costs and Prices (CACP) had earlier recommended. Follow this up with direct income support to fill the income shortfalls so as to realise the dream of Atmanirbhar Bharat. #

A case to make MSP legal right of farmers. The Tribune. June 23, 2020

https://www.tribuneindia.com/news/comment/a-case-to-make-msp-legal-right-of-farmers-102423?fbclid=IwAR3UUC9ZP9popmfDLNgUVCxcXde0cea76Tn41VhByxGm_IUkIMK4FW3VZCQ

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From Growth Economics to Economics of Well-Being

These are cars lined up before a food bank in America 

Pic courtesy -- MotherJones

At the beginning of the coronavirus outbreak, the World Economic Forum shared on Twitter a study 

conducted by Statista, a German online portal for statistics. It listed the top ten countries where people are 

losing faith in capitalism, where people agree “capitalism as it exists today does more harm than good in the world.” Interestingly, India tops the chart with 74 per cent respondents agreeing, followed by France (69 per cent), China (63 per cent), and Brazil (57 per cent). Germany trails with 55 per cent, UK (53 per cent) and with Canada and United States at 47 per cent each.

The declining faith in capitalism comes at a time when Oxfam International in its annual presentation, timed a few days before the World Economic Forum meeting in January at Davos in Switzerland, presents the shocking report on income inequality. Accordingly, India’s richest 1 per cent carries four times more wealth than the combined wealth of bottom 70 per cent. Internationally, the report says 2,153 billionaires have more wealth than 60 per cent of the global population. Ironically, the same wealthy corporations are once again on the forefront seeking massive Covid-19 bailouts. Such economic bailouts over the period have helped shape the popular thinking that global economic system in reality supports ‘socialism for corporate, and capitalism for the poor’. The worsening income inequality, which is increasingly coming under the scanner, is enough to fuel growing dissatisfaction with capitalism. As if this was not enough, the pandemic has further widened the social and economic gulf with the poor certainly faced with a much greater risk. With massive job losses, the challenge to stay safe and at the same time the struggle to provide food for the family has further deepened the gap between haves and have-nots.

Despite market reforms being pursued aggressively over the past four decades, one better way to understand how the social and economic disparities have only widened, comes from an insightful analysis of growing food insecurity and that too at a time of plenty. Writing in the New York Times, Patricia Cohen compares the long queues for food in America at the time of the Great Depression in the 1930s with the still longer queues of cars, stretching to several miles, before food banks during the 2020 pandemic. Separated by a time gap of almost 80 to 90 years, a memorable picture taken by photographer Margaret Bourke-White (of Time Life Pictures) shows a long line of poor citizens waiting for relief below a signboard showing a happy family in a car, with the banner claiming: ‘World’s highest standard of living’.

Nothing much seems to have changed. The economic model of growth has only made the rich richer, and the poor have been driven against the wall. In a country, which is known to be the world’s richest economy, pictures of cars lined up for an average of 2 miles or so before a food bank, is only a stark reflection of ‘profound, longstanding vulnerabilities in the economic system’. Not only in America, the distressing visuals of a traumatised migrant workers in India, with children in laps and carrying family belongings on head, trudging on foot to reach their homes several hundred kilometres away, will continue to haunt the nation for quite some time. Whether it is the long queues of cars in America or the long march in India, the pandemic has laid bare the inequalities perpetuated over the decades. A serious rethink is now required to radically overhaul the economic system bringing in equity and justice at the centre of human development.

It doesn’t end here. Four decades of neoliberal economics has also unleashed an environmental havoc. With temperatures soaring, ice caps melting and greenhouse gas emissions (GHGs) rising, climate change in no longer a distant reality. Many believe that the destruction of prime natural resources, forests and biodiversity hotspots has lead to the emergence of deadly diseases. A complex web of relationship exists between industrial farming, factory farms and bushmeat markets calling for an immediate fixing of the broken food systems so as to avoid the next pandemic. Whether it is the resulting environment destruction or the rampaging economic inequalities, the Covid crisis should act as an urgent wake-up call for governments to seriously move towards an economic system where the majority population is not deprived of basic necessities, where the emphasis shifts from economic growth to economics of well-being, where Gandhi’s talisman becomes the new development mantra. 

Prime Minister Narendra Modi recently said the biggest take away from the global crisis “is to become self-reliant.” Although several newspapers editorials as well as lead articles have warned against returning to self-reliance and that too at a time when the world needs to quickly move into a trajectory of high growth, I think what the Prime Minister said is exactly what the country needs. Not only making villages self-reliant, where agriculture becomes the pivot for rebooting the Indian economy, the policy imperative has to swing to creating adequate farm, public health and education infrastructure thereby revitalising the rural economy. This has to be accompanied by a renewed emphasis on ‘Make in India’ programme – especially by revitalising the MSME sector -- given that too much dependence on global value chains is now coming under the radar.

The principle of self-reliance is based on according dignity to labour and living in harmony with nature. These two underlying principles for economic well-being come in direct conflict with traditional economics which continues to harp on productivity and growth, in short pushing for more aggressive market reforms. The bumpy road ahead however will need a clear cut change in policy direction where first providing a generous social security net for the unskilled as well as skilled industrial workers becomes an immediate necessity. Secondly, and more importantly, the focus has to shift from destroying nature in the quest for economic growth.

Staying indoors for several weeks has made people realise the importance of conserving and protecting environment. They now need appropriate policies that make it possible. Economic well-being is an idea whose time has come.#

Losing faith in capitalism. The Tribune. May 16, 2020

https://www.tribuneindia.com/news/comment/losing-faith-in-capitalism-83920?fbclid=IwAR1Zbq6RJImJNDIMvp6CK8g8M_PC5QVrqEJpi_7-ouZSY8pp2wejbVD3-P0

READ MORE - From Growth Economics to Economics of Well-Being

Indian agriculture has been in distress for over two decades. Why couldn't economists see it earlier?

Pic courtesy: The Hindu

It was in 2013, when just prior to the inauguration of the annual World Economic Forum (WEF) jamboree at Davos in Switzerland, Oxfam too released its annual global inequality report. Estimating that the richest 100 families in the world had added $ 240 billion to their wealth in a year, the report said the amount of wealth concentrating in the hands of top 100 was good enough to wipe out global poverty four times over. If only that report had been heard and action taken to reduce global poverty, the widening inequality could have been contained.  

A few days back, Oxfam released its latest ‘Time to Care’ report ahead of the 50^th Annual Meeting of the WEF. While it once again clearly brought out how the concentration of wealth in the hands of world’s 2,153 billionaires had accentuated over the years, almost equalling the wealth in the hands of 4.6 billion people or 60 per cent of the global population, it also pointed to the worsening inequality in India. India’s richest 1 per cent holds more than four times the wealth that exists in the hands of 95.3-crore Indians forming 70 per cent of the country’s population. In addition, the combined wealth of India’s richest 63 families was higher than the Rs 24,42,200-crore outlay of the Union Budget for the financial year 2018-19.   

Coming at a time when all eyes are on Budget 2020, it will be interesting to see whether the Finance Minister Nirmala Sitharaman will make an attempt to correct this historical distortion in economic approach. With growth hitting an 11-year low and that too on the back of an economic slowdown, and with big business drumming up fears of fiscal slippage if she resorts to increased government spending so as to spur rural demand, I doubt if the credit rating agencies and the economists working with brokering agencies will allow for any policy space to be utilised for bridging the widening inequality. Already, enough noise is being created in the mainline media warning against any fiscal exuberance, suggesting big-bang measures which harbours on more of the same and therefore keep fiscal deficit within the target proposed.  

At a time when fall in consumption and investment are being considered as the reasons behind the economic slowdown, any meaningful attempt to enhance rural spending will come from providing more income in the hands of the rural poor, which will also go a long way in addressing growing inequality. Regardless of what credit rating agencies have been suggesting, the Finance Minister will have to defy the contours of the predominant economic thinking that has pushed the economy on a downhill slide. An economy which caters to serving the consumption needs of 10 per cent of the population must now look beyond, and as the Prime Minister often says to translate into Sabka Saath Sabka Vikas.   

In other words, Budget 2020 provides a perfect opportunity to set the economic imbalance right.

In economic terms, everything boils down to creating demand. More the demand more is the economic growth. And it is primarily for this reason the 7th Pay Commission was hailed by India Inc as a booster dose for the economy. After all, more income into the hands of employees would mean more demand, and thereby more consumption. Similarly, any further relief in personal income tax is expected to leave more surplus money into the hands of urban middle-class thereby giving consumers more to spend. But again, this fits into an economic thinking that restricts all measures to cater to consumption needs of 10 per cent of the population. On the other hand, I have always argued that unless growth is inclusive the economic benefits will not reach the masses. Considering that bulk of the rural poor comprises farmers and farm workers, the focus has therefore to shift to agriculture.

Of the 95.3-crore Indians that the Oxfam report talked about, at least 60-crore are engaged directly or indirectly with farming.  The first and foremost step is to start viewing agriculture as part of the formal economy. Agriculture should not only be seen as a sector whose only contribution is to ensure that food inflation does not cross the four per cent (plus or minus two per cent) limit as laid down under the Reserve Bank of India (RBI) macro-economic policy, but should be seen as a sector that can create economic buoyancy. More so, at a time when the bottom 60 per cent population holds only 4.8 per cent of the national wealth. This is because agriculture unfortunately has been kept deliberately impoverished so as to keep economic reforms thriving as a result of which agrarian distress remains largely pronounced. According to the Economic Survey 2016, a report that I have often quoted, the average farm income in 17 States of India stands at a paltry Rs 20,000 a year. In other words, farming families in roughly half the country, survive on less than Rs 1,700 a month. At such low incomes, the share of agriculture in country’s GDP is bound to remain low.

The IMF says that declining rural demand has pulled down India’s growth, which in turn has pulled down global GDP. This became known to IMF (and for that matter to mainline economists) only when India’s GDP figures slipped down to less than 5 per cent. But even for the past two decades, farm incomes had either remained stagnant or were in the negative, which means rural spending were already low. This fact was never acknowledged. An OECD-ICRIER study for the period 2000 to 2016-17 shows that Indian farmers had lost Rs 45-lakh crore on account of being denied the rightful price. This was followed by a period when according to Niti Aayog, annual growth in real farm incomes had remained at ‘near zero’. However, not even an iota of concern was exhibited by the World Bank/IMF, the credit rating agencies or India’s mainline economists at the extra-ordinary crisis that prevailed in rural India. As long as GDP hovered at 6 per cent and above, economists failed to see the slump in rural demand.

The launch of PM-Kisan scheme in last year’s budget, providing a direct income support of Rs 6,000 per year per farm family (owning land), for which a budgetary provision of Rs 75,000-crore was made, is a ‘tectonic’ shift in economic thinking. As someone who had relentlessly been seeking an income transfer to the farming community, to partly offset the economic loss farmers have been undergoing year after year, I think PM-Kisan is the right vehicle coming at the right time to increase rural incomes. There is no other policy instrument that can reach all farmers. To make a meaningful impact, my suggestion to the Finance Minister would be to provide an economic stimulus package of Rs 1.50 lakh crore over and above the Rs 75,000-crore that is already allocated under the PM-Kisan scheme. This would provide an amount of Rs 18,000 ever year or Rs 1,500 per month (against Rs 500 at present) which is enough to meet some farm expenses like cost of seed, manure and bio-pesticides. This may not sound to be of much significance for those living in the cities but imagine the implications it has for the rural poor whose income is hovering around Rs 20,000 per year. In any case, the additional allocation under PM-Kisan scheme will flow back into the markets by way of enhanced consumer demand. An effort should also be made to ensure 100 per cent implementation of this scheme. At present, against a total of 14.5–crore farmers, only about 7.6-crore farmers have been covered till Nov 30. Also, the Finance Minister should expand this scheme to benefit tenant farmers.

When farm incomes are low, it has negative fallout on farm workers. According to a study by the Centre for Monitoring Economy (CMIE), in the past one year, 2018-19, almost 1.1 crore people lost their jobs. “Estimated 91-lakh jobs were lost in rural India, while the loss in urban India was 18-lakh jobs. Rural India accounts for two-thirds of India’s population but it accounted for 84 per cent of the job losses,” the report said. Several other studies have shown farm wages declining to its lowest in past five years, and massive job losses being faced by both farm and non-farm workforce. Even the MNREGA scheme, for which a budgetary provision of Rs 61,084-crore was made under revised estimates for 2019 fiscal, numerous reports of payments not being made in time have appeared. To bring the economy back on track, my second suggestion would be to enhance MNREGA budgetary allocation by another Rs 10,000-crore, taking it to Rs 70,000-crore for fiscal 2020.

While the Rs 25,000-crore corpus for last-mile funding for stalled housing projects may help the construction industry, another stimulus of Rs 25,000-crore is needed to prop up the Zero Budget Natural Farming (ZBNF) initiative that the Finance Minister had mentioned in last year’s budget but refrained from making any budgetary provisions. Drawing from the successful reach of the ZBNF programme in Andhra Pradesh, where approximately 5.85-lakh farmers have been shifted from chemical farming systems, it is time to replicate organic cultivation in erstwhile Green Revolution areas, which are faced with severe crisis in groundwater depletion as well as environmental contamination. In addition, an allocation of Rs 500-crore be also made to set up Farmer Markets in major urban centres. This should be to encourage the supply of chemical free farm produce to the health conscious urban population.  

And finally, I expect the Finance Minister to launch an Ease of Doing Farming initiative on the lines of ease of doing business. After all, if 7,000 steps for ease of doing business can be laid out for the industrial sector, agriculture too needs it desperately. At every step, linked to production and marketing, a farmers faces obstacles that are primarily because of lack of governance. This will go a long way in making agriculture an economically viable and environmentally sound enterprise. A vibrant agriculture will create so much of demand that the wheels of development will never be faced with a slowdown. Try it, to experience it. #

Source: 'Ease of Doing Agriculture' is the way forward. National Herald. Jan 31, 2020
https://www.nationalheraldindia.com/opinion/ease-of-doing-agriculture-is-the-way-forward?fbclid=IwAR2j0nI_Zg5XA1MMD6z77toBjeFfYZpy-eHubUqcXKtQ6VpVYkdeegq3oG8  

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