Little WTO support for MSP

12th WTO Ministerial postponed. 

Pic courtesy: China Daily

In the light of the farmers demand for according a legal sanctity to Minimum Support Price (MSP) a question that is being repeatedly asked is whether any such move will violate the World Trade Organisation (WTO) provisions? 

This assumes importance given the continuous tirade by some of the rich developed countries, led by the US, EU and Canada, blaming India for breaching the subsidy limits. While India maintains that its MSP operations and the public stock holding for food and livelihood security is completely WTO compliant, this hasn’t deprived some member countries from raking up this contentious issue time and again. With developed countries eyeing a significant proportion of the huge market that is available, given an estimated 80-million plus nutritionally-deficit population in India, which is covered under the National Food Security Act, the issue of restricting public stock holding so as to allow for subsidised imports has always been on the agenda.   

Even though the 12^th Ministerial Conference, which was scheduled to be held at Geneva from Nov 30 to Dec 3, has been postponed after Switzerland imposed travel restriction following the outbreak of Omicron, the new virus variant, the issue was hotly debated in the run up leading to the preparation of the final draft for the negotiations. Although it didn’t find place in the final draft, some countries had even gone to the extent of vaguely proposing that procurement of ‘traditional staple food crops’ be restricted to 15 per cent of the total production. If this had found approval, and given India’s dismal ranking at 101 among 116 countries in the Global Hunger Index 2021, the severe implications any such move would have on ensuring food and nutritional security were certainly worrisome.  

It was at the Bali WTO Ministerial in 2013 that developing countries had managed to wrest an interim “Peace Clause” protection that acted as a safeguard for countries like India. While developing countries were expected to cap the subsidy support through administered prices at 10 per cent of the product-specific value, called de minimis support, for the rich countries the permissible limit (de minimis) allowed is 5 per cent. Since US, EU and other members of the Cairns Group (a group of exporting countries) had been continuously raising the issue of India exceeding the outer limits in case of wheat and rice, calling it as trade distorting, the G-33 Group (a group of 47 developing countries) are asking for a permanent solution for the challenge they collectively face on meeting the food, livelihood and nutritional security of the small holders as well as the nutritionally poor. 

In 2018-19, taking resort to the ‘Peace Clause’ that protects developing countries from breaching the permissible limit India had informed WTO that it had crossed the de minimis ceiling in case of rice. Peace Clause protects developing countries from being drawn to any dispute even if it exceeds the subsidy ceiling. This is what infuriates developed countries, including the Cairns Group, which is keen that the Peace Clause protection is taken away. The other objection by the developed countries is the upheaval subsidised grains cause to the global trade. With the G-33 Group agreeing not to export any quantity from the procured food stocks, at least the issue of procurement causing trade distortions has been put to rest. 

While in 2018, India and China had put up a joint proposal before the WTO asking for eliminating the $160 billion worth of trade distorting subsidies the rich countries provide using the Aggregate Measure of Support (AMS) provisions, more recently a fresh submission by India, in September 2021, calls for reducing distortions in global agricultural trade. Pointing to how asymmetrical trade rules have tiled the balance against the developing countries, India categorically states: “Seven members – EU, Japan, US, Russian Federation, Switzerland, Canada and Norway – have more than 96 per cent of the Final Bound Aggregate Measure of Support (FBAMS) global entitlement, while the remaining member countries have less than 4 per cent.” Simply put, it means the big players are the biggest violators of the farm subsidy regime but spare no effort in pointing to the developing countries. 

In the US and Canada, dairy sector alone received more than 50 per cent of the product-specific support over the period. Very cleverly, the product specific support is now being disbursed among non-product specific-support to show how questionable subsidies are being brought down in some important commercial trading activities. For instance, dairy and sugar together had a share of 91 per cent in product-specific support in the US in 1995. It declined to 37 per cent in 2001, and further dipped to 18 per cent in 2014. But  while the share of dairy and sugar declined progressively, the share of cotton and corn increased from 2 per cent in 1995 to 28 per cent in 2001, and then to 40 per cent in 2014. Similarly in EU, the share of butter, skimmed milk powder and wheat has increased from 17 per cent in 1995 to 78 per cent in 2010. 

While the developed countries accuse India of breaching the subsidy limit on rice, wheat, sugar and cotton, a look at their own subsidy support tells you how unfair the trade regime has been. While India’s subsidy support for rice now exceeds the permissible limit of 10 per cent, US gives 82 per cent product-specific support on rice, and EU provides 66 per cent, a flagrant violation of the WTO norms. Similarly, while the US subsidy support for sugar is 66 per cent, EU is giving twice as much – 120 per cent. A careful look at the entire range of trade distorting subsidies the rich countries provide clearly shows how massive subsides in commercially important commodities (and also processed foods) results in lowering the international prices. Let it be clear: it’s not competitiveness but subsidies that determine the international prices. 

If ‘Peace Clause’ is a protection that India needs to build food and nutritional security, a guaranteed MSP is the price shield that Indian farmers need to protect their livelihoods. #

Source: Little Support for MSP. The Tribune. Dec 9, 2021. https://www.tribuneindia.com/news/comment/little-support-for-msp-348084?fbclid=IwAR06rWn8HHk0dR--urBoP0KAR2hcw1etffC8xinAiClq98JG6dOkr2bsHCk#.YbGCThFHrx8.twitter

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Greed triggers gross vaccine inequality

Pic courtesy: NDTV 

This is disturbing. With only one among 500 in the low-income countries having received the vaccine shot in poor countries, a rigorous vaccine inequality has been at play. This is against every fourth person in the rich countries having received a shot. As per the World Health Organisation (WHO) poor countries have received only 0.2 per cent of the vaccine doses while the rich countries walk away with a share of 87 per cent.

So far, only 32 per cent in America, 23.1 per cent in UK, 2.1 per cent in India and 0.3 per cent of the population in the Philippine have received both the doses. At this rate, it may take years before the world can emerge out of the pandemic. The rich need to understand they cannot remain safely isolated from the deadly virus till the poor too have got the protective shield.

What is coming in the way is the greed for more profits over public health. Instead of pushing for a speedier vaccination drive globally, a handful of vaccine manufacturers are actually using patent protection granted under the Trade-Related Intellectual Property Rights (TRIPs) Agreement of the World Trade Organisation (WTO), to hold the world literally to ransom. Not only has the Big Pharma, some of the developed countries have been hoarding the vaccines and oppose any move to temporarily lift the patent protection. The US was hoarding 60 million doses of AstraZeneca vaccine, which it has now decided to share with other countries. Notably, the US Food and Drug Administration (FDA) had not approved AstraZeneca vaccines (called CoviShield in India) for domestic use, and therefore it made little sense to withhold it anymore.

Although India, South Africa and some other developing countries have petitioned WTO to allow a waiver on patent protection for Covid-19 vaccines, the rich trading block – the US, UK, EU, Japan, Canada, Switzerland, Norway, Brazil and Australia – are averse to any such move thereby denying these countries the access to technology to go in for large-scale production of the vaccines.

The pressure to oppose the IPR waiver comes from the pharmaceutical giants (and lobbyists) who have in a signed letter to the US President appealed to disregard the joint proposal put forward by India and South Africa stating that it was without any evidence. It also urged the US Administration to continue to ‘oppose the TRIPs intellectual property waiver’. Hollywood too is siding with the pharmaceutical industry. The TRIPs Agreement provides for a patent monopoly for 20 years. 

Although there exists a clause in the TRIPs Agreement that allows developing countries the option of using compulsory licensing, enabling the governments at time of national emergencies to permit local manufacturers to use the patented technology without worrying about the patent monopoly, developing countries are reluctant to use the option fearing trade retaliation. No wonder, despite even the Supreme Court mentioning the option of using Section 92 of the Indian Patents Act under which compulsory licenses can be issued to manufacture a patented drug; there has not been any visible movement on that front.

Pfizer’s has now offered its vaccines to India at a ‘not-for-profit’ price, but has spelled out any details about the controversial patent issue. It needs to be known that it was in Feb that the TV channel WION had reported how the pharmaceutical giant was trying to extract a higher price from some Latin American countries as a guarantee in exchange for supplying vaccines. It struck deals with seven countries, and was in negotiation with Argentina and Brazil. To Argentina it asked for putting its bank reserves, military bases and embassy buildings as collateral. It asked Brazil for military bases, sovereign assets and an international fund to write-off any expenses arising from probable law suits. The deals fell through. Even at that time, Pfizer’s chairman, Albert Bourla, had in a press release claimed how the company was committed towards equitable and affordable vaccines for people around the globe. Shows the double face of the pharmaceutical industry.

Moreover, it is not that the Covid-19 vaccines were produced with company’s own financial resources and in house research. These vaccines were in fact developed with public money support. For instance, US through its Operation Warp Speed, spent $12 billion to finance research, production and delivery of vaccines produced by a handful of companies. UK Government had provided 84 million pounds for manufacturing support to University of Oxford and Imperial College, London. As we all know, Oxford University later carved out a global licensing agreement with AstraZeneca. German government had given Pfizer’s German partner BioNTech close to $445 million. Further, writing in Project Syndicate,economist Jeffrey D Sachs says: “The Intellectual Property held by Moderna, BioNTech-Pfizer, and others is not mainly the result of those companies’ innovations, but rather of academic research funded by the US Government, especially the National Institutes of Health (NIH). The private companies are claiming the exclusive right to IP that was produced largely with public funding and academic science.”

The billionaire philanthropist Bill Gates too has received brickbats for his recent statement opposing any move to transfer the vaccine technology to developing countries. To say that developing countries do not have the capability to effectively use the technology transfer is not true. There are a number of companies in India, Canada, South Africa and Brazil among others which have the potential to ramp up production. The IPR waiver can easily expedite the mass production of generics, making it cheaply available. That’s what the world needs at this critical juncture.

Well, Pfizer alone is expected to swell its vaccine profits this year by $ 15 billion. This comes at a time when a horrible surge in virus infections is likely to push hundreds of millions of people in Global South at risk for want of vaccines and that too cheap. Let’s not forget, 3.22 million people have already perished worldwide from Covid-19. While the patent debate rages on, the big question is how the world can allow a handful of vaccine companies to profit over human lives. #

Source: Greed triggers gross vaccine inequality. The Tribune. May 6, 2021. https://www.tribuneindia.com/news/comment/greed-triggers-gross-vaccine-inequality-248780

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The demand for minimum assured price has global implications

A minimum assured  price is the determining factor. 

Addressing the Oxford Real Farming Conference last week, I said that the iconic farmers’ movement in India will have tremendous global implications. If the Indian farmers succeed in making Minimum Support Price (MSP) a legal right, it will cause major disruptions in international trade with focus shifting from trade competitiveness to first ensuring that livelihoods of farmers – the primary producer – everywhere in the world become economically viable and sustainable.  

At the same time, instead of leaving farmers to face the vagaries of markets, which has pushed farmers globally in a debt trap, the demand for ensuring that no trading takes place below the MSP not only provides farmers with a safety net but will gradually become an economic design for the rest of the world to emulate. Across the globe, farmers continue to suffer the consequences of keeping farm gate prices artificially low so as to keep the economic reforms viable. An economically worked out minimum assured price is what would make farming a viable proposition. 

At a time when the world is increasingly looking towards ‘growth without economic growth’ the time has come to make farmers an equal partner in growth. This can only happen when a price assurance is given to farmers. 

Take the case of coffee. While the global coffee market was estimated at $ 102.5 billion in 2019, growers have only received a small fraction of the price – not more than 1 per cent – of the end price a consumer pays. While coffee roasters and retailers rake in huge profits, a majority of the 12.5 million coffee growers somehow survive below the extreme poverty line of $1.90 a day. Although there are several proposals for responsible marketing initiatives, including setting up of a Global Coffee Fund, probably the best way forward would be to provide an MSP to coffee growers.

Given the fact that even the multinational giant Nestle has expressed helplessness, providing an assured price to coffee growers in an otherwise exploitative global value chain is actually what should constitute responsible marketing. This holds true for other agricultural commodities as well. The implications of the Indian farmers protest therefore are far reaching. 

Writing in these columns, this writer had earlier explained how more than 90 per cent of the cocoa farmers were living in extreme poverty, receiving only $ 1.30 as the average daily income. Like the coffee growers, cocoa farmers’ share of income in the end consumer price is hardly a fraction of the enormous profits the chocolate manufacturers make. Just because these farmers are poor no one has actually bothered till recently to look at their plight, to know how markets have destroyed millions of farm livelihoods.  

Coming back to the disruptions expected in international trade, and contrary to the protesting farmers demand, pressure continues to be built on India in the World Trade Organisation (WTO) to dismantle the Farm Support Programme, which means curtailing the MSP for wheat and rice to keep it within the prescribed limit of 10 per cent for product-specific support under the Aggregate Measure of Support (AMS). According to the US, India has for a number of years exceeded its 10 per cent support limit, and is actually under-reporting the extent of support. While India has contested these claims, it does explain why India is reluctant to commit on the farmers demand for extending the MSP delivery for 23 crops for which the prices are announced every year.  

The US and its allies have time and again said that the MSP regime in India disrupts domestic and global prices. Strangely, while the US points to Indian support to farmers as a hurdle in global trade, the product-specific subsidies being provided by the US, Canada and European Union actually distorts trade and makes agricultural exports from the developed countries appear globally competitive. In reality, it is the huge agricultural support that these countries provide for commercially important farm commodities that lowers the international prices. As a result of which the MSP being given to wheat and paddy farmers in India looks to be higher. Let us not forget, these subsidies are in addition to the $ 246 billion of farm subsidies the OECD provided in 2018.  

According to a joint paper some years back by India and China before the WTO, the three big layers -- the US, EU and Canada -- provide for 90 per cent of the product-specific support for agricultural commodities thereby grossly distorting global prices. The total farm support these countries provide – exceeding the 5 per cent AMS limit for rich countries – is to the tune of $ 160 billion. In many cases, this support is twice the total value of the crop produced (215 per cent for wool; 141 per cent for mohair by the US; and in the EU by 120 per cent for white sugar and 155 per cent for tobacco). This huge subsidy support depresses global prices. 

As if this is not enough, the Organisation for Economic Cooperation and Development (OECD) comes out with another shocker. Even against these depressed international prices, the prices Indian farmers get are still 13 per cent less. 

Developing country farmers therefore have in reality been silently bearing the true cost of such enormous market price distortions. The export competitiveness that we see is built on the massive subsidy support these countries provide to agriculture, year after year. The time to end these price distortions has come. Protesting farmers have now provided policy makers a direction to rethink and redesign economic policies to usher in sabka saath sabka vishwas by revisiting farm policies, to draw from inherent strengths rather than borrow failed policies from abroad.  

Farmers demand for making MSP a benchmark for domestic and international trade is expected to result in severe disruptions in international trade, and will also result in betterment of a large section of country’s population. What the protesting farmers are standing for holds the key to future growth, and provides a road map for bridging the huge income disparity the world has failed to address. 

Farmers agitation will impact global trade. The Tribune. Jan 16, 2021

https://www.tribuneindia.com/news/comment/farmers-agitation-will-impact-global-trade-199058?fbclid=IwAR23Os3eT4Lmg_579aFkuXzwc9I1r6b69exfYL5vnrPSD87uoFEkag2-eTw

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Markets have failed US/EU farmers

Writing in the Conservative American, Austin Frerick, a director at the Open Markets Institute, had said: “In the 1980s, 37 cents out of every dollar went back to farmer. Today, farmers take home less than 15 cents on every dollar.” Pointing to the increasing concentration of economic power in the hands of a few multinational corporations over the decades to be primarily responsible for the declining farm incomes, he called for fixing the broken food system.

Last week, another article in Financial Times asked: “Is our food system broken?” In fact, a Google search for broken food systems comes up with hundreds of articles, reports and studies, clearly pointing to the desperate need to redesign global agriculture, with the primary focus on adopting sustainable farm practices and the desperate need to make agriculture economically viable. Another search for farm distress and among the top articles to pop-up is from the Time magazine: “’They’re trying to wipe us off the map’. Small American farmers are nearing extinction,” screams the headline. The more you read on farm distress the more you realise how in the name of free markets and the freedom to sell anywhere, to anyone is pushing small farmers off the land.  

That makes me wonder. If after five decades or more of liberalisation of agricultural markets, with no stock limits for big retailers, and commodity futures markets giving an indication of the price at the time of planting, Al Davis, a former Nebraska senator and cattle farmer is left to say: “Farm and ranch families are facing a great extinction. If we lose the rural lifestyle, we have really lost a big part of what made this country great,” isn’t the exuberance being exhibited over the planned liberalising of agriculture markets in India overtly misplaced? After all, if leaving farm prices to markets is the winning formula, isn’t it first time to explain why American and European agriculture is in a severe state of distress.

Ever since the days of Uruguay Round negotiations, and subsequently after the WTO was formed in 1995, monumental agricultural subsidies being paid by the developed countries have remained a contentious issue. Former Commerce Minister Kamal Nath, who represented India at a number of WTO Ministerial conferences, had often said “you cannot expect Indian farmers to compete with the US treasury,” referring to the massive subsidies being doled out in America. Later, Arun Jaitley as Commerce Minister too had echoed the same sentiments at the time of the Cancun Ministerial. Even now, developing countries are asking for re-opening the hotly debated issue of farm subsidies.

This brings me to the essential question. If agriculture markets are so efficient, how come it failed to prop up US/EU agriculture? The US Department of Agriculture has itself acknowledged that the real farm incomes have been on the decline since the 1960s. And that too, despite such heavy subsidy support provided year after year. This is primarily because 80 per cent of these subsidies go to agribusiness companies, and the remaining 20 per cent are cornered by big farmers, as many studies have shown. An UNCTAD-India study in 2007 had shown that if the green box subsidies (protecting domestic support in agriculture) in the developed countries were to be withdrawn, agricultural exports from US, EU and Canada would drop by about 40 per cent.

Even 25 years after the WTO came into existence; OECD countries are still providing a huge producer support for agriculture, touching $ 246 billion in 2018. Of which, in EU-28 countries, the producer support totals $ 110 billion a year, roughly 50 per cent of it being in the form of direct income support. These subsidies are expected to further increase in the post-Covid period.

Repairing the broken food system therefore would urgently require restructuring the agricultural markets. Whether in America, Europe or India, where despite the scale, agrarian distress has been worsening over the years, the proposed agricultural reforms have to be tailored to the need to first make farming an economically viable, and profitable venture thereby restoring the pride in farming. Leaving farmers at the mercy of the markets hasn’t worked in developed countries. Nor has commodity futures trading been of much help. To illustrate, let’s look at the $ 103 billion chocolate industry, where the prices for cocoa beans is largely determined by commodity futures. While Africa alone produces about 75 per cent of the cocoa in the world, what percolates down to farmers is relatively insignificant. With hardly 2 per cent revenues coming to cocoa farmers, millions are living in acute poverty.

For several years, dairy farmers in UK had been protesting at supermarkets demanding to be paid a fair price that protects them against the volatility in prices. The bigger the retailer the more is the tendency to dictate prices. In the quest for higher profits, and at the same time ensuring competitive prices to consumers, big retail has often been known to squeeze on farmer’s margins. If big retailers like Sainsbury and Tesco, with the ability to maintain huge stocks, were providing a higher price to farmers, there is no reason why half of all the UK farms would end up being in business only by supplementing income from non-farm activities.

Providing a fair and assured price to farmers therefore is turning out to be the biggest challenge. All that has been tried, and tested in the developed countries has failed to show any promise. In fact, it has only pushed developed as well as developing country farmers into a severe crisis. Enabling farmers to sell anywhere, to anyone to get a better price is no reason for excitement, unless farmers can be assured of a better price. Instead of pushing what the agri-business industry needs as marketing reforms, let us develop a system that actually helps farmers become economically viable and in true sense atmanirbhar. Developing a food system based on local production, local procurement and local distribution is what India needs.

This is only possible by strengthening the existing networks of regulated APMC markets, and building a robust system of trading where the Minimum Support Price (MSP) becomes the model price. #

The broken food system. The Tribune. May 29, 2020

https://www.tribuneindia.com/news/comment/the-broken-food-system-91249?fbclid=IwAR3iLqaJuEjVBZ7Mj8BT8hT3HCebV4w41-KNDf_vyxaHepID2wEqgewRq2c

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Remembering Martin Khor -- a tribute

Pic courtesy: Wikipedia

The stakes were very high. 

The World Trade Organisation (WTO) was deliberating, and if I am not mistaken this was sometimes in July 2008, on the extent to which agricultural products could be covered under Special Safeguard Measures (SSM). While big players wanted to limit the number of products on which tariffs could be imposed at a time of surge in farm imports, India wanted more policy space to apply SSM, which means wanted more products to be covered.  

In other words, India’s effort ostensibly was to protect the loss in farm livelihoods that is expected at a time when a flood in cheaper imports can bring about a crash in domestic prices for farmers and thereby result in livelihood loss. The talks at Geneva hinged on a clearly visible imbalance, with big players expected to get through. Knowing the disastrous implications in store, it was at that crucial juncture that I organised a one day conference of farmer leaders in New Delhi. What made this conference significant was that it was for the first time that almost 50 farmer leaders from all over the country, cutting across political as well as ideological affiliations, had assembled on one platform.

And secondly, after a day of intense brainstorming, interspersed with angry reactions from some of the farmer leaders present, the resolution that was issued, signed by each of the farmer leaders, representing the 600-million strong farming community, is believed to have tilted the balance at the Geneva negotiations. A day later, I received an email from Martin Khor, who was then leading the Third World Network (TWN) team at Geneva, keeping a close eye on every happening. Complimenting me for organising the farmers meeting, he said in as many words that the resolution from Indian farmer leaders had thrown the big boys of international trade at the SSM negotiations on the back foot. He then spoke to me and in his own inimitable style explained how the New Delhi statement from farmer leaders would turn out to be a saviour for farming communities throughout the developing world. 

What Martin had hinted turned out to be true. The SSM talks eventually collapsed.

Martin (1951-2000) passed away peacefully at Penang in Malaysia on April 1. In his death, the world has lost one of the biggest champions of economic equality, social justice and just globalisation. He was on the forefront of a continuous battle against the hegemony of transnational corporations, and how the international laws and treaties were being suitably designed to circumvent their unfettered dominance across the developing economies. With his immaculate penchant for minute details, and his deep understanding of the geo-political dimensions, the insights he provided to activists and negotiators alike was certainly instrumental in influencing the negotiations.  

Like hundreds of researchers and trade analysts from across the globe, I too learnt a lot from his analytical grip over trade negotiations. I would look eagerly every week in the SUNS Monitor for his reports and unique analysis of events as they took place. The quarterly Third World Resurgence magazine too came in handy to follow the developments in international trade, multilateral investment, climate change as well as in various related aspects of the globalisation process. He stood, and stood tall, for protecting the development interests of the Global South and in a lot many ways I think his contribution, although the developing world may fail to acknowledge, remains unparalleled.

Later in 2009 he was appointed the Executive Director of the South Centre in Geneva, a position that was earlier held by Dr Manmohan Singh. There again, his sharp analysis came in handy for developing countries to frame their trade arguments.

I met Martin first time at Penang in 1984 when the Consumer Association of Penang (CAP), a formidable research and advocacy platform for development issues, invited me along with Claude Alvares and Sharad Joshi from India to attend a conference which led to the formation of Third World Network. Not much was known about him at that time. He was a simple affable guy always greeting you with a smile. The Uruguay Round of negotiations leading to the formation of WTO catapulted him to prominence. It was during those days that I was tracking the global trade negotiations especially in the context of food, agriculture, biodiversity and intellectual property rights and that gave us ample opportunities to meet and interact. In many of my trips to Geneva, and sometimes at the WTO Ministerial Summits, it was always an added bonus to sit and chat with him. One thing that emerged every time we spoke was that he always stood for protecting the rights of the poor, and was a farmers’ friend.

I particularly remember when a prominent NGO invited me to be part of a group of WTO Ambassadors and negotiators who were being taken to visit the farming communities in and around the Black forest region of Germany. Before I embarked on the travel, and knowing that I was among only a couple of civil society representatives from the developing world, I spoke to Martin to know a little bit more about the background of the accompanying WTO negotiators, where they came from and who I should be spending more time during numerous opportunities for informal interactions that the visit would certainly throw up. 

I must acknowledge that was very helpful in sharpening my understanding. Since the visit was planned for the rural areas, I also got a peep into how EU’s massive agricultural subsidies were being disbursed. 

The passing away of Martin Khor into history is a great personal loss. He was in true sense a philosopher, friend and guide. The challenge now is to continue his legacy.

Goodbye, my friend. #

Remembering Martin Khor, Champion of Economic Equality and Just Globalisation. The Wire. April 6, 2020. https://thewire.in/trade/remembering-martin-khor-champion-of-economic-equality-and-just-globalisation

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Invisible Emergency

Three weeks after the kharif harvesting season began farmers were unable to get the right price for their produce. Out of the 14 kharifseason crops that were being marketed, a newspaper reported (Oct 26, 2019) that the mandi prices of at least nine of these crops had been ruling much below the minimum support price (MSP) that was announced by the government. Market prices for moong, urad, tur, niger, bajra, jowar, ragi, cotton, soybean and sunflower were about 8 to 37 per cent below the MSP. In addition, market prices of cotton too were short by an average of Rs 500 a quintal (from the MSP) while farmers had a better price realisation only in case of paddy and maize wherein a more assured procurement system operates.   

Well, isn’t that reason to celebrate? If food prices remain low, the household budget remains intact. The nation rejoices when food inflation remains in check. Never bothering to know what happens to millions of farmers who produce that cheaper food.

Let’s look a little further. The price drop in kharif 2019 was no exception. For the past two years, farmers had reportedly sold pulses, oilseeds and coarse cereals at prices that were 20 to 30 per cent lower than the MSP. Across the country, irate farmers had protested at many a places demanding purchase of the crop harvest they had brought to the mandis. Even in case of wheat and rice, the two crops that are largely procured, farmers were unable to get the procurement price except at places where a robust procurement system exists. Primarily for this reason, truck-loads of paddy and wheat are illegally transported all the way from Bihar and Uttar Pradesh to Punjab and Haryana where a vast and efficient procurement network exists. But with the World Trade Organisation (WTO) breathing down its neck, and with autonomous liberalisation in progress, India is under tremendous pressure to dismantle the food procurement and distribution network.

Suddenly, for no apparent provocation, in the midst of the paddy procurement season, the Karnal district administration in Haryana imposed a ceiling on paddy purchase beyond its quota of 13.5 lakh tonnes for the season. While no explanation    available, the government it seems is all set to withdraw from its stated commitment to buy every grain of wheat and paddy that is brought to the mandi. In Punjab too, the Chief Minister has reportedly told a meeting of arhtiyas that he would not be able to make a commitment that the procurement operations next year operates as smoothly as it used to all these years, pointing to a cut in public stock holding limits in future. Perhaps this is the beginning of an end of public procurement, a system that was so assiduously built over the years pulling the country literally out of the ‘ship-to-mouth’ trap, when food aid from across the continents would go directly to feed the hungry population.   

With granaries overflowing now, cutting down on procurement seems to be the policy approach to reduce unmanageable food surplus. But what will happen to millions of farmers, who toil hard to produce bumper harvests, only to find no buyers for their produce? Will the nation evolve a system of adequately compensating the farmers while keeping prices low?

Farmer throwing tomato, potato and onions on the streets is a recurring phenomenon. Add to it the denial of rightful price for most agricultural commodities, and that too year after year, the reasons for the continuing agrarian distress becomes all too apparent. In fact, I have always maintained that when a farmer undertakes crop cultivation what he does not realise that he is actually cultivating losses. This is appropriately illustrated in an analysis in the Down to Earth magazine (Feb 16-28, 2019) that clearly showed that against a production cost of Rs 32,644 per hectare for wheat, a farmer is able to get only Rs 7,639 leaving a huge shortfall of Rs 25,005 per hectare. In the case of paddy, the loss is Rs 36,410 per hectare; for maize, the gap is Rs 33,688 and for arhar the loss works out at Rs 26,480 per hectare.

Take another case. In response to an RTI application, the Department of Agriculture, Haryana, had replied saying that against the estimated cost of production of wheat at Rs 2074 per quintal for the 2018-19 marketing season, the procurement price was Rs 1,840 per quintal, which means a loss of Rs 234 per quintal. Similarly, for cotton the procurement price was Rs 5,450 per quintal against an average cost of production of Rs 6,280 per quintal, showing a loss of Rs 830 per quintal. With procurement prices deliberately kept low, agriculture becomes a loss making enterprise, and sooner or later farmers are left with little choice but to quit or continue to slog under distress all through life. For the Commission for Agricultural Costs and Prices (CACP) – which works out the MSP for 23 crops – the mandate is not only to provide an assured price to farmers but to maintain a balance with international prices thereby ensuring that the procurement price it fixes does not fuel inflation. The higher the food inflation, the higher will be the pressure on industries to provide higher wages to workers. The higher the wages for industrial workers, the more is the possibility of economic reforms going awry.

Farmers alone therefore are left to bear the burden of keeping food inflation low. They are silently bearing the cost of subsidising the consumers.

The cost of keeping food inflation low has been unprecedented. A brute illustration of the staggering cost farmers had to pay to keep food prices under check comes out very clearly from an OECD-ICRIER study, which computes that between 2000-01 and 2016-17 – a period of 17 years --  farmers suffered a cumulative loss of Rs 45-lakh crore on being denied the rightful price for their produce. It estimated the loss per year for farmers at Rs 2.65-lakh crore based on a negative Producer Support Estimate (PSE) Index of (-) 14.4 per cent. PSE tells us what percentage of farm revenue came from policy support. In case of India, farmers suffered because of trade restrictions, low prices and huge gaps in marketing policies, including shortfall in assured procurement. But an interesting point here is that the loss to farmers actually works out to be the gain for consumers. Perhaps that’s the reason why the shocking estimates of massive losses suffered by farmers didn’t draw any outrage from the middle class.

While the government gets a pat on the back for keeping food inflation under control, it is difficult to even visualise the trauma and suffering a farming family has to undergo after being denied the rightful price for their produce; the hardship families have to suffer when farmers dump tomato or potato or garlic onto the streets out of sheer frustration arising from a price crash in the markets. The denial of rightful income increases their dependence on farm credit as a result of which household indebtedness has multiplied over the years. The increasing debt burden is the primary reason for the spate of farm suicides the country is witnessing, and which (the data) the government has been withholding after 2016. According to the National Crime Record Bureau (NCRB) as many as 3,18, 528 farmers had committed suicide between 1995 and 2015, a stark reminder of the severity of the crisis.

When prices slump, the small farmers are first to bear the consequences, often fatal, but forcing them to abandon agriculture and migrate to the cities looking for menial jobs. On the other hand, increasing migration from rural to urban areas is seen as a sign of economic growth. In fact, the policy emphasis has remained on moving people out of agriculture into the cities which are in need of dehari mazdoor (cheap labour). The continuous slide in real farm incomes therefore has only helped create conditions that forces farmers to abandon agriculture and migrate. According to Niti Aayog, the growth in real farm incomes in the 5 year period between 2011-12 and 2015-16 has been less than half a percent every year, 0.44 per cent to be exact. In such a dismal scenario, what do we expect farmers to do except to quit farming and migrate?  

As rural distress deepened, several studies have brought out the grim realities that continue to hit farm and non-farm workforce in rural India. When farming is in deep economic crisis, it will definitely cast a shadow on the workforce it is generally dependent on. With Gross Value Addition (GVA) in agriculture dropping to its lowest in 14 years, a  report by Centre for Monitoring Economy (CMIE) showed that in the past one year, 2018-19, almost 1.1 crore people lost their jobs. “An estimated 91-lakh job 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. Earlier, a leaked Periodic Labour Force Survey 2017-18 report of the National Sample Survey Office (NSSO) had shown that 3.4 crore casual labourers in rural areas, of which 3-crore were farm workers, had lost job between 2011-12 and 2017-18. This represented a 40 per cent drop in casual farm workforce.

The demise of agriculture therefore is clearly embedded in the economic design. Keeping food prices low has been the bane of agriculture. Besides low prices, the continuing bias against agriculture is evident from the low public sector investments. As per the Reserve Bank of India, public sector investment in agriculture hovered around 0.3 to 0.4 per cent of the GDP between 2011-12 and 2016-17. Such low public sector investment pulled private sector investments down in the process, reaching a low (in combined investments) of 2.2 per cent of the GDP in 2016-17. With low investments and low output prices it is futile to accept a miracle to happen in agriculture. It is therefore quite obvious that the decimation of agriculture over the years is the outcome of an unwritten policy of keeping agriculture deliberately impoverished. It suffers not as much from low productivity (as is often believed) as from deliberately kept low farm incomes.

The immediate challenge is to bring more money into the hands of the farming community, which will create more demand, and in the process reignite the country’s economy. Moreover, if agriculture becomes economically viable and environmentally sustainable, it can take away much of the pressure the country faces in creating additional employment. Agriculture being the largest employer, it alone has the ability to reboot the economy. Especially at a time when the bottom 60 per cent population holds only 4.8 per cent of the national wealth, and a significant proportion of this comprise farmers and farm workers, a refurbished agriculture needs to look beyond the outdated textbook prescription of reducing the population in agriculture, and instead focus on revitalising agriculture. This is the surest way to Sabka Saath, Sabka Vikas.

Since a beginning has already been made with the launch of a scheme to provide direct income support to farmers, a tectonic shift in economic thinking moving from ‘price policy’ to ‘income policy’, one measure could be to double the allocation under PM-Kisan programme. At present, an amount of Rs 6,000 per month is being provided to landowning farmers, in three equal installments. Effectively this comes to a paltry support of Rs 500 per month, and needs to be raised to make a real difference. I am hoping that sooner than later, the direct income support will be enhanced to Rs 5,000 a month. This will supplement income support measures that have been launched in several states, beginning with the innovative Ryathu  Bandhu scheme in Telengana.

This has to be followed up by setting up a more elaborate mechanism to ensure a minimum monthly assured income of Rs 18,000 per month per farming family. The idea is not to issue a cheque every month but to evolve a mechanism to provide farmers with an assured monthly income based on crop productivity and geographical location of the farm. Among several other steps to bring in structural reforms that agriculture is crying for, agriculture needs to come up with an index for ease of doing farming. If 7,000 steps, big and small, can be created for the industry under the ease of doing business norms, I see no reason why agriculture should not receive the same benefit in governance and implementation issues.    

At a time when the average farmer in the United States receives a direct income support of $ 60,586 (Rs 42 lakh); $ 10,149 in Japan; and $6 ,762 in European Union; what the Indian farmer gets is too meagre. A farmer needs to be adequately compensated for the loss he/she incurs in providing cheap food. Let’s be clear, a farmer cannot be penalised anymore for growing food. The nation must stand with the farmers in this crisis and find a suitable template to provide them with a real income (and an annual increment) that is at par with other sections of the society. #

Source: State of Environment 2020. 

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Low farm incomes is killing agriculture

French farmers drove to Paris to protest low farm incomes -- Al Jazeera photo

A New York farmer, who also works as a lawyer, tweeted this the other day: “Headed home, I tried to work in the law office today, but my head is full of the disasters I am seeing on the dairy farms and in rural areas. Even long time farmers in my area are trying to sell land to save the rest of the farm. Where is this headed? I don't know.” Well, if such a deepening farm crisis should dominate one of the most productive agricultural systems in the world, it’s time to pause and rethink.

The question that needs to be asked is whether the US agricultural policy is deliberately aimed at decimating the farm sector? And in that sense whether Indian agriculture too is intentionally (or unintentionally) moving in that direction? To say that the landholdings in India are too small to be economically viable is understandable but why is that even in the United States, where the average farm size is 444 acres, small family farms should be on way out? Why is that in Australia, where the average farm size is 4,331 hectares, should agriculture become unviable? Going by the economy of scale there seems to be no plausible reason why farmers in America and for that matter in Australia should be quitting farming. If small holdings are unviable how come even large holdings are becoming uneconomical, unless of course policy makers refuse to admit that farmers everywhere in the world, not only in India, are being denied real time prices, depriving them of their rightful income.   

First of all, let’s be clear. The US has always been for pushing small farmers out of agriculture. Look at it, even at a time when US agriculture is passing through turbulent times, the American Agriculture Secretary Sonny Perdue unabashedly acknowledges: “In America, the big get bigger and the small go out.” This echoes what a former US Agriculture Secretary Earl Butz, who served under President Richard Nixon and Gerald Ford, had famously said: “Get big or get out.” This was followed by a cleverly drafted narrative of “feeding the world”, pushing farmers to produce large surpluses that actually dipped prices. Such a deliberate policy has left US small farmers struggling. Many of them are going out of business and quitting agriculture in desperation.

The policy to get big serves as an invitation for an increasing corporate control over agriculture, which is also becoming an unwritten policy for the developing world to follow. In addition, whether it is the World Trade Organisation (WTO) or the Regional Comprehensive Economic Partnership (RCEP) treaty, trade policies have been very conveniently tweaked to provide an enabling environment for big agribusiness giants to step in. As competitiveness became the market mantra, developing as well as least developing countries are being increasingly forced to open up for cheaper agricultural products, thereby displacing millions of small farmers in the bargain.

To illustrate, the biggest dairy farm in China is spread over 22,500,000 acres, an area equal to that of Portugal. According to worldatlas.com, this farm houses around 100,000 cows. The second biggest dairy farm, spread over 11,000,000 acres, is also in China. The remaining eight of the top ten big dairy farms are situated in Australia, which despite the size are under stress. No wonder, the push for seeking an unfettered access into India through the regional mega RCEP treaty, which India has for the time rightly decided to stay out. Considering that 10 million people are involved in dairying in India, imagine the destruction of livelihoods from cheaper dairy imports from Australia, New Zealand and China.     

Returning back to agriculture, rural America, like rural India, is faced with a severe agrarian crisis. Like in India, where the average income of farming families in 17 states, which is roughly half the country, stands at a paltry Rs 20,000 a year, the US agriculture is not doing good either. More than half of US farmers have a negative income. According to the American Farm Bureau Federation, 91 percent farmers and farm workers face distress. Besides affecting their mental health, the severity of the crisis is such that 87 percent farmers fear they will have to abandon farming. Accordingly, farm debt in 2019 is expected to soar to $ 416 billion, the highest since 1980. For several decades, farm gate prices have remained frozen when adjusted for inflation. Prevailing onion prices for instance are no different from the prices farmers received 30 years back. Corn prices have remained static for almost five decades.

If such a worsening farm crisis is happening in a country which applies state-of-the-art technology in agriculture, and is often projected as an example to be followed by the rest of the world, isn’t it time to re-evaluate how inappropriate is the argument for pushing in more sophisticated technology (often unwanted) in Indian agriculture? No one is against technology but it has to be relevant depending on the needs, and not pushed to simply benefit commercial interests. If in a country which is completely high-tech in agriculture, the suicides rate in rural areas is 45 per cent higher than in urban areas isn’t it time to redesign Indian agriculture, focusing more on sustaining small farms thereby reducing the rural urban migration? Shouldn’t the Ministry of Agriculture and Farmers Welfare therefore embark on a fresh strategy to bring in policies tuned in more to domestic needs that make farming environmentally sustainable and economically viable?

An OECD-ICRIER study has shown that Indian farmers have been suffering a loss of 14 per cent every year in farm incomes for almost two decades, between 2000-01 and 2016-17.  This has largely benefitted the consumers who paid 25 per cent less for all agricultural commodities every year. In other words, it is the farmers who have been subsidising the country all these years. An outcome of the global economic design which aims to deliberately keep farm prices low, farmers’ anger is brewing across the world. As farm protests spill on the streets in Germany, Holland, Canada, America and India, the reason for growing farm anger was best summed up by Ian McLachlan, President of the National Farmers Federation of Australia, who had sometimes back while addressing a farmers rally said: “We’re sick and tired of subsidising the rest of Australia.” #

Farm tech bring pushed to benefit Corporates. The Tribune. Nov 30, 2019.

https://www.tribuneindia.com/news/comment/farm-tech-being-pushed-to-benefit-corporates/868064.html?fbclid=IwAR3e6Ls_oaq6g7yTEGt-IE743yundSpXjnVqPgJKeW56lZDboZz4krPlhxo

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India stays out of RCEP treaty

15 members of RCEP --Wikipedia map

Soon after assuming office, when the US President Donald Trump withdrew from the Trans Pacific Partnership (TPP) mega-trade agreement between 12 countries, which shared a common coastline on the Pacific and made up for 40 per cent of the global GDP, it came in for a lot of criticism. Terming it as a “horrible deal” President Trump was convinced that the treaty, which was meant to remove 18,000 tariffs on agricultural and manufactured goods, would steal American jobs.

Withdrawing from another mega-trade deal -- the Regional Comprehensive Economic Partnership (RCEP) -- which covers 45 per cent of the global population and accounts for 25 per cent of world’s GDP, Prime Minister Narendra Modi in a statement a few days ago, said: “When I measure the RCEP Agreement with respect to the interests of all Indians, I do not get a positive answer. Therefore, neither the Talisman of Gandhiji nor my own conscious permits me to join RCEP.” Remarkable words, indeed. Again, like US President Trump, what perhaps weighed on Prime Minister’s mind were the massive job losses and livelihood destruction expected on removing tariffs on 92 per cent of the tradable goods, including manufacturing and agriculture.

At a time when the dominant economic thinking is swayed towards globalisation, a strong leader demonstrating political courage to withstand the tide is certainly admirable. More so, at a time when dominant economic thinking creates a fear of the unknown – how much the country will miss out by not being a part of the proposed free trade agreement (FTA), some term the phenomenon as Fear of Missing Out (FOMO), the Prime Minister’s assertion for fairness and balance is legitimate. Such a precautionary approach becomes absolutely essential knowing that in the past too India had entered into free trade agreements with 12 of these RCEP countries (including the 10-member ASEAN grouping) with the same illusion of finding an access into their markets only to register a whopping trade deficit of $ 107.28 billion. The assumption that getting into an RCEP agreement at this stage will further widen the trade deficit and hit agriculture the most therefore is not entirely unfounded.

Similarly, the over enthusiasm with which India went on signing Bilateral Investment Treaties (BITs) on the presumption that it will promote investments were in reality vague and without proper homework. As the number of arbitrations increased, India terminated 58 of these BITs.

Given this backdrop, it is quite obvious that the fear of unknown has been over-hyped. If the FTAs with the Asian countries were pushed in the search of penetrating important markets and participating in the value chains of East Asian economies, it didn’t work. To Illustrate, India’s trade deficit with the 10-member ASEAN, signed in 2010, has increased by 250 per cent. It is therefore quite obvious that the Indo-ASEAN Agreement was signed without any adequate assessment, no proper scrutiny and was perhaps based more on the unknown FOMO factor. Otherwise there is no reason that the exposure to 10 Asian countries markets should fail to provide any significant trade outcomes. It is therefore heartening to know that the Prime Minister has now called for a review of Indo-ASEAN trade agreement. In fact, not only Indo-ASEAN there is a dire need to review all the bilateral and plurilateral trade agreements that India has so far signed.

There are lessons in store. When the multilateral World trade Organisation (WTO) treaty came into effect, a lot of euphoria was generated. We were told that a multilateral trading system – based on one country one vote principle – would obliterate the need to get in cumbersome and time consuming bilateral agreements. But over the years, this was proved wrong with more than 300 bilateral free trade agreements (FTAs) signed, which in principle were WTO plus treaties with stronger intellectual property rights (IPRs) and aggressive push to open up markets. Since most countries already are into bilateral agreements – with emphasis on zero tariff imports and removal of non-tariff barriers -- I fail to understand how any incremental growth can be expected from regional treaties where majority members are already having separate FTAs. Unless of course the new grouping includes a giant like China (with which India has a trade deficit of $ 53 billion) and countries like Australia and New Zealand (like in the RCEP) which desperately eye to get a foothold into India’s dairy (and farm sectors) to pull out their own dairy sector from distress.

The extra precaution with which India wants to engage with RCEP trade partners is therefore quite justified. Although the Commerce Minister Piyush Goyal lays out three conditions – strict rules of origin, updated base duty period, from 2014 to be moved to 2019, and auto-trigger mechanism – to be addressed before re-entering the RCEP negotiations, India’s decision making should be guided by more detailed studies and more open and transparent stakeholder dialogues. The Ministry of Commerce cannot be allowed to work in isolation, and needs to take other ministries on board. Reports saying that China was upset at India opening up issues like auto-trigger at times of volume surge, changing the base duty etc a few months before the treaty was being finalised raises questions over the competence of Indian negotiators. How come for seven years of RCEP negotiations, they failed to bring up these crucial issues that India is in any case fighting for in the ongoing Doha Development Round of WTO. 

Even during the earlier days of WTO negotiations, the promise of a drastic reduction in the monumental agricultural subsidies being provided by the richest trading block – the Organisation for Economic Cooperation and Development (OECD) – was projected to act like a ‘big bang’ for India’s farm exports. This was a gigantic mistake. Except for a jugglery in the way these agricultural subsidies were very conveniently shifted between the three boxes – green, amber and blue (in WTO parlance) – these subsidies have remained more or less intact. The 28-member EU provides $ 65 billion in farm subsidies, three times of what the US gives, and any quick effort to sign an FTA with these two giants must be carefully evaluated in the light of the damage it can inflict on India’s agriculture. Considering that 600 million people are engaged in agriculture, directly or indirectly, it is important to weigh the fallout on farm livelihoods before rejoicing over the market access an FTA provides. Nor can agriculture be sacrificed anymore for some gains in the services sector. Let’s treat Mahatma’s talisman as the preamble for any future trade negotiations. #


India holds its own. The Tribune. Nov 15, 2019
https://www.tribuneindia.com/news/comment/india-holds-its-own/860892.html?fbclid=IwAR1-S3eR9t3Fg4Lcn25eVXYWSVjqbnlcnwGRu9muy4aRpdp5McRabJCG8vU

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US Farm Bill 2018 -- time to link tariff reduction with subsidy elimination

This map tells us of US farmers who received more than one million dollar in farm subsidies in the ten year period between 2008 and 2017

 -- Pic courtesy Forbes

At a time when the US President Donald Trump has slammed India for its “high tariffs” even going to the extent of calling it a “tariff king”, which in other words is a pointer to the protection being accorded against cheaper imports, the massive American and European farm subsidies that not only distorts global trade but in the process hit millions of farm livelihoods as well as food security of the majority world have remained far away from the political glare.  

Farm subsidies have remained a bone of contention ever since the World Trade Organisation (WTO) came into existence. But the rules of the game for domestic support have been so well defined by the rich countries, by very cleverly packing most agricultural subsidies under the ‘green box’ in trade parlance.  Green box subsidies are considered to be non-trade distorting. Nearly 88 per cent of the US farm subsidies and 85 per cent of EU subsidies are bracketed under the ‘green box’ and therefore remain unchallenged. Except for the celebrated case wherein Brazil had taken to the US to the dispute panel on cotton subsidies (which US lost), there have not been any serious attempt to open up green box subsidies to fresh scrutiny. The US/EU remains stubborn on renegotiating the Agreement on Agriculture, wherein the subsidy issue falls.   

With the farm subsidies issue in limbo, and amidst the US-China trade war, the US passed the 2018 Farm Bill making a budgetary provision for $ 867 billion support in the next ten years for farm subsidies, Supplementary Nutrition Assistance Programme (earlier called as ‘food stamps’ programme), crop insurance and conservation programmes among other specified categories like international trade, rural development, local food systems, beginning farmers and farm research. Roughly 80 per cent of the support is for the supplementary nutrition programme, which in 2018 had ensured that food be made available to 42 million Americans who couldn’t afford it.

The US Farm Bill is a comprehensive piece of legislation enacted every five years. It was introduced in 1933 in the backdrop of the Great Depression, and is aimed at providing financial support to farmers to stay economically viable. Since 1965 the Farm Bills have been passed with regular frequency, mostly confining to five years period. In Europe, the Common Agricultural Policy (CAP) was introduced in 1962 and like in the US it is aimed at supporting farmers through a mechanism of income support, market measures and rural development initiatives. Admitting that farmers generally get 40 per cent less income than the average household, the CAP programme in 2018 provided Euro 41.74 billion for income support and another Euro 17.07 for market interventions and rural development.

Broadening the definition of a family farm, the 2018 US Farm Bill has included not only children and their spouses but also nephews, nieces, cousins and other members of the extended family of a farmer as recipient of agricultural subsidies. All they need to do is to establish their participation in farm management and that can be even without these members being actually on the farm. Although the stated objective is to attract the younger generation in farming, the move has evoked strong reactions. While India has questioned the rationale behind the new definition, many experts believe that it is designed to help the bigger players stay big.

While high tariffs remain under attack, over the years a complicated and veiled system of subsidies and non-tariff barriers have kept US/EU farmers protected. Writing in the Forbes magazine, Adam Andrazewe detailed how since 2008, for over 10 years now, top 10 recipients of US farm subsidies have pocketed an average of $ 18.2 million, which comes to $35,000 a week. There are 6,618 farmers, corporations and agri-business that have made $ 1 million or more in farm subsidy support since 2008. While the rich have got richer, surprisingly a large number of recipients were people living in the cities. In addition, 12 members of the Congress too walked away with $637,059 as subsidy in 2017 alone. A subsidy of $1.08 billion in 2017 went to farmers for not producing anything under the Conservation Reserve Programme.

How the richest US farmers are becoming more rich.

Under the CAP reform in Europe, between the period 2021 and 2027 farmers will receive a total of Euro 365 billion ($438 billion), a reduction in support by 5 per cent, over the current level of funding. In 2016, the EU provided on an average a direct income support of Euro 259 per hectare, with a low of Euro 118 to a high of Euro 622 per hectare. Based on the farm structure, nearly 80 per cent of direct income support goes to 20 per cent of farmers. In addition there are basic payments targeting specific types of beneficiaries. Another Euro 365 million was earmarked for the young entrants in farming, below the age of 40 years. In India, on the other hand, farmers receive an average of $ 250 as subsidy, much of it by way of indirect support.

While India’s miniscule farm subsidies are under consistent attack from the US/EU as well as from some other countries, the rich countries are not willing to reduce their farm support. Even when the WTO Dispute panel had ruled against the US on cotton subsidies, a case that was filed by Brazil, the US didn’t reduce the subsidy support being given to its farmers. It instead reached an agreement with Brazil to provide a support of $ 147million over a period of ten years to Brazilian cotton growers. Such are the high stakes involved that without reducing its own subsidies, the US (along with EU and others) is building pressure on India to do away with support for public stockholding of foodgrains, primarily targeting the MSP regime for wheat, rice and pulses. What needs to be understood is the continuing massive support to US cotton farmers depresses global prices as a result of which the Indian cotton farmers are priced out. This is true for other agricultural commodities as well.

With the US-China trade war is expected to escalate, the time is ripe for India and other emerging economies to shift the focus to the more pressing need to cut back farm subsidy support in the rich countries. As long as these subsidies (both explicit and implicit) remain, there can never be a fair and equitable trade. #

Staking it on subsidies. The Tribune. July 4, 2019

https://www.tribuneindia.com/news/comment/staking-it-on-subsidies/796771.html?fbclid=IwAR11RDOyqLj7cxJdFgKfvfzYv6evLgdjMIFvmnf-wRkyv7wRAfy1iiDrxf0

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Minimum Support Price for agriculture is increasingly under WTO scanner

Farming will increasingly come under more pressure 

At a time when agriculture distress is at a peak, the pressure from World Trade Organisation (WTO) to seek reduction in the procurement prices for wheat, rice, pulses, cotton and sugarcane is posing a renewed threat to the future of agriculture. WTO pressure to reduce Minimum Support Price (MSP), and Fair and Remunerative Price (FRP) in case of sugarcane, comes at a time when Niti Aayog has accepted that the growth in real income of farmers in the past two years has been almost zero.

While Australia and Brazil have dragged India on its burgeoning sugar subsidies to the dispute settlement panel of WTO, which for all practical purposes acts as a court to settle trade disputes, five other countries – Guatemala, European Union, Russia, Costa Rica and Thailand – want to join the dispute settlement consultations, which in simple word means these countries want to be a party in the case against Indian sugar subsidies. Interestingly, while the WTO is planning to question India’s massive subsidisation of sugar, non payment of sugarcane arrears have been ballooning. In Uttar Pradesh alone, cane arrears have grown substantially in past two years, from Rs 4,497-crore in Mar 2017 to reach Rs 12,700-crore on Mar 2019.

The first round of dispute consultations on sugar subsidies with the seven countries begins in the third week of April.

Earlier, 12 countries – including European Union, Russia, China, Japan, Brazil, Canada, Egypt, Kazakhstan, Korea, Thailand, Taiwan and Sri Lanka – had become party to the US challenge of India’s export subsidies, including export incentives for SEZ and merchandise exports. Citing the Agreement on Subsidies and Countervailing Measures (ASCM) of the WTO, the US had computed the explicit and implicit export subsidies that India is giving at $ 7 billion. That India is under a sharp scanner at the international negotiations was never in doubt but the increase in the number of countries questioning India’s subsidies is certainly a cause for worry.

Let’s go back to the issue of agriculture to see how the WTO is hitting India where it will pain the most. In a separate development, Canada has joined the US in questioning the hike in MSP for pulses over the past few years. On Feb 12, the US along with Canada, filed a notification in the WTO Committee on Agriculture (COA) questioning India's market price support for five types of pulses. Accordingly, India exceeded the permissible limit as defined by WTO in case of price support for chickpea, pigeonpea, moong, black matpe and lentils. The argument US and Canada are using is that India has “under-reported” its market price support for pulses, which is a violation of the WTO Agreement on Agriculture.  

The US Trade Representative Robert Lighthizer and Secretary of Agriculture Sonny Perdue have at the time of filing the complaint, said: “When calculated according to WTO Agreement on Agriculture methodology, India's market price support for each of these pulses far exceeded its allowable levels of trade-distorting domestic support.” Giving specific details, they have blamed India for deliberately keeping the subsidies under wrap, and presenting a data which is questionable. Claiming that India’s total market price support for pulses ranged from 32 to 85 per cent and adds up to $9.5 billion, they accused India of “under-reporting” these subsidies.

India on the other hand maintains that its total subsidy support for all kinds of pulses comes to 1.8 per cent, and is far less than the permissible limit of 10 per cent. As per WTO norms, the product specific support (which is counted as subsidy) cannot exceed 10 per cent of the value of total production. To understand, in simple words what it means is that if the value of total production of chickpea is Rs 500-crores, the MSP that farmers get for chickpea cannot exceed Rs 50-crore.

While the US, EU, Canada and other countries are saying that India is using a methodology (to calculate the subsidies) which is non-compatible with the WTO methodology, India’s position is that the complainant countries are actually using a faulty methodology. The mistake these countries are doing is that they taking the MSP figures, and reduce from it the external reference price (ESP), set by WTO which is fixed on 1986-89 statistics, and then multiply with the total value of production of a particular crop. This gives a much exaggerated figure. In reality, India does not purchase the entire production at MSP but only a fraction of the total production to meet the food and nutritional security needs of the marginalised communities. The correct way therefore should be to multiply the amount of crop harvest that is purchased at MSP instead of multiplying with total production.

In case of wheat and rice also, US has been challenging India’s calculations for a number of years, saying that the 2013-14 compilation by India was far short of the actual 65 per cent of price support for wheat and 77 per cent for rice. India had claimed that its MSP for both these crops was well within the prescribed limit of 10 per cent.

The basic objective behind the aggressive stance at WTO is to seek more market access for agricultural and dairy products. The US has made this abundantly clear after the US President Donald Trump had withdrawn benefits to steel and aluminium products under the Generalised System of Preferences (GSP). But the failure on the part of India to impose retaliatory tariffs on 29 US products, including several important agricultural commodities, shows the weakness in its trade policy. India has further extended the deadline for imposing retaliatory custom duties to May 2, hoping that the US may relent.

Much of the blame for opening up the domestic markets to flood of agricultural imports actually rests on India’s failure to take the US to the WTO dispute settlement panel on the question of massive subsidy support being given to US agriculture. We are actually suffering the consequences of our own failure to be combative in trade diplomacy. But what is worrying is that the consequences of all the collective failures to stand up and protect domestic agriculture and thereby India’s food security will fall on the beleaguered farming community, already reeling under a terrible distress. #  

खेती के मोर्चे पर भारत की नई चुनौतियां. Dainik Jagran. April 19, 2019
https://www.jagran.com/editorial/apnibaat-world-trade-organization-concern-report-india-new-challenges-on-farm-focus-19145965.html?fbclid=IwAR286RG7B6dyWHy_F03oRZM5n2Iw6Y4qNkOzc-7eohhl6H51xK8ocRYKzIw

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