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DEVELOPING COUNTRIES, INCLUDING India, that participated in the Uruguay Round Agriculture Agreement are discovering to their dismay that developed nations are not averse to practise something different from what they preach or agree to. Reduction of export subsidies, improvement in market access, and reduction in trade-distorting domestic support were all part of the URAA commitment made in 1994. However, it is common knowledge that far from reducing, support to agriculture in OECD countries has been mounting steadily, and now stands close to $350 billion or 1.3 per cent of average GDP within the OECD area. The Doha Development Agenda sought to launch a new round of multilateral negotiations to achieve the URAA goals.

Not unexpectedly, developed countries of the EU, and Japan and the US continue to pursue policies that distort global trade. Prolonged period of low commodity prices appears to have weakened the resolve to reform policies and liberalise trade; but that hardly justifies a breach of commitment. Now, the US farm legislation that provides for $180 billion in farm spending over the next 10 years — of which 70 per cent will go for direct support payments to commodity producers — seeks to expand subsidies, reinstate the target-price system abolished in 1996, and introduce new payments. It is indeed an irony that government payments will rise if commodity prices continue to fall; and prices are most likely to fall because such massive payments will encourage more production. The range of agri-products includes bulk crops such as wheat, rice, corn, cotton, soyabean, and peanuts in addition to milk, wool, honey, dry peas and lentils. The US is a major exporter of many of these. The latest US move is sure to trigger retaliation in the form of additional subsidies by the EU, Canada, and Australia. These developments with global ramification will have serious implications for all developing countries. India has close to 70 per cent of its one billion population deriving its livelihood from agriculture and related activities. It is an unequal bargain between developed and developing countries on the WTO platform. Each developing economy must, therefore, design its own response to the worsening international agri-trade distortion.

Fortunately, there are signs that New Delhi is alive to the trends in global farm and trade practices. The country has considerable flexibility to counter the flooding by cheap, highly-ubsidised agri-imports by imposing tariffs under the WTO and countervailing duties as also invoking safeguard provisions. Importantly, the domestic production base should be strengthened; and the process of agricultural diversification and value addition accelerated. Apart from removing controls and restrictions on farm goods marketing, rural infrastructure — roads, warehouses, marketing yards — needs focussed attention. Ultimately, there is no alternative to making Indian agriculture more efficient in terms of both cost and quality. Only then can the country truly stand up to international trade pressures and negotiate with others on equal terms and with dignity.

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Distorting world farm trade

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