The Hindu Business Line : Spat over food subsidy

AFTER THE COLLAPSE of the World Trade Organisation Ministerial at Cancun, there are welcome signs of global farm trade again moving in the direction of reforms. Diplomats of the WTO member-countries who met in Geneva recently are sanguine that a framework accord on farm goods could be reached in the coming months. The core issues would continue to be reductions in farm support, export subsidy and import tariffs as also allowing greater market access. The rigid attitude of the developed and the developing countries that led to the breakdown of talks at Cancun seems to be slowly but surely giving way to a certain pragmatic flexibility in the stand of policymakers across the world.

No doubt, there are differences over tariff cuts and market access — issues of critical importance to developing countries — and negotiations on these are likely to be both protracted and painful. But, equally, there is now the distinct possibility of convergence of views on export subsides and farm support. The European Union is under pressure to agree to discuss setting a deadline for eliminating them even as the EU itself has made some progress in persuading other countries to offer concessions on their export support mechanisms. The US too has promised to review its export-related credit and credit guarantee schemes as also food aid policies that act as subsidies. So far so good. But a matter of serious concern for the world is the recent spat between the WTO Director-General and the EU Trade Commissioner over the exact value of farm subsidies among industrialised countries. The EU Trade Commissioner, Mr Pascal Lamy, has objected to the WTO chief, Mr Supachai Panitchpakdi, quoting from the OECD official publication Monitoring and Evaluation of Agricultural Policies in OECD Countries that places total support to agriculture at $318 billion in 2002 ($311 billion in 2001). Mr Lamy asserts that the numbers reported by OECD are highly contestable and overstated, and that the right figure would be around $100 billion and less than $45 billion in the EU. At the moment it is unclear what the intentions of Mr Lamy are in raking this up or where exactly the truth about numbers lies; but the fact of the matter is that — regardless of the subsidy figures — Europe continues to pay massive farm-distorting subsidies that not only hurt farmers in the developing world but also undermine world agriculture trade. The EU must acknowledge this reality.

After the historic decision on decoupled payments last June, the EU must help move the trade talks forward. More important, policymakers around the world must ensure that this unseemly dispute over subsidy numbers is not allowed in any manner to derail the farm negotiations. Meanwhile, for India, irrespective of developments at the WTO, there is no alternative to strengthening the domestic agriculture so that it is able to stand up to global competition. A serious rethink on food subsidy is necessary. Currently, a large part of food subsidy bill relates to wasteful carrying cost on foodgrains that does not benefit either the consumer or the producer.