Financial Daily from THE HINDU group of publications
Saturday, Jun 12, 2004
Agri-Biz & Commodities
G-20 alliance meet to break deadlock in WTO farm trade talks
New Delhi , June 11
WITH the G-20 alliance of agricultural exporters mainly led by Brazil, India and South Africa once again slated to meet on the sidelines of the forthcoming meeting of the UN Conference on Trade & Development (Unctad) in Sao Paulo next week, the focus is on how to achieve a framework agreement in global farm trade talks by the end of July 2004 so that the Agreement on Agriculture (AoA) of the WTO would take off from next year.
That is why the European Trade Commissioner, Mr Pascal Lamy, and the Farm Commissioner, Mr Franz Fischler, recently shot off a missive to all WTO trade ministers promising to phase out farm export subsidies, provided other forms of subsidised export competition were also eliminated and that there is an acceptable end to market access and domestic support. Together with its transatlantic partner the US, the EU has submitted a proposal to the WTO recently for others to weigh.
In India, the United Progressive Alliance (UPA) led by the Prime Minister, Dr Manmohan Singh, has also quickly put in place a new Cabinet Committee on WTO and also a Group of Ministers (GoM) to study the state of play in the WTO talks and also the country's response to the various framework agreements covering agriculture, non-agricultural market access (NAMA) and the two Singapore issues of trade facilitation and transparency in Government procurement.
Both the GoM and the Cabinet Committee on WTO met on June 9 and 10 respectively and authorised the Union Commerce and Industry Minister, Mr Kamal Nath, about the mechanism and options New Delhi has in its armoury while conducting framework agreements in the next month's General Council meeting of the WTO in Geneva.
Mr Kamal Nath has also made the proper pitch in his briefing to the media about how India is concerned over the food security issues and the trade-distorting effects of hefty farm subsidies by rich countries to their farmers which in turn adversely affect the terms of trade of developing country farmers in the global grain market.
So any demand from the rich world to bring down domestic support in developing countries for their farm sector and enhance market access for cheaper farm goods imports from highly subsidised rich world would not be acceded to by developing countries where farming is the livelihood concerns for millions and food security the bedrock of its very existence, officials in the trade policy division of the Commerce Ministry contend with grit and gusto.
Even as the well-stated position of both developed and the developing countries on agriculture negotiations is by now widely known and debated, the recent raft of reports from the Paris-based inter-governmental think tank of 30 rich industrial countries on analysis of European Union agriculture alongside highlights of two other reports an assessment of farm policies in OECD countries and forecasts for world prices, demand and output make a grim reading.
No doubt, the agriculture policy reforms agreed by EU ministers last year remain a crucial step towards the "decoupling" of support to farmers so that the payments they receive are less dependent on what they produce.
Hence in its assessment of the impact of the Common Agricultural Policy (CAP) reform agreed last year, the OECD maintains that increased decoupling should reduce distortions to international trade and help boost farm incomes.
But the OECD evaluation of the EU's CAP suggests only a modest fall in production of the main commodities covered by the reform in the EU, though net exports are expected to decline more sharply.
The OECD study does not mince words when it points out that the CAP reform makes no marked cut in the overall level of support to EU farmers; nor does it open up EU markets to non-European producers.
Moreover, because payments would still largely be linked to farm size, support would continue to favour richer farmers with most land.
Yet another shocking news to Third World governments plumping for drastic cut in domestic support and elimination of export subsidy in farm goods from rich, government support to farmers across 30 countries of the OECD was 229 billion euros in 2003, accounting for 32 per cent of farm income.
This also signifies a slight rise from the 31 per cent recorded in 2002 but is down from the average 37 per cent of farm income of the 1986-88 period when CAP lavished subsidies building milk lake and butter mountain and surplus stocks of cereals and grains across the western Europe, much to the detriment of developing country exporters of farm goods.
With this sort of staggering farm subsidies distorting the global grain trade, the road ahead for hammering out any framework pact in the short time ahead is unlikely to be achieved, trade experts worriedly say.
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