The Hindu Business Line : TRADE WITH CAUTION

Besides ensuring energy security and ushering in a knowledge economy, India and the United States have agreed to intensify efforts to develop a climate supportive of trade and investment. With the goal of doubling bilateral trade in three years, both have agreed on a wide area of cooperation and in the farm sector this is sought to be achieved through the Knowledge Initiative on Agriculture with a three-year financial commitment to link universities, technical institutions and businesses to support education, joint research, and capacity building including in the area of biotechnology. Bilateral trade in agriculture would be promoted through agreements that open the US market to Indian mangoes; India will have the authority to certify that farm produce shipments meet the US Department of Agriculture organic standards; and provide for discussions on regulations affecting trade in fresh fruits and vegetables, poultry and dairy, and almonds.

These initiatives are sure to give a new fillip to agriculture and agribusiness in India. Investment from the US, especially in sunrise sectors such as food processing, is indeed welcome. Surely India has much to learn in the areas of agriculture production, processing, marketing and distribution. However, it would be naïve to believe that Indian agriculture and agribusiness would quickly undergo a major transformation. Even while concretising these initiatives, policymakers have to exercise caution, especially in matters of tariff reduction and market access. Considering the tardy domestic output growth and the demand surge, India is unlikely to be a major exporter of agri-produce to the US, or any other major market. On the other hand, because over two-third of the US farm output is intended for overseas markets, India — with a large population and rising incomes — will be a natural target market. If there are subtle and not-so-subtle attempts to crack the lucrative Indian market open for American farm goods (much of it highly subsidised), it should come as no surprise.

Protection of domestic interests must take priority over allowing market access. Also, there may be attempts to push US-patented agricultural biotechnology products. Independent evaluation of the technology and the appropriateness of agbiotech products for Indian conditions is a must. The quid pro quo in matters of trade has to be worked out clearly and equitably. Both countries have reaffirmed their commitment to completing the WTO Doha Development Agenda before the end of 2006, and agreed to work together towards this end. Sounds ironical because they are on the opposite sides in the debate over farm subsidy reduction.

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