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Wednesday, 23 December 2015 03:56
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If WTO gets stalled, TPP-type agreements get a boost

 

While commerce minister Nirmala Sitharaman expresses her disappointment with the attempt by rich countries to introduce ‘new issues’ at the WTO meeting in Nairobi, without reaffirming the principles of the Doha Development Agenda, both she and prime minister Narendra Modi must keep in mind that WTO is India’s best bet. If issues are not fixed multilaterally, they will be fixed bilaterally—and as the Trans Pacific Partnership agreement shows, this means accepting terms dictated by countries like the US and, for instance, significantly watering down India’s patent laws.

Sitharaman is right in wanting to protect both India’s farmers as well as its poor, but this can be achieved in a WTO-compatible manner. The Food Corporation of India (FCI) buying too much grain and jacking up costs due to its inefficiency—and then selling at a so-called discount—actually costs the government tens of thousands of crore rupees extra; so, jettisoning it in favour of lower FCI stocks and more direct cash transfers is not just WTO-compatible, it helps the fisc. Similarly, India may feel it is a sovereign right to provide support to farmers through a lopsided procurement policy and through fertiliser/power/irrigation subsidies, but if the same funds can be channelised as OECD-style ‘income support’, why not do this, especially as it also makes Indian farming more efficient? Even after this, it is true, India will not be able to match the hidden subsidies given by the OECD.

A study by the International Centre for Trade and Sustainable Development projected that “the subsidies US farmers receive—by virtue of creating an artificial incentive for them to increase planting, boosting both production and exports—could suppress world cotton prices by between 5 and 9 percent across a range of possible market scenarios”. Put another way, if the US didn’t give huge subsidies to cotton farmers, millions of Indian ones could wend their way out of poverty. But why get stuck on this issue, albeit of principle, since many of India’s farm exports are still more competitive than manufacturing ones and, despite the OECD-subsidies, are able to hold their own in global markets—it would be more fruitful to have a discussion to ensure India’s farm exports don’t get hit by unfair phytosanitary standards. In Paris, India signed on to the final accord, not because it was fair—it was completely unfair since the rich countries got out of a legally binding commitment to compensate poor countries for eating up their carbon space—but because it realised the protest was futile. Amazingly, that lesson didn’t trickle down to Nairobi.

 
 

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