Eco Project (2)

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CHAPTER 1

INTRODUCTION:

The WTO was born out of negotiations, and everything the WTO does is the resultof negotiations. The bulk of the WTOs current work comes from the 1986 94negotiations called the Uruguay Round and earlier negotiations under the GeneralAgreement on Tariffs and Trade (GATT). The WTO is currently the host to newnegotiations, under the Doha Development Agenda launched in 2001.

Trade relations often involve conflicting interests. Agreements, including those painstakingly negotiated in the WTO system, often need interpreting. The mostharmonious way to settle these differences is through some neutral procedure basedon an agreed legal foundation. That is the purpose behind the dispute settlement

process written into the WTO agreements.

While the WTO is driven by its member states, it could not function without itsSecretariat to coordinate the activities. The Secretariat employs over 600 staff, and itsexperts lawyers, economists, statisticians andcommunications experts assist WTO memberson a daily basis to ensure, among other things,that negotiations progress smoothly, and that therules of international trade are correctly applied andenforced 155 members on 10 May 2012.

GATT is now the WTOs principal rule-book for trade in goods. The Uruguay Round also creatednew rules for dealing with trade in services,relevant aspects of intellectual property, disputesettlement, and trade policy reviews. The completeset runs to some 30,000 pages consisting of about 30 agreements and separatecommitments (called schedules) made by individual members in specific areas such aslower customs duty rates and services market-opening.


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MEANING:

India is one of the founding members of WTO which came into existence on January01, 1995 replacing GATT (General Agreement on Tariffs and Trade) and promisingthe herald of new era in the rule based system of governing and promoting

international trade concomitant with the needs of the on-going processor globalization.

Where countries have faced trade barriers and wanted them lowered, the negotiationshave helped to open markets for trade. But the WTO is not just about openingmarkets, and in some circumstances its rules support maintaining trade barriers for example, to protect consumers or prevent the spread of disease.At its heart are theWTO agreements, negotiated and signed by the bulk of the worlds trading nations.These documents provide the legal ground rules for international commerce. They areessentially contracts, binding governments to keep their trade policies within agreedlimits. Although negotiated and signed by governments, the goal is to help producersof goods and services, exporters, and importers conduct their business, while allowinggovernments to meet social and environmental objectives.

Trade relations often involve conflicting interests. Agreements, including those painstakingly negotiated in the WTO system, often need interpreting. The mostharmonious way to settle these differences is through some neutral procedure basedon an agreed legal foundation. That is the purpose behind the dispute settlement

process written into the WTO agreements.

There are a number of ways of looking at the World Trade Organization. It is anorganization for trade opening. It is a forum for governments to negotiate tradeagreements. It is a place for them to settle trade disputes. It operates a system of trade rules. Essentially, the WTO is a place where member governments try to sortout the trade problems they face with each other.

The WTO agreements are lengthy and complex because they are legal texts coveringa wide range of activities. But a number of simple, fundamental principles runthroughout all of these documents. These principles are the foundation of themultilateral trading system


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WHAT WTO STANDS FOR AND WHAT WTO DO:

There are a number of ways of looking at the World Trade Organization. It is anorganization for trade opening. It is a forum for governments to negotiate tradeagreements. It is a place for them to settle trade disputes. It operates a system of

trade rules. Essentially, the WTO is a place where member governments try to sortout the trade problems they face with each other.

The WTO agreements are lengthy and complex because they are legal texts coveringa wide range of activities. But a number of simple, fundamental principles runthroughout all of these documents. These principles are the foundation of themultilateral trading system

The WTO is run by its member governments. All major decisions are made by themembership as a whole, either by ministers (who usually meet at least once everytwo years) or by their ambassadors or delegates (who meet regularly in Geneva).

While the WTO is driven by its member states, it could not function without its

Secretariat to coordinate the activities. The Secretariat employs over 600 staff, and itsexperts lawyers, economists, statisticians and communications experts assistWTO members on a daily basis to ensure, among other things, that negotiations

progress smoothly, and that the rules of international trade are correctly applied andenforced

It is a 149-member organization with Pascal Lamay as its head. It represents all thetrading nations of the world, who import-export goods & services. Created on Jan1,1995, it was considered the biggest reform in trade since WWII. Its predecessor,GATT (General Agreement on Tariff & Trade), had a tumultuous 47 years history.GATT made a beginning in 1948, and provided a framework for trade expansion vis--vis removing barriers on free movement of goods and services. It provided platformfor 8 trade negotiations in its checkered history until 1994, the last trade negotiationsthe Uruguay Round, resulted in the creation of WTO. In each of these Rounds (high level negotiations), the West, mostly Europe, Japan and North Americanegotiated trade deals with themselves in mind. The developing world including India,China, most of Africa and Latin America were forgotten as backward and withoutany clout. For Example, the Kennedy Round of 1963 quadrupled the world trade. Atthat time India and China had not emerged and hence did not figure in the worldtrade talks. Tokyo Round of 1973-79 quadrupled the already quadrupled world tradein last 25 years. In each case tariffs and trade distorting subsidies were progressivelyreduced on industrial goods & services. The West enjoyed unprecedented prosperity.US & Japan were the biggest gainers, followed by the all the nations of the Europe.Poor countries stayed poor. Nobody spoke on their behalf, and they had no clout tomake their presence felt. There are simple reasons for that. First, the poor countrieshad no money to compete in the international market with quality goods, secondsubsidies provided by the nations to encourage development after WWII made their

products much cheaper. Hence a die was cast for poor to stay poor. In 1982, China

burst on the international trade scene. In 2002, India became an upcoming star for the world to take note. Hence a new trade body was needed to regulate and


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encourage trade. Hence at the Uruguay Round, a decision was taken to set up a new body (WTO) to manage the growing trade.

TRADE NEGOTIATIONS:

The WTO agreements cover goods, services and intellectual property. They spell outthe principles of liberalization, and the permitted exceptions. They include individualcountries commitments to lower customs tariffs and other trade barriers, and to openand keep open services markets. They set procedures for settling disputes. Theseagreements are not static; they are renegotiated from time to time and newagreements can be added to the package. Many are now being negotiated under theDoha Development Agenda, launched by WTO trade ministers in Doha, Qatar, in

November 2001.

IMPLEMENTATION AND MONITORING:

WTO agreements require governments to make their trade policies transparent bynotifying the WTO about laws in force and measures adopted. Various WTO councilsand committees seek to ensure that these requirements are being followed and thatWTO agreements are being properly implemented. All WTO members must undergo

periodic scrutiny of their trade policies and practices, each review containing reports by the country concerned and the WTO Secretariat.

DISPUTE SETTLEMENT:

The WTOs procedure for resolving trade quarrels under the Dispute SettlementUnderstanding is vital for enforcing the rules and therefore for ensuring that tradeflows smoothly. Countries bring disputes to the WTOif they think their rights under the agreements are

being infringed. Judgements by specially appointedindependent experts are based on interpretations of the agreements and individual countries commitments.

The system encourages countries to settle their differences through consultation. Failing that, they can

follow a carefully mapped out, stage-by-stage procedure that includes the possibility of a ruling bya panel of experts, and the chance to appeal theruling on legal grounds. Confidence in the system is

borne out by the number of cases brought to the WTO around 300 cases in eightyears compared to the 300 disputes dealt with during the entire life of GATT (1947 94).


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BUILDING TRADE CAPACITY:

WTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, and support to help them build their trade capacity, to handle

disputes and to implement technical standards. The WTO organizes hundreds of technical cooperation missions to developing countries annually. It also holdsnumerous courses each year in Geneva for government officials. Aid for Trade aimsto help developing countries develop the skills and infrastructure needed to expandtheir trade.

WTO IS MORE BENEFICIAL FOR LESS DEVELOPED CONTRIES:

Giving them more time to adjust, greater flexibility and special privileges; over three-quarters of WTO members are developing countries and countries in transition tomarket economies. The WTO agreements give them transition periods to adjust to themore unfamiliar and, perhaps, difficult WTO provisions.

OUTREACH:

The WTO maintains regular dialogue with non-governmental organizations, parliamentarians, other international organizations, the media and the general public onvarious aspects of the WTO and the ongoing Doha negotiations, with the aim of enhancing cooperation and increasing awareness of WTO activities.

GOODS:

It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower customs duty rates and other trade barriers; the text of the GeneralAgreement spelt out important rules, particularly non-discrimination.

Since 1995, the updated GATT has become the WTOs umbrella agreement for tradein goods. It has annexes dealing with specific sectors such as agriculture and textiles,and with specific issues such as state trading, product standards, subsidies and actionstaken against dumping.

SERVICES:

Banks, insurance firms, telecommunications companies, tour operators,hotel chains and transport companies looking to do business abroadcan now enjoy the same principles of freer and fairer trade thatoriginally only applied to trade in goods.

These principles appear in the new General Agreement on Trade inServices (GATS). WTO members have also made individualcommitments under GATS stating which of their services sectors


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they are willing to open to foreign competition, and how open those markets are.

INTELLECTUAL PROPERTY:

The WTOs intellectual property agreement amounts to rules for trade andinvestment in ideas and creativity. The rules state how copyrights, patents, trademarks,geographical names used to identify products, industrial designs, integrated circuitlayout-designs and undisclosed information such as trade secrets intellectual property should be protected when trade is involved.

The Indian patent law is under review for bringing it in conformity with WTO provisions.A particular part of Article 27 mentioned below has direct implications for agriculture. Even the

product patent aspect will have implications for agriculture by way of protection tothe inventorsof new agricultural products. Since processes are easy to copy, product patents arenecessary.The provision of TRIPs need to be strengthened to include (a) micro organisms butexclude life forms, b) registration system of grassroots innovations (unlike utility

patent system,this registration system should be like product patent for ten years just as Australian innovationsystem has been proposed,(c) widespread patent search facility for educational andentrepreneurial networks and centres so that quality of research and education can becompetitive,

(d) just as a global registry has been proposed for wines under TRIPS, India must

insist that similar global registry must exist for greensmall innovations too.


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CHAPTER 2

IMPORTANCE OF INDIAN AGRICULTURE :

Agriculture forms the backbone of the Indian economy. This sector contributes to theIndian economy in a variety of ways:

It provides direct employment to 65% of working people in the country andcontributes about 29% of GDP of the country. In advanced nations like theUS, agriculture accounts for a mere 2% of GDP, and employs 4% of the totallabour force. The position is similar in other advanced countries. For example,agriculture contributed 2% of GDP in France with 6% share in labour force;in Germany the contribution of agriculture to GDP was 1% with 3% share inlabour force. The corresponding figures for UK were 2% and 3% (World Bank

2000). Agriculture also provides the foodgrains to feed the large population of thecountry.

Indian agriculture is an important source of supply of raw materials toindustries in the country.

Agriculture contributes a sizeable share in Indias exports. Besides, it provides fodder for the large cattle population. Being the largest source of employment and income to millions of people, it

provides a vast market for our industrial products.

The country has made significant improvements in agricultural production, but theachievements have been mainly confined to a few areas. The major challenges for our agriculture system would always be increasing production and productivity toensure food security for the rising population. Meeting this challenge means alsoensuring food security and a better standard of living for the rural people. Indias

performance in agriculture affects overall rural development and the extent of rural poverty. Therefore, the performance of the economy is crucially dependent upon thatof agriculture.

ITS MEMBERS:

While the WTO is driven by its member states, it could not function without itsSecretariat to coordinate the activities. The Secretariat employs over 600 staff, and itsexperts lawyers, economists, statisticians and communications experts assist

WTO members on a daily basis to ensure, among other things, that negotiations progress smoothly, and that the rules of international trade are correctly applied and

enforced 155 members on 10 May 2012. India 1 January 1995
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CONCEPT OF WTO ARISES:

1944 - The United Nations Monetary and Financial Conference is held in BrettonWoods to plan the future of the worlds monetary system. Came to be known as theBretton Woods system.

The International Monetary Fund (IMF) and the International Bank for Reconstructionand Development (IBRD) are set up. The conference also recommends the setting upof an International Trade Organization (ITO).

1946 - A Preparatory Committee, with 23 members, is established by the United Nations Economic and Social Council to draft the charter of the proposedInternational Trade Organization (ITO).

1947 - The General Agreement on Tariffs and Trade (GATT) is set up with theobjective of removing barriers to world trade.

1947 The first multilateral trade negotiation's (MTN) rounds are held inGeneva.8

1949 - The second round is held in Annecy, France. While further tariff concessions are negotiated, 10 more countries join GATT in Annecy.

1950 - The third round is held Torquay, England, and four more countries became members of GATT. 9 The General Agreement on Tariffs and Trade is signedas an interim measure by the original 23 countries on 30 October 1947. And GATTenters into force on 1 January 1948. 1956 - The fourth round comes back to Geneva.

1960 - The fifth round was known as the Dillon round (1960-61).

1962 - With the Kennedy Round in 1962-67, the focus shifts to an elimination

of non-tariff barriers. By the time of the Kennedy Round, around 50 countries aremembers of GATT

1973 The Tokyo (1973-79) rounds begin. Reduction of non-tariff barriersreceives even more serious attention. 99 countries participate in the negotiations. Afew of the Tokyo Round results are incorporated as codes or arrangements, referredto as the GATT-plus system.10

1981 The new Reagan administration in the US becomes more aggressive onliberalizing agriculture.

1982 The Ministerial declaration launches work programme on agriculture, theDe Zeeuw Committee on Trade in Agriculture.

1985 - Leutwiler group (1983) report recommends clearer and fairer rules for agricultural trade.

1986- Fourteen agricultural exporters meet in August in Cairns, Australia, to work on agricultural trade issues together. In September, the Punta Del Este MinisterialDeclaration takes place in September.

1987- The US calls for complete phase out of all agricultural subsidies thatdistort trade by 10 years.

1988- Working Group on Sanitary and Phytosanitary Measures set up, Mid-termReview, Montreal, December 1988.

1989 - Individual countries submit detailed liberalization proposals.1991 The Dunkel Draft Text, 1991 announced.


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THE URUGUAY ROUND:

The Uruguay Round (1986-94) is considered by both its defenders and its criticsas a major landmark in international trade negotiations. It has changed the terms of

the world trade regime in many significant ways. In this round, besides negotiationareas of tariff and non-tariff measures, three new areas were touched:

1. Trade in services,2. Trade related investment measures (TRIMS),3. Trade related intellectual property rights (TRIPS)

Through these agreements, WTO members operate a non-discriminatory trading systemthat spells out their rights and their obligations. Each country receives guarantees thatits exports will be treated fairly and consistently in other countries markets. Each

promises to do the same for imports into its own market. The system also givesdeveloping countries some flexibility in implementing their commitments.

The Uruguay Round also persists with this trend, such as in the government procurement code or the information technology agreement. In the government procurement negotiations, India is an observer, but not a signatory. In the finalUruguay Round package, such GATT-plus, agreements are called Plurilateral tradeagreements. This is in contrast to multilateral trade agreements, which areGATT/WTO agreements proper and have universal application. TRIPS. To break thisdeadlock in talks, Arthur Dunkel, the then Director General of GATT, unilaterally

presented a 433-page document on December 20, 1991. 11 The Final Act, which wassigned in Marrakesh in 1994 by 135 countries, consisted of an entirely new set of 16agreements that had superseded the earlier GATT agreement. It created a formalinternational institution - the World Trade Organization or WTO12, which came intoforce on 1 January 1995 - to oversee implementation of multilateral trading rules.

It introduced many new areas under the purview of GATT and the WTO:agriculture,textiles andclothing,

services,trade-relatedintellectual property rights,trade-related investment measures,subsidies,anti-dumping rules,

public procurement, and so on.

It allowed for trade disputes to be brought before a Dispute Settlement Body of theWTO and for retaliation across trading categories for transgression of rules. Itenforced a shift from quantitative restrictions on imports to tariffs, as well as greater

predictability in tariff reductions by forcing every member country to declare tariff bindings in all traded goods, and by promising tariff reduction over time.


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Gains from the Uruguay Round

At the time of signing the Marrakesh agreement, the following kinds of gainswere to benefit the signatories:

1. Static gains due to a reallocation of resources to areas of comparativeadvantage (that is, those that are relatively better at producing particular goods).

2. Efficiency gains that would result from reduced slack in economies thathave been highly protected.

3. Dynamic gains due to improved technical efficiency or lower input use per unit of output and technological change.

The World Trade Organization (WTO) on January 1, 1995, succeeded the GeneralAgreement on Tariff and Trade (GATT). It was a watershed event in the history of global trade. At present, the WTO has 146 member countries including India. TheWTO deals with the tariffs and quotas between the member countries and works toremove any anomalies. Agriculture was also included in the WTO (Agreement onAgriculture)14. India, being one of the signatories of WTO and after losing its appealin the WTO, liberalized trade on agro-commodities as per WTO norms.

Article 20 of the AOA15 ensured that these reforms are an ongoing process. Re-negotiations in this regard take stock of the experience of the past years and explorethe potential for further commitments to the reform process. The Uruguay Roundnegotiations involved discussions on new areas such as agriculture, textiles, garments,trade in services, trade-related intellectual property rights (TRIPS), and trade-relatedinvestment measures (TRIMS), in three distinct thematic groups. The first wasreducing specific trade barriers and improving market access for partner countries.Areas under this were tariffs, non-tariff measures, tropical products, natural resource-

based products, textiles and clothing, and agriculture. A second theme was one of strengthening GATT disciplines and improving the rules under which GATT operated.Areas under this theme were GATT articles, safeguards, MTN agreements andarrangements, subsidies and countervailing measures, dispute settlement and functioningof the GATT system (FOGS). The third and final theme covered new areas includingTRIPS, TRIMS, and services.


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FEATURES OF THE WTO:

Under the auspices of the WTO, many trade-related agreements were signed bythe member countries and for the first time, an Agreement on Agriculture(AOA) was reached to reform and dismantle trade barriers in the agricultural

sector The objective of the Agreement of Agriculture is to reform trade in the sector

and to make policies more market oriented. This would improve predictabilityand security for importing and exporting countries.

The WTO wishes to liberalize trade barriers within member countries byreducing the tariff and non-tariff barriers, such as quota restrictions.


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The WTO agreement requires the conversion of all non-tariff barriers on agro-commodities trade into equivalent tariffs. These tariff rates equivalent are to becombined with the existing tariffs and the resulting composite tariffs are to be boundat that rate.- Each country is given the flexibility in distributing the average tariff cut over

different commodities, as long as each individual tariff is reduced by at least15% (10% for the developing countries) over the relevant period.

- Where the resulting tariff is prohibitive, a minimum level of imports, equal to 3%of domestic consumption is to be guaranteed. These minimum access quotaswill rise to 5% of domestic consumption after six years.

- The minimum allocation quotas for developing countries constitute 2% of domesticconsumption moving up to 4% after 10 years.

- The agreement also provides for a cut in the subsidies from the 1986-90 levels by36% (24% for the developing countries) over six years (ten years for thedeveloping countries) in equal annual installments.

- Developed countries are also required to reduce the volume of exports of eachsubsidized commodity by 21% over six years with average export levels of 1986-90. A corresponding reduction by 14% is required for the developingcountries.

Benefits for India Reduction in export subsidies on farm products in developed countries will make

Indian agricultural exports more competitive. Exports will increase to $ 1.5 billion by 2005. Fruits, oil seeds, cotton, and

milk products will be benefited due to subsidy reductions. There will be higher price realizations, which will help in improving the

standard of living of farmers. Countries will be forced to produce only what they are best at. This will mean

increased efficiency and higher productivity throughout India.16 Environmental programmes are exempt from cuts in subsidies so that the

environment protection programmes continue unabated. India does not have to cut subsidies or lower tariffs as much as developed

countries and it has been given enough time to complete its obligations. Distortions in the market place would reduce, which would benefit the end

consumer.


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THE CHARACTERISTICS OF WORLD TRADE ORGANIZATION ARE ASFOLLOWS:

World Trade Organization is a separate legal entity. It has a legal and institutional foundation of the multi trading system.

All its agreements are permanent and binding to all member countries. All its members enjoys equal voting rights, irrespective of type and volume of

trade. It has an automatic dispute settlement system. It has a rule based and time bound approach. orld Trade Organization has global status like IMF, but it is not an agent of

UN. It has a wide coverage of not only trade but also service. It focuses an trade related aspects of intellectual property rights. World Trade organization is a huge organizational body having a large

secretariat.

BENEFITS FOR INDIA:

Reduction in export subsidies on farm products in developed countries willmake Indian agricultural exports more competitive.

Exports will increase to $ 1.5 billion by 2005. Fruits, oil seeds, cotton, andmilk products will be benefited due to subsidy reductions.

There will be higher price realizations, which will help in improving thestandard of living of farmers.

Countries will be forced to produce only what they are best at. This willmean increased efficiency and higher productivity throughout India.16

Environmental programmes are exempt from cuts in subsidies so that theenvironment protection programmes continue unabated.

India does not have to cut subsidies or lower tariffs as much as developedcountries and it has been given enough time to complete its obligations.

Distortions in the market place would reduce, which would benefit the endconsumer.
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CHAPTER 3

THE AGREEMENT ON AGRICULTURE:

The Agreement on Agriculture signed at the end of the Uruguay Round of negotiations deals mainly with the nature of entry of the imported goods in domesticmarkets and the nature of support provided to the domestic farmers and exporters of agricultural goods by their governments. It also lists the different types of cropssubsidies that have to be reduced.

The Agreement on Agriculture signed at the end of the Uruguay Round of negotiations, which has as its objective the establishment of a fair and market-oriented agricultural trading system , dealt with three groups of issues.These were(i) better market access, or easier entry of imported goods into different nationalmarkets;(ii) reduced domestic support, or lower direct or indirect support provided to domesticfarmers by national governments;(iii) lower export subsidies or lower budgetary support for exporters of agricultural

products.

MARKET ACCESS:

Market access was sought to be increased in a number of ways. First, the AoAmade tarrification mandatory. That is, countries had to dismantle, in a phased manner,any non-tariff barriers such as a ban on imports of particular agricultural products or ceilings set on the quantities of individual products that could be imported (otherwisetermed quantitative restrictions or QRs), and only use import tariffs or duties asmeans of protection.

Second, the agreement required that the developed countries reduce their tariff levels by 36 percent over a six-year period from the start of implementation, with acommitment to reduce tariffs on each tariff line by a minimum of 10 percent.Developing countries were required to reduce tariffs by 24 percent over a 4-year

period, and ensure a tariff reduction of 10 percent in each tariff line17. Third, allcountries had to specify ceilings at which their tariffs were bound, or the maximum

level to which tariffs would be raised under any circumstances. Finally, there was aminimum level of actual access of imported commodities to domestic markets thateach country had to ensure. This was set at 3 percent of average domesticconsumption during the 1986-88 reference years, to be ensured by 1995 and 5

percent of the same by 2000 in the case of the developed countries and 2004 in thecase of the developing countries. If countries did not reflect this minimum access,they were expected to use the mechanism of tariff -rate quotas , or lower tariffs for imports of a magnitude required to ensure the realization of minimum accessrequirements. Despite these detailed specifications, the AoA provided countries with anescape clause in the event of a large and disruptive inflow of imports. Under theSpecial Safeguards provisions, countries that had tarrified their QRs, It needs to be

noted that given the level of such tariffs at the time of implementation of the tariff reduction commitment, the actual increase in access may not be substantial. The least


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developed countries were provided a concession, as they were not required to reducetheir tariff levels.tarrified products, with an import surge or by a fall in import pricesto levels that were low relative to those that prevailed during the 1986-88 reference

period, were allowed to impose higher tariffs and other restrictions to restrain imports.

DOMESTIC SUPPORT:

The AoA defined the principles on the basis of which the Aggregate Measure of Support (AMS) provided by the government of a country to its agricultural sector was to be computed. The aggregate measure of support was the sum total of theAoA product-specific and non-product-specific support provided by national and sub-national or federal governments in individual countries. The original Dunkel Draft of the Uruguay Round Agreement provided for commitments to reduce domestic supporton a product-by-product basis. However, the agreement between the G-2, the US, andEC at meetings that took place at Blair House in Washington in November 1992(known as the Blair House Accord), which paved the way for the successfulconclusion of the negotiations on the Uruguay Round, replaced these product-wisecommitments to a commitment to reduce overall support to agriculture18. Not all of these measures of support were considered violative of free trade

principles and therefore eligible for inclusion in calculations of the AMS. In fact, theAgreement on Agriculture categorized the different possible measures of support intothree categories. The first, termed the amber box measures, were seen as those

policies, which do have a substantial impact on the patterns and flow of trade . Allsuch domestic support measures were to be taken into account while computing theAMS level, and countries had to commit themselves to reduce in the aftermath of theagreement. The second termed the green- box measures were those that were seen ashaving no major effect on production and trade and were considered completely non-violative of the AoA and not subjected to any reduction commitments.

They included a variety of direct payments to farmers, which were seen asaugmenting their incomes without influencing production decisions. Some of themwere:

Producer retirement programmes, Resource retirement programmes, Environmental protection programmes Regional assistance programmes Public stockholding for food security reasons

Agricultural input subsidies for low-income, resource-poor families, Domestic food aid, Certain types of investment aid, General services that provide among other things:


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SUPPORT IN THE FORM OF SUBSIDIES COMES BY WAY OF:

price support, or measures such as government procurement, backed byexport or import controls using tariffs and QRs and

budgetary support, in the form of explicit budgetary outlays on subsidies

on farm inputs and credit, agricultural research and extension, deficiency payments, insurance and disaster payments, diversion payments for temporary retirement of resources, and compensation in lieu of reductions in market price support or implicit budgetary outlay in theform of revenues foregone as a measure of support to agriculture.

Research, training, and extension, Marketing information, Certain types of rural infrastructure.


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CHAPTER 4

WTO & AGRICULTURE IN INDIA:

India is one of the founding members of WTO which came into existence on January01, 1995 replacing GATT (General Agreement on Tariffs and Trade) and promisingthe herald of new era in the rule based system of governing and promotinginternational trade concomitant with the needs of the on-going processor globalization.

WTO provisions related to international trade are now similarly applicable toagriculture which was brought within the fold of GATT in the Uruguay Round(1986-93) of multilateral trade Negotiations (MTNs).

Application of WTO provisions on agriculture involves many contentions issues and isan area of serious concern for developing countries which are primarily agrarianeconomies, Moreover, the world, despite growing interdependence and integration, ishighly heterogeneous with regard to levels of development. This heterogeneity is verymuch noticeable when we compare the agricultural sector of developed anddeveloping countries.

Support infrastructure like storage, processing, finance, marketing, transport and R&Dfacilities are much more advanced and organized. In sharp contrast, in a country likeIndia, for millions of farmers who derived their livelihood from agricultural, it is stilla way of life and not an occupation they have chosen for themselves. Indian farmersare mostly involved in subsistence farming with very little or no marketable surplus.

On the other hand, there have veer instances where in the USA farmers have been

given subsidies worth millions of dollars to keep their farmland uncultivated. In India70% of the holding are not of the economy size, making application of moderntechnology difficult and unaffordable for the farmers.

The developed countries like the USA, Japan and EU countries heavily subsidize their agriculture with high quality standards and aggressive marketing practices, thesecountries hold 72% share of world trade in agricultural products are keep thedeveloping countries virtually at the periphery of world market.

The silent features 0f this agreement include three main provisions which have become effective 1 Jan, 2000.

Under access all non-tariff barriers like quota will be converted into tariffs. India hasalready removed quantitative restriction on all her import. It has now imposed

protective tariff on imports of sensitive agricultural products in order to protect theinterest of its farming community.

As far as the maximum limit of tariff is concerned no country is permitted to imposetariff beyond a certain limit. All industrialization countries are to reduce tariff by36% within six years. For individual agricultural products tariff has to reduce by atleast 15%. Developing countries like India have to reduce tariff by 24% within 10years. On any individual agro product tariff cut has to be at least by 10%.


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Under Export Competition the developed countries are to reduce the value of directexport subsidies by 36% over a period of six years and in volume terms 21%. The

base period for these cut is 1986-90 or 91-92 if exports were higher in that period.Over the same periods the developing countries are to reduce the value of directexport subsidies by 24% and volume terms by 10%.

Under domestic support this issue is linked to providing state support to farmers infarm production. Under AoA (Agreement on Agriculture) the developed countries areto reduce AMBER BOX subsidies within 6 years by 20c starting from 1995 with1986-88 periods as base. The same has to be reduced by 13c with in 10 years bydeveloping countries.

AoA has classified all subsidies given to farmers into three categories AMBER BOXsubsidies, BLUE BOX subsidies and GREEN BOX subsidies. Under AMBER boxsubsidies such domestic support its included which is meant to encourage farmers to

produce more.

BLUE BOX subsidies are related to quantum of output and hence are consideredminimally trade distorting. Such subsided is provided only up to certain limit of

production. GREEN BOX subsidiary aid to farmers comes under this category. Thedeveloped countries have used provisions of AoA to further infest of their farmers.

The developed countries have used provisions of AoA to further the interest of their farmers. For example, they have remodeled AMBER BOX subsidies in such a waythat these qualities to be put into BLUE or GREEN BOX subsidies. These countriesare constantly pressuring the developing countries for greater market access for agricultural product but are not willing to bring down the level support that they

provide to their own farmers.Developing countries like India feel that they are being discriminated against inmatter like tariff on food imports into developed countries. For example, in the nameof mutual access, OECD countries impose very low tariff on imports from fellowmembers while similar imports from developing countries are subjected to higher tariffs.

The Nov. 2001 Doha round of ministerial talks were termed as Development Round because comprehensive development of the accepted as its agenda.

Theoretically, issues like production and trade of agriculture products along withdomestic support and subsidy to it, compliance issues, intellectual property rights,special discriminatory practices and market access were to be discussed. But soon it

became clear that on the ground developed countries were not willing to yield muchto the developing countries for deeper market access. By the termination of thisround it was clear that issue related to agriculture pushed other issues to the

background.

For the developing countries safeguarding the interest of their farming sector is amatter related to the very survival and substances of there population. Moreover in arepresentative democracy like ours it would be a political hara-kiri if the governmentignores the interests of farmers and agriculture under international compulsions.


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In the Doha round of negotiations, while the developed countries were mainlyconcerned about issues like market access and IPR, the developing countries wereconcerned about food security, poverty elimination and economic growth with respectto the process of globalization. It is alleged by developing counties that the developedworld shows only hypocritical concern about these issue.

In the farm bill in the USA and the collective farming policy in EU, agate supporthas been promised to the farmers than before. Sensing a major deadlock in futurerounds of discussions on AoA, the agriculture ministers of EU countries presented areconciliatory package in the last week of June 2003. In this they promised not tooffer any subsidy to their farmer but insisted that agricultural income world still be

protected. This is a wily move as it replaced a trade distorting measure like subsidy by protection of agriculture income which will not be treated as trade distorting andhence qualifies to be put in the GREEN BOX.

It would be a misnomer to call such protection as minimally trade distorting because

it will influence the allocation of recourses in the since that in the absence of such protection fewer resources would be committed to agriculture protection will serve asan inceptive not to move resources away from agriculture leading to over productionthis surplus produce will be used to disallow imports from the developing world or for dumping in the world market. The worst aspect of this package was that noteven a mention of reducing export subsidy found place in it.

The ministerial meet at Cancun in Mexico held on 10-14 sep. 2003 raised questionson the working of the whole apparatus of WTO.

The only major achievement on the part of the developing countries was that they

did not succumb to the pressures of the developed countries. As expected the Cancunmeet too was focused on agriculture G-5 group countries with India, china, Brazil,Argentina and South Africa as its members emphasized the urgency of the need toreduce farm subsidy in the developed countries especially in the USA and EUcountries.

India played a pro active role in this initiative. It was highlighted that the cottonexport dependent economies of the world like Chad, benign, male and Burkina Fasohave suffered massively due to the farm subsidy that the USA gives to its 25,000cotton growers.

Even Australia and New Zealand supported the stand taken by the G-21 group of thedeveloping countries. The revised draft presented for negotiations was heavily titled infavour of the developed countries. It required the developing countries like India toreduce farm subsidy by 70% while EU members and the USA were required toreduce it by 41% and 36% respectively. The revised draft was a big blow to theheightened expectation of the developing countries.

At cocoon the developed countries did not yield much to the outstanding demand of the developing world but cleverly included issues like investment, competition, tradefacility and government procurement to build pressure on the developing countries.

Honk Kong ministerial conference ended in the same manner. The developingcountries, led by G-5 opposed the proposals of US and European Union on theground that they were against the interests of the poor countries. Doha round talks


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are at the moment floundering because of the uncompromising stands adopted by players such as EU, US and G-5.

The interesting part of the whole thing is not one can be said to be the mainculprits because every Government involvement in the WTO negotiations is squarely

accountable and answerable to its constitution and population back home, whichmeans among other things, that no commitment can be made which will lead toweakening of the domestic support base beyond a point.

Politically the issue of AoA is so sensitive that no government, whether in thedeveloped or the developing countries, is in a position to compromise with theinterests of farmers in the name of collectivism.

Now the question arises that what should be Indians strategy? As things stand at present, the provisions of AoA do not appear to have a threatening impact ondomestic support and export subsidy under AoA. The non-product specific support

amounts to 7.5% of the value of agriculture production in India.Since product specific support is negative, the Aggregate measure of support to Indianagriculture is still below the deminimise of 10 percent in terms of the Uruguay roundstipulations. India has already suggested that AMS be calculated as the sum of the

product specific and non-product specific support (WTO 2001). As the input subsidesto resource-poor farmers are exempt from reduction commitments under WTO (thesecome under non product specific support), so the overall level of support given toIndian Agriculture is less than the minimum of 10% as set under WTO stipulations.

Agriculture sector in India has responded positively to the launching of macroeconomic reforms in 1991. With liberalization of exchange rate, the terms of trade for agriculture have shown a significant improvement. Private investment inagriculture registered a step rise in the post-reform period. For the first time sinceindependence India has become a net exporter of foodgrain.

The fear that liberalization of imports would lead to massive influx of agricultureimports too has been found to be misplaced. Quantitative restrictions on imports have

been lifted since April 2000. Though import like fruits, ketchup and meat productshave increased, they still account for a miniscule of total agricultural imports.

Though there is clearly a need to be constantly vigilant and work in league withother developing countries and removal of tariff and non-tariff barriers, the major challenges the developed countries at WTO, we need to take measures which makeIndian agriculture more competitive.

The fortunes of Indian agriculture which now accounts for about 20% of the GDPand provides employment to about 60% of labour force crucially depend upon greater investment, both private and public, in irrigation power, roads and the ability of agriculturists to access the modern technology specially the yield augmentingtechnology. Conditions need to be created for widespread diffusion and application of this technology by the farm sector.

To conclude, it can be said that WTO provisions pose no real threat to Indianagriculture though aspects related to IPR, removal of tariff and non-tariff barriers andmarket access need to be dealt with constant vigil and suitable expertise. Relevant


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institutional and legal changes (like in patenting) need to be brought about Equallyimport is the need to restructure, modify and revamp our agriculture sector so that itcan rise up to the challenges thrown by growing integration with the rest of theworld. The need of the time is to make it more efficient, modern diversified andcompetitive. The time to engineer a second Green revolution has arrived.

AGRICULTURE SUBSIDIES:

Due to the Agreement on Agriculture (AOA), India can no longer remain aloof from the restof the world. It had to join the WTO. This AOA has established a number of generallyapplicable rules with regard to agriculture and trade related matters. Most of the developedcountries are providing huge subsidies to the agricultural sector. In these countries not morethan 10% of the population is dependent on agriculture. The below table gives theinformation about the subsidies that are being given to agriculture by different countries and

the percentage of the population depending on agricultureIndia provides only 2.33% subsidy to agriculture. It is very small when compared with other countries. The Aggregate Measure of Support (AMS) to agriculture will be 10 percent inIndia as against 5% in the developed world. The total subsidy on agriculture in thedeveloped world works out to $150 billion and in the developing world $19 Billion. If theAMS exceeds 10 percent in any country, it has to reduce by 13% by 2004. According tothe WTO the AMS in India, product subsidies is 7.5% and subsidy on non-product is minus38.5%. So there is no question of losing any thing in our agriculture by accepting the AOA.

SUBSIDIES TO AGRICULTURE: Country Subsidy per hectare %subsidies Population dependant on agricultureEEC $82 37% 8%USA $32 26% 5%apan $35 72% 4%

China $30 34% 24%South Africa $24 60.67% 18%india $14 2.33% 60%


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TARIFFS:

The tariff on agricultural commodities have been consider-ably restructured to comply withWTO requirements. India is committed to reduce tariffs on 686 agricultural products. The

average tariff on agricultural commodities was 115% before the agreement. After theagreement it has been reduced to 35%. Along with 686 commodities the tariff on 587 other commodities is on an average 50% less than the negotiated tariff. Only on 10 commoditiesis the tariff rate more than the negotiated tariff rate.We must recall, in this context that two decades ago India agreed at an international meetingto reduce the tariff either to zero or to a minimum level on the import of dairy products. Inother words, India had accepted in principle the import of agricultural products many yearsago. In the case of edible oils we agreed (binding) to impose a tariff of up to 150 percent

but the bounded duty at present is 0. With a duty reduction on edible oils as low as 25%,hundreds of oil mills have closed down, groundnut farmers are unable to get a minimum

price and even compelled to dispose of their product at huge losses. Pulses were importedunder OGL (Open General License) at zero interest rates. In July 1999 the Government oIndia sought to renegotiate the tariff on pulses. But the international community has notyielded.

THE CHALLENGE:

a. Investment: Indian agriculture needs a lot of investment to have large-scale production.By this we can reduce production costs. But the problem is that large scale agriculture

displaces persons who are dependent on agriculture. Instead of criticising WTO we haveto think of an alternative system. Corporatisation of agriculture is seen to be inimical tosocial justice. Redistribution of land to the landless poor through the various land ceilingacts leads to fragmentation which will be a hurdle to improved production as well as

productivity. b. Patent System: Plants such as neem, turmeric and products such as Basmati (scented rice)

are patented or about to be patented by American companies. It is strange that in Indiathese have been household plants used in cooking and for medicinal purposes sinceancient times. The system of Ayurveda has existed since times immemorial. All medicinal

products based on plants and plant products must be patented by Indian companies.

Conceding the patent rights to an American based company is ridiculous and we have totake this up with the WTOs Dispute Settlement Board (DSB) at Geneva.c. The challenges before Indian agriculture are immense. India is not where it should have

been in the world market for agricultural products despite being one of the top producers.The country needs to put greater emphasis on cultivation of international varieties. UntilIndia takes some steps in this direction, it will continue to produce more only to earnless. The major challenges for Indian agriculture system would always be increasing

production and productivity to ensure food security for the raisingpopulation.d. Rigid quality control is a major challenge for Indian agriculture. The global agricultural

market is influenced to a great extent by the quality of products, especially whenexporting to developed nations. Indian agricultural exports have to face tough competition,which is a matter of serious concern. The right type of technology for growing and

processing must be adopted so that there is good quality production at lower costs, which


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in turn will reduce the prices and place India in a better position to compete globally.Indian producers produce agricultural goods at competitive prices. Yet low global pricesresulting from subsidies by the developed nations mainly the European Union and UnitedStates, deprives India of any advantage on the price front. The US is exporting wheat at

prices 40 per cent lower than production costs. In the case of soybean, the price

difference has been increasing steadily over the last four years and is currently at 30 per cent while for maize it is 25-30 per cent. In 2001, cotton was being sold in theinternational markets at a price 57 per cent lower than its production cost, while the

price difference for rice has stabilized at 20 per cent. As a result of these prices, the USIs the worlds largest exporter of wheat, corn, cotton and soybean, and the second largestin rice.

While agricultural trade liberalization was justified on the grounds that Northernagricultural markets would open to India, Indias exports to Europe have actually declinedfrom 13 to 6 per cent. This is because the North still maintains high subsidies and trade

barriers. The WTO regime has become a challenge because it has shown that agriculturetrade liberalization has become a unidirectional phenomenon that opens markets in theSouth for Northern business corporations but closes markets in the North for trade fromSouth. Such trade will destroy livelihood opportunities for resource-poor farming familiesand agricultural labour.

Global forces are now playing an important role in determination of cropping patterns,investment levels, price structures, quality of production and level of international trade.Indian farmers are facing multiple challenges. Firstly, they are being asked to provide agreater variety of better quality products at lower cost, and in a safer manner than ever demanded before. Secondly, they are being asked to produce this abundance on ashrinking natural resources base that is often subject to government regulations.

As far as India is concerned there are some danger signals. Population growth rate andhigher per capita income suggest that demand for foodgrains is growing. But there aredoubts about the supply response. In terms of acreage, area under foodgrains has notincreased. Yield growth rates of food grains are also stagnating in most parts of thecountry. The productivity of soil has also started declining. The underground water tablein most Indian states is getting rapidly depleted. Based on these facts, various studieshave pointed out that India will be a net importer of rice in the near future.

FISHING IN INDIAN WATERS: There is another problem that has arisen as a result of our accepting WTO norms. Everycountry has to allow fishermen of other countries to catch fish in its territorial waters. Indiaexports special grade fish (Tuna and Prawns) to other countries and earns substantial foreignexchange. Around 10 lakhs people are dependent on fishing. Deep sea fishing leads toexhausting not only fish resources, but also displacement of our people in fish catching,

processing industries etc. This too is an issue that needs to be discussed at the appropriateWTO forum.


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BENEFITING THE CONSUMER:

Given that exports from India are already very low, we will be put to greater disadvantageif new hurdles are put in the way of our exports. There are still larger issues of public

good at stake in such decisions. If producers from other countries were able to offer better commodities at far cheaper prices, it would be unjust and unfair to the Indian consumers torestrict or ban such imports indefinitely. Expecting such protection as a time bound measuremay be reasonable, if during that limited time span, we make determined efforts to increase

productivity in agriculture, improve the infrastructure and upgrade the efficiency of Indianindustry to face global competition. We, the farmers of India are confident that withudicious measures of protection during the brief transition period of 4-5 years, we will be

able to successfully face international competition by building world class agriculture, provided the government gets off our backs and stops putting new hurdles in our way.

THE QUESTION OF SUBSIDIES:

Another important stipulation in the WTO Agreement on Agriculture is that Governments direct support to agriculture i.e. non-product-specific. The Aggregate Measurement Support(AMS) should not exceed 5% in the case of developed countries and 10% in the case odeveloping countries. USA, Europe, S. Korea, Japan etc., support agriculture in various ways.In rich countries, it has become necessary to ensure that agriculture continues and that some

people stay in agriculture. Besides, if the whole of the country becomes a forest oindustries and cement concrete, there is a risk of the environment being destroyed. For thesereasons, richer countries feel the need to keep agriculture operating and even flourishing.Subsidies and income guarantees are given for producing as also for not producing. There isa subsidy for producing a commodity and another subsidy for not producing the samecommodity. There is also a subsidy for keeping the land fallow. Apart from this,governments spend liberally on research in agriculture; the development of underdevelopedareas; infra-structure, transport and communication to mention a few. The situation in India isquite the contrary. In rich countries 1 to 2% of the population depends on agriculture. InIndia, it is more than 70%. 98% of the population of developed countries can extend amplehelp to their 2% farmers. On the other hand, 30% of Indias population cannot extend much

help to 70% farmers; nor is there the political will to do so. Therefore, the Indian farmer faces the continuing prospect of being crushed under negative subsidy for decades to come.

Some suggest that the Government should get included in the WTO Agreement, new ways andmeans to support farmers. As of today, there isnt any condition in the WTO Agreement onAgriculture (AoA), which stops the Indian government from helping farmers. Therefore, talking ofresh provisions is pointless.


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EXPORTING AGRICULTURAL PRODUCE:

Coming to ground realities, what are the prospects and scope for the export of Indian agricultural

produce? Potential exporters will face difficulties both in the domestic and foreign markets. Thedemand for Indian farm products (excluding some exceptions like Basmati Rice, Darjeeling Tea etc.)is very low. The reason is that Indian products are of poor quality. India lacks a system of gradingand testing our produce. There is little awareness of regulations that are accepted the world over asnecessary for the protection of the health of a consumer. Due to the license-permit system, Indianexporters have earned a bad name as unreliable suppliers. Indian agricultural exports are limited toethnic markets catered through cousin-to-cousin channels.

The deficiencies in Indian agriculture pose severe problems in entering the world market. Land inIndia, due to various land-related Acts and chronic penury, is fragmented. Efforts to encourage theconsolidation of land and production of quality-produce in viable volumes have been ineffective.Besides, the infra-structure for storage, transport, processing, grading and rating quality-standards arealmost non-existent. Farmers fail to comprehend the sophistication of global markets, as their experience is limited to primitive APMC operations.

THE PLIGHT OF INDIAN FARMERS:

Up to 1996-97, the prices of most agricultural commodities in the global markets were higher thanthose in Indias domestic market and, therefore, there was a clear comparative advantage in exports.At least at the farm gate, the Indian farmer was capable of competing with any farmer in the world.By the time the produce reached the point of embarkation, poor infrastructure wiped out most of theadvantages. Even then, in some areas like organic farming products, medicinal and aromatic plants,multiplication of hybrid seeds etc., India had an advantage in global markets.This situation has rapidly changed in the last 2-3 years. Modern technology has helped improveagricultural productivity in many countries around the world. As a result, there is a glut in theagricultural commodity market and a recession in prices. Therefore, the Indian farmer is not able toexport several agricultural products, as our domestic prices are higher than those in global markets.The condition of the Indian farmer is like that of a debilitated convalescent trying to face a flood.

Exploited by the white colonial rulers and now by our own brown rulers, our land has beenfragmented and depleted of fertility resulting in low production, capital evasion, lack of newinvestment, poor infrastructure; the lack of storage and marketing facilities; inadequate irrigation andelectricity, the absence of roads and the insufferable burden of indebtedness. And then one finemorning, our farmers in such a condition, see a surging flood of globalization and revolution in

biotechnology.The basic objective of globalization is to improve the global Division of Labour with reference tocomparative advantage. Indian agriculture has the benefit of abundant sunlight, ample water and ahardy peasantry. Ultimately, these elements will be decisive in global competition. But while taking

the such big leap from traditional agriculture to world-class competitive agriculture, some measuresneed to be taken that will be immensely useful and essential. These are:


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Freeing Indian Agriculture from State Control Laws and by-laws, rules and regulations, red-tapeism, and inefficiency of governmental machineryhave strait-jacketed Indian agriculture. Ousting the State from agriculture and privatization of the

agriculture sector are the most important measures. At present, land is owned by the State. It isleased to farmers for cultivation. The State, at its whim, can acquire land on the pretext of public

purpose and dislodge farmers. Understandably, farmers are not willing to undertake sizeableinvestment on their land. The State controls all farm inputs like fertilizers, pesticides and farmequipment, etc. Disposal of the produce is also under comprehensive State control.

Unifying the Indian Market The entire world is getting unified as a market, but India itself is not a unified market. State

barriers like district bans, state bans, zoning and levy have fragmented the domestic market. On theother hand, different countries in Europe, with different languages, faiths and cultures, and despite ahistory of two world wars have come together and developed a unified common market (TheEuropean Economic Community or the EEC). In India, it has become imperative to scrap theEssential Commodities Act and other restrictive measures emanating from it and to create a unifiedmarket when we are on the threshold of globalization. A unified Indian market will increase thedemand for agricultural produce; besides, the market will facilitate cropping patterns consistent withagro-climatic realities and comparative advantage.

Modernization of Market Networks In India, agricultural commodities are sold mostly through Agricultural Produce Marketing Committees(APMCs). At one time, these Committees helped to improve agricultural marketing. But, today theydo not provide even minimal facilities required for marketing, like shelter, godowns, facilities for

processing, grading, sorting, quality evaluation, packaging, and information on various commoditymarkets, etc. Commission agents and adatiyas dominate these markets. If, instead of this system,another one like super -market networks so common in many developed countries take over, farmerswill feel comfortable entering global markets.

Information Network Information regarding price, the demand and supply positions of commodities in different markets all

over the world, weather reports and forecasts and agricultural extension advice must be easilyaccessible to farmers in the villages. Websites and portals providing such information and servicesare available. Development of information and communication networks enabling farmers to haveaccess to this information is necessary.

Warehousing ReceiptsThe present system for the purchase of cereals and other farm produce must be changed andreplaced by a system of storing farm produce in warehouses and extending to farmers credit to theextent of 70% of the value of material kept in godowns, needs to be introduced. This can easily be

done by recognizing warehouse receipts under the Negotiable Instruments Act.


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Corporatisation with Land Equity All these measures are beyond the ambit of the State. They are also beyond the capabilities of co-operative establishments. For this, the efficiency of the company structure (joint stock companies) and

the sense of participation and involvement of co-operatives will have to be brought together to forgenew forms of economic institutions. Farmers could come together and form companies with shareholdings proportionate to their land. Joint Stock Companies should take responsibility for finance,management, technology, and post-harvest work like warehousing, storage, processing, sales andexport. If this is achieved, Indian farmers will be able to handle the challenge of global competition.After thousands of years of enslavement and exploitation, with changes in the situation worldwide thechain that binds the hands and legs of the farmers - are breaking. Opportunists would like us to

believe that there is happiness in living as slaves and that freedom is painful. Farmers cannot bedeceived by such calumnies and allow themselves to be diverted from their determination to livewith self-respect and in freedom. Editors Note: This extract has been edited to make for easier reading without in any way changing the meaning or the thrust of this part of the Declaration.Kerala farmers driven to death by falling produce prices Thiruvanathapuram, April 11Incidences of farmers committing suicide following the fall in prices of agricultural commodities have

been reported in Kerala.A farmer in the northern district of Palakkad ended his life by consuming pesticides after he wasserved notice from a bank for revenue recovery. The body of 38-year old Ganeshan, a traditional

paddy cultivator, was found in his fields last week.Ganeshan, who owed Rs.2.75 lakhs to the Land Mortgage Bank by way of loan and interest, hadhidden the notice he received from his family members.Farmers organizations say that the plight of a large number of farmers in the state is similar.The steep fall in the prices of agricultural commodities like rubber, coffee, coconut and tea as aresult of globalisation have pushed farmers to penury.The Kerala farmers have suffered losses to the tune of Rs.6,650 crores in 2000-2001, according to arecent study conducted by the Kerala Agricultural Prices Board for a workshop on World TradeOrganisation.Board Chairman Dr. Thomas Varghese said that the per capita loss suffered by farmers in Keralawould amount to Rs.12,000 per annum.

IMPLICATIONS OF AOA ON INDIAN AGRICULTURE:

The repercussions of the WTO Agreement and the removal of Quantitative Restrictions on importsare quite alarming. The fall in the prices of agricultural goods and dumping of cheap agriculturecommodities from other countries is causing harm to the welfare of Indian farmers. Developedcountries have imposed heavy tariffs to minimize imports, whereas in India tariffs are low. Due tothis, various commodities are being dumped in India. The US is dumping five primary farmcommodities in global markets in clear violation of WTO Agriculture rules. It is exporting corn,


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soybean, wheat, rice and cotton at prices far below their production cost in an effort to wipe outglobal competition.

The continuation of high domestic support to agriculture in developed countries is a cause of concern

as they encourage overproduction in these countries leading to low levels of international prices oagricultural products. At the same time the rich industrialized countries continue to subsidize farmers

by giving them direct payments which are exempt from any reductions requirement and whichessentially are cash handouts contingent on making adjustments in production. These payments areneither affordable nor helpful in a developing country. The result is that the industrialized countriescontinue to dominate world trade in agriculture while preventing India and other developing countriesfrom achieving self-sufficiency in food production.

The AoAs requirement to reduce domestic support will prevent the Indian government from providing the necessary support to farmers to compensate for shortage or overabundance caused byclimatic fluctuations in market prices or any other factors. In fact subsidies are essential for Indianagriculture as 65 per cent of people are directly or indirectly dependent upon agriculture. It is nolonger the question of mere economics because the social and political implications of developmentsin agriculture cannot be ignored.

The domestic support provision also affects Indias food security. The Agreement exemptsgovernmental expenditures relating to public stockholding for food security purposes from reductionrequirement if the operation of such a programme is transparent and follows officially publishedobjective criteria. This automatically subjects these programmes to external scrutiny. A developingcountry may acquire and release foodstuffs at administered prices; however, the difference betweenthe international market price and the administered price will be included in the calculation of AMS.Therefore, the public stockholding system will be subject to reduction requirements if the AMSexceeds the de minimis level.

The export commitment requirements, in turn, prevent India from providing subsidies to industry thatare necessary for it to expand its share of world export markets. This limitation will also adverselyaffect the future of Indian agriculture.

The reduction in custom duties and non-tariff barriers as well as guaranteed minimum market sharefor imports will force Indian farmers to compete against large Transnational Corporations which haveexcessive financial power resulting from their oligopolistic control over world food markets. Indianfarmers cannot compete on equal terms against the enormous financial and technological clout of thetransnational giants of the rich countries, particularly when custom duties and other import barriersare reduced, and these companies are guaranteed a share of Indian market. Compliance with marketaccess requirements will devastate domestic food production and India will become dependent onforeign foodgrains.To conclude, it is feared that the Agreement is not favorable to India due to the following reasons:


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i. The country will be compelled to import at least 3% of the domestic demand for agricultural products.ii. The government will be forced to reduce subsidies to farmers.iii. The Public Distribution System and Public Procurement System will have to be abandoned.

AGRICULTURE AND NEW TRADE ISSUES :

Inclusion of new trade agenda issues in the next round is considered by some developingcountry negotiators as undesirable because it would distract attention from the market access issuesthat are deemed to be of greater importance to them. However, inclusion would have the advantagethat more OECD non-agricultural groups would take part in the round which could counter-balanceforces favouring agricultural (and other sectoral) protection. As well, better rules on some of those

new issues would reduce the risk of farm trade measures being replaced or made ineffective bydomestic agricultural measures and technical barriers to trade that may be almost as tradedistorting a risk that has grown considerably in the past year or so (Anderson 1998b; Roberts,Josling and Orden 1999).

The new trade agenda issues are highly relevant to agriculture. Indeed, some of them figured prominently in the Uruguay Round negotiations on agriculture. For example, progress was made indesigning rules for the application of sanitary and phytosanitary standards, and in disciplining theability of governments to grant agricultural production subsidies. However, disciplines are weak,country-specific, or nonexistent in many other areas. These include competition-related policy andregulation (the nexus of state-trading, export taxes and cartels, and intellectual property broadlydefined to include indications of origin, breeders rights and seed varieties), liberalization of ancillaryservices and input markets (distribution, marketing, use of new production technologies),and the extra-territorial application of production process standards.

The UR Agreement on Sanitary and Phytosanitary (SPS) standards requires that SPS measures beimposed only to the extent necessary to ensure adequate food safety and animal and plant health onthe basis of scientific information, and are the least trade-restrictive measures15 available to achieve the risk reduction desired. Although there is substantial wiggle room in thewording of disciplines, the dispute settlement evidence to date shows that exporting countries cansucceed in obtaining rulings against the most egregious cases of protectionist abuse of standards(Roberts 1998). As is generally the case, the SPS agreement was motivated by market accessconcerns.

The relevance of much of the new trade agenda is that it mostly concerns domestic policies.For example, in some countries entry and arbitrage barriers may be significant; or state-tradingentities (STEs) may have the exclusive right to import and/or to export so as to control domesticsupply and distribution of agricultural commodities (Ingco and Ng 1998). India is an extreme casewhere there are restrictions on mobility and trade in agricultural goods, with private traders being

prohibited to build up stocks in key staples or to engage in arbitrage activity across districts. In partsuch restrictions are enforced because of the existence of monopsony state buying agencies (e.g., incotton).14 The point is a general one: the positive payoff to developing country agriculture from

domestic regulatory reform can be substantial (Gisselquist and Srivastava (1997). Governmentstherefore need to determine how multilateral negotiations on the specifics of regulatory regimes could


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CHAPTER 5

WTO ISSUES IN INDIA:

India is one of the founding members of the World Trade Organisation (WTO) and participation inthe WTO rule based system implies greater stability, transparency and predictability in the governanceof international trade.

The importance of WTO in promoting multilateral trade is being increasingly acknowledged. TheWTO rules envisage nondiscrimination in the form of national treatment and most favoured nation(MFN) treatment to our exports in the markets of other WTO members.

National treatment ensures that our exports to other member countries would not be discriminatedvis-a-vis their domestic products. MFN treatment likewise ensures non-discrimination among variousmembers in their tariff regimes and also other rules and regulations.

Emerging from continued discussions in various multilateral for a , developmental issues along withtrade related issues are being increasingly focused at the international level. Poverty concerns odeveloping countries along with development and trade policies are also being given cognisance.

Need has been felt for integration of trade policies with development strategies, increasing support toareas of finance and debt relief, recognising the importance of technology for development,improvement in market access for developing countries in sectors like textiles, clothing andagriculture, and providing better access to the dispute settlement mechanisms for these countries.

The issue of abuse of the anti-dumping procedure*, the problems of rules of origin criteria, technical

barriers to trade, regional trading blocs, etc., are also being considered at various levels in the WTO.

The Government of India has taken several steps to implement the policy commitments made under some of the agreements, particularly

under the Agreement on Tariffs and Quantitative Restrictions Agreement on Agriculture (AoA), TradeRelated Intellectual Property Rights (TRIPs), Trade Related Investment Measures (TRIMs), GeneralAgreement on Trade in Services (GATS), apart from others. A strategy for tariff negotiations is,however, required.

The additional 'non-trade' issues relating to transparency in government procurement practices tradeand competition policy, trade and environment, and trade and labour standards proposed in theSingapore and the Geneva Ministerial need to be addressed for negotiations.

The commitments regarding the technical barriers to trade, social agenda covering labour standardsand environmental and phyto-sanitary issues also require establishment of certain national standardsand technical regulations in a standardised and transparent system.

At the same time, there are some issues on which India has expressed certain reservations. Theseare:

During the implementation of WTO agreements in the last six years, India has experienced certain


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imbalances and inequities in the WTO agreements. It is found that some developed countries have

not fulfilled their obligations in letter and spirit of the WTO agreements, and many of the Special

and Differential Treatment clauses, in favour of developing countries, added in various WTO

agreements have remained in operational.Taking advantage of the exception clauses provided in the WTO, most industrialised countries are

still enforcing various regulations on foreign producers and suppliers.

Extending the scope of the investment regime in WTO beyond Trade Related Investment Measures

and General Agreements on Trade in Services, is not appropriate.

A multilateral framework cannot guarantee an increase in FDI inflows although it threatens to

adversely affect the quality of the inflows.

There are also other asymmetries present, as the WTO does not address the responsibilities o

corporations which often impose trade restrictive clauses on their subsidiaries.

WTO has not been able to ensure abolition of non-trade barriers being imposed on labour and

environmental considerations, including the linkage in certain Generalised System of Preferences

(GSP) schemes to these issues.z

The present negotiations strategy is based on the decisions taken at the Doha Ministerial in November 2001. The Doha Declaration focused mainly on TRIPs agreement, public health, trade andenvironment and the implementation related issues and concerns. Elaborate timetables on work

programme for current negotiations in agriculture and services and other issues have been workedout.

The Doha Conference presented mixed results for India. India's main concern was to speed upimplementation of various agreements and to undo the imbalances and inequities present in someWTO agreements. From India's point of view, faster removal of the textile quotas maintained bydeveloped countries like the USA was the most important implementation issue, which was, however,met with limited success. As far as environmental issues are concerned, the Doha declaration hasmandated negotiations to clarify WTO rules in the light of multilateral environmental agreements.These negotiations could lead to developed countries raising barriers against goods from developingcountries on the pretext of environmental protection.

India had also reservations on starting negotiations on four new 'non-trade' areas, namely, multilateralinvestment, global rules on competition, transparency in government procurement and trade facilitation,i.e., framing of uniform custom's procedures for clearance of goods. India could secure only a two-year respite and the study process would continue for two more years, i.e. up to the Fifth MinisterialConference, when a decision about negotiations will be taken on the basis of an explicit consensus.

Apart from mandated negotiations in agriculture and services where the process has already started,negotiations on market access for non- agricultural products is quite important for India, as reduction


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or elimination of tariffs, tariff peaks and tariff escalation as well as removal of non-tariff barrierswill be quite helpful in exports. India would, of course, have to make offers even though thenegotiations will be carried out under less than full reciprocity as far as developing countries areconcerned.

The other area where action is required is in regard to extension of protection of geographicalindications to products other than wines and spirits under Article 23 of TRIPs and the relationship between TRIPs and the Convention on Biological Diversity (CBD), and Traditional Knowledge (TK)under Article 71.1. The process of legislation in regard to geographical indications needs to becompleted. In the area of TRIPs and access to medicine, where additional flexibility is provided inseparate ministerial declarations in terms of compulsory licensing and parallel imports, India can

benefit in terms of lower prices of crucial life saving drugs and even promoting exports o pharmaceutical products.

India and other developing countries should now ensure an average balance of reciprocity in thesenegotiations. There is need for a continued effort to handle some of the complex issues, as per

international requirements as well as our domestic resources and other constraints, during the TenthFive Year Plan.


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CHAPTER 6

CONCLUSION:

Infrastructure in relation to post-harvest technology, including rural communication, godowns,refrigerated storage, and transportation arrangements for perishable commodities is inadequate. TheWorld Trade Agreement stringent requirements of sanitary and phytosanitary measures are yet to beunderstood. There is an urgent need to improve yield per drop of water. During the last fewdecades, farmers in various countries have shifted from flow irrigation to sprinkler, drip, and nowmembrane irrigation. Plant-scale agronomy is replacing field-scale agronomy. Precision farmingtechniques need to be adopted. Contract farming and corporate farming, with increased investmentsneeds to grow. There is indeed an urgent need to quickly implement the Plant Variety Protection andFarmers Rights Act as well as Biodiversity Act without delay. Indian farmers need adequateinformation. Computerized systems of information need to be developed and the benefits o

cyberspace should be extended to poor farm families.Given the complexities and escape routes available to the western world in the implementation othe agreements, one could question the methodologies followed in the reduction commitment norms.Market-access commitments have been tampered with dirty tariffication. Moreover, already low ratesof tariffs have been reduced as compared to a reduction in high tariff rates.35 On the other hand,some of Indias low tariff bindings may be re-negotiated. Calculation of price support within the

product-specific AMS is not clearly defined in the text. Therefore, it would be a good idea to bringa consensus among the member countries on this issue. Developing countries that have net-taxedtheir agriculture, may ask for credit of some sorts for having negative AMS. Further, blue-box

policies may be suggested to be eliminated altogether or moved out of the exemptions for thecalculation of current AMS. Moreover, along with export subsidies, export credits and guarantees mayalso be suggested to be brought under reduction commitments. The SPS and TBT agreements doaffect agricultural markets. Modernizing our agricultural processing will not only enhance our export-market potential, it would also reform domestic food quality.

Understanding the direction and magnitude of the effects of WTO agreements on Indianagriculture is a very difficult proposition. Some attempts have been made in the past to quantify theeffects of the WTO Agreement and trade liberalization on Indian agriculture. While the direction othe gains to Indian agriculture may be correct, one may not agree with the assumptions of their models, and the magnitude and distribution of these gains. In the presence of imperfectly competitiveexport market structures, the increase in terms-of-trade for Indian agriculture may not be as high as

predicted by the computable general equilibrium studies that implicitly assume perfectly competitivemarkets. Whatever little improvement may occur in the terms-of-trade, it will have negative or at

best very little effect on farmers welfare, as supply response to terms-of-trade improvement isambiguous. On this ground, developing countries may ask for further and sharp reductions in theexport subsidies and domestic support given by the developed world. Indian agriculture will stand togain through improvements in irrigation, transport, agricultural extension services and research.Expenditures on such items are exempt from domestic support reduction commitments under thegreen-box policies.

In the emerging post-WTO world economic order, direct competition from imported goodscannot be prevented. With the eventual dismantling of the quantitative restrictions and reductions oindustrial tariffs, our choice of warding off foreign competition is nothing more than wishfulthinking. So, we must focus on how India can use the changed conditions to earn benefits. For this,first and foremost the economy has

35 Therefore, the Swiss Formula may be suggested to reduce higher tariffs by steeper cuts.


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to identify and develop a modern infrastructure to facilitate agricultural exports. The post-harvesttechnology and the storage facilities need to be upgraded. There is a need to commercialize the farmoperations by improving the management and marketing techniques. This can be achieved by

establishing mutually beneficial linkages with the industry. Thus, there is plenty of scope for India tochange from a mere producer to an exporter of value-added and processed farm products and highquality seeds.

Under the existing circumstances, the liberalization of world trade in agriculture will benefitdeveloped countries more than developing countries. Given the conditions of high tariffs in thedeveloped world and low or nil tariffs in developing countries, the removal of QuantitativeRestrictions on agricultural commodities will tilt the balance of global trade in favour of thedeveloped nations with detrimental effects on the producers in Third World countries. India must bealert to the implications of the WTO

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