INDIAN FARMERS AND WTO AGREEMENT: ECONOMY

INDIAN FARMERS AND WTO AGREEMENT: ECONOMY

NEWS: Why protesting farmers in Punjab want India to withdraw from WTO

WHAT’S IN THE NEWS?

Farmers at the Punjab and Haryana borders are protesting against India’s membership in the World Trade Organization (WTO), particularly its Agreement on Agriculture (AoA), claiming that the provisions under AoA harm Indian agriculture. These provisions include limiting agricultural subsidies, the dumping of subsidized foreign goods, and the potential threats to India’s Minimum Support Price (MSP) system. Farmers demand India’s withdrawal from WTO agreements to protect their livelihoods.

1. Understanding the WTO

  • Formation: The World Trade Organization (WTO) was created to establish global trade regulations and replace the General Agreement on Tariffs and Trade (GATT) post-World War II. The WTO was officially founded in 1994 under the Marrakesh Agreement.
  • India’s Membership: India joined the WTO on January 1, 1995, marking its participation in global trade liberalization.
  • WTO’s Role:
  • The WTO oversees international trade by implementing trade agreements between nations.
  • It provides a platform for resolving trade disputes through a well-defined Dispute Settlement Mechanism (DSM).
  • It supports the integration of developing countries into the global trade network, providing them with preferential treatment.

2. The Agreement on Agriculture (AoA)

  • Objective: The AoA aims to reform agricultural trade, making it more market-driven and reducing the trade-distorting policies. Its focus is on enhancing stability and predictability for global agricultural markets.
  • Scope of AoA: It applies to both basic agricultural products (such as grains, vegetables, and fruits) and processed agricultural goods (like canned foods, wine, and spirits).
  • Market Access: This pillar of AoA seeks to reduce trade barriers like tariffs, promoting the free flow of goods across borders.
  • Domestic Support: Countries provide subsidies to their farmers. The AoA categorizes subsidies into:
      • Amber Box: Subsidies that distort trade, subject to reductions.
      • Blue Box: Subsidies tied to production limits, less distorting than Amber Box.
      • Green Box: Non-distorting subsidies (e.g., rural development funds) that are allowed without limits.
  • Export Competition: The AoA regulates export subsidies, which can distort global agricultural markets by encouraging countries to export goods at lower prices than what it costs to produce them.

3. WTO Subsidy Categories and India’s Limitations

  • Amber Box: These subsidies distort trade and are subject to strict limits under the WTO framework. India, under the AoA, is permitted to provide subsidies up to 10% of its agricultural output value, which is often insufficient to cope with the rising input costs (seeds, fertilizers, irrigation).
  • De Minimis Clause: Allows developing countries to provide subsidies up to 10% of the value of agricultural output, which still limits India’s ability to support farmers effectively.
  • Green Box: Permits non-distorting subsidies, but India is often unable to use them effectively for boosting agricultural competitiveness.

4. Farmers’ Concerns with WTO and AoA

  • Subsidy Cuts and Input Costs: The restriction of subsidies has become a critical concern. With the rising costs of inputs like fertilizers and seeds, farmers feel unable to get adequate financial support, exacerbating their economic distress.
  • Market Access and Dumping: Developed nations, which provide substantial subsidies to their farmers, often flood the Indian market with cheap subsidized agricultural goods, driving down prices for locally produced crops. This practice, known as dumping, harms Indian farmers, who struggle to compete with artificially low-priced imports.
  • Food Security Risks: Indian farmers argue that WTO rules restrict government subsidies that are essential for ensuring food security. Without these subsidies, India could face a situation of greater reliance on food imports, undermining self-sufficiency.
  • Minimum Support Price (MSP): WTO rules treat subsidies linked to MSP as trade-distorting, meaning that the Indian government may face pressure to reduce its MSP-linked subsidies. The MSP system is a key safety net for farmers, ensuring they receive guaranteed prices for their produce.

5. Other Challenges India Faces with WTO

  • Dispute Settlement Mechanism (DSM): India, like many developing nations, has faced several trade disputes at the WTO. These disputes often involve challenges to India’s domestic agricultural policies and subsidies.
  • Protectionist Measures: While the WTO promotes free trade, developed countries often resort to unilateral protectionism, adopting trade barriers (tariffs, quotas) under the guise of safeguards, which contradicts the WTO’s free trade principles.
  • Fisheries Subsidies: India’s domestic fisheries subsidies, aimed at achieving self-reliance in food security, are under scrutiny at the WTO, adding pressure to reduce them as part of global trade rules.
  • WTO’s Definition of ‘Developing Country’: India’s classification as a developing country creates tensions within the WTO framework, as it is still subjected to restrictions despite its growing economic status. This classification adds extra pressure, especially when addressing agricultural issues.

6. India’s Approach to WTO Reform

  • Multilateralism: India has advocated for a more inclusive WTO that accommodates the voices of smaller nations, ensuring that they are not overshadowed by dominant trading blocs like the European Union or the United States.
  • Addressing New Trade Challenges: India emphasizes the need to evolve WTO rules to accommodate new trade issues like digital trade, data governance, and sustainability.
  • Dispute Settlement Reform: India calls for the restoration of a functional Appellate Body, which is currently inactive, to ensure fair and predictable trade resolutions.
  • Agricultural Reform Demands: India seeks the introduction of special safeguard mechanisms, which would allow it to protect its agricultural sector from import surges that harm local farmers. It also demands better protection for its public stockholding programs aimed at ensuring food security.

7. Conclusion

India’s stance on WTO negotiations has been shaped by the complex balance of embracing global trade opportunities while safeguarding the interests of its farmers. The Agreement on Agriculture (AoA) presents challenges that affect agricultural subsidies, food security, and market competitiveness. As India continues to assert its position in global trade, addressing farmers’ concerns, supporting sustainable agriculture, and pursuing reforms within the WTO will be crucial for balancing its developmental goals with its participation in international trade systems.

Source:  https://indianexpress.com/article/explained/explained-farmers-protest-punjab-wto-9782208/#:~:text=They%20argue%20that%20the%20WTO,their%20livelihoods%2C%20particularly%20in%20Punjab.