IMPLICATIONS OF WORLD TRADE ORGANISATION ON AGRICULTURE

1. 4/25/2012 Dr. P. K. Vasudeva 1 IMPLICATIONS OF WORLD TRADE ORGANISATION ON AGRICULTURE BY DR. P. K. VASUDEVA SENIOR PROFESSOR, ICFAI (UNIVERSITY) IBS, CHANDIGARH

2. 4/25/2012 Dr. P. K. Vasudeva 2 IMPLICATIONS OF WTO ON AGRICULTURE The Agreement on Agriculture of the WTO establishes a programme for the gradual reform of trade in agriculture. The programmes aims at establishing “a fair and equitable market-oriented agricultural trading system” by requiring countries to adopt new disciplines governing both: The use of border measures to control imports. The use of export subsidies and other subsidies that governments grant to support the prices of agriculture products and assure a reasonable income to farmers.

3. 4/25/2012 Dr. P. K. Vasudeva 3 BORDER MEASURES Tariffication Country to abolish non-tariff measures (such as quantitative restrictions, discretionary licensing and variable levies). The obligation to tariffy quantitative restrictions does not apply to restriction maintained by developing countries in balance of payment difficulties. These countries are however, required to bind their tariffs. As a result developed countries have established new higher rates of tariffs for products (mostly temperate zone) to which they previously approved non-tariff measures. The tariff equivalent of non-tariff measures was calculated on the basis of average market average world market prices for the product subject to non-tariff measures and its guaranteed price in the importing countries. As a result developed countries have established new higher rates of tariffs for products (mostly temperate zone) to which they previously approved non-tariff measures. The tariff equivalent of non-tariff measures was calculated on the basis of average market average world market prices for the product subject to non-tariff measures and its guaranteed price in the importing countries.

4. 4/25/2012 Dr. P. K. Vasudeva 4 PERCENTAGE OF REDUCTION IN TARIFFS The developed and transitional economy countries have undertaken to reduce tariffs by an average of 37% (in six years) and developing countries by 24% (in ten years). The least developed countries even though they have bound tariffs at higher sealing rates were not required to reduce them. Tariffs on a particular product must be reduced by at least 15% by developed countries and 10% by developing countries.

5. 4/25/2012 Dr. P. K. Vasudeva 5 CURRENT ACCESS COMMITMENTS In order to ensure that imports are not affected by application of higher rates resulting from tariffication, importing countries have given current access commitments by establishing tariff quotas on either a duty free or a preferential basis to cover imports that were entering market at lower duty rates.

6. 4/25/2012 Dr. P. K. Vasudeva 6 MINIMUM ACCESS COMMITMENTS For products for which little or no imports took place in the past because of the highly restrictive nature of the regime, countries were required to give minimum market access opportunities. The commitments provide for the establishment of tariff quotas equal to 3% of domestic consumption in the base period 1986-88 and rising to 5% by the end of 2000 for developed countries and 2004 for the developing countries.

7. 4/25/2012 Dr. P. K. Vasudeva 7 Lower rates (specified in the national schedules but not greater than 32% of the bound tarriffied rates) are applicable to the imports up to the quota limits, while the higher rates resulting from the tariffication will apply to imports over the quota limits. As a result of minimum access commitments, countries will have to import modest amount of their most restricted products.

8. 4/25/2012 Dr. P. K. Vasudeva 8 AGREMENT ON SCM The Agreement on SCM which deals with industrial products, divides subsidies into three categories according to traffic lights system: Red, Amber and Green. Red Subsidies Red Subsidies are prohibited; they include export subsidies. The rule against the use of export subsidies on industrial products, previously applicable to only developed countries, now covers developing countries. However, the later countries have a traditional period of eight years.

9. 4/25/2012 Dr. P. K. Vasudeva 9 Amber Subsidies Amber Subsidies mainly cover domestic support subsidies. These subsidies are permissible but actionable by importing countries. These are mainly covering domestic support subsidies. It requires that AMS should be reduced by developed countries by 20% over a period of 6 years from the average level reached in the base period 1986-88. Developing countries are required to reduce AMS by 13.33% over a period of 10 years.

10. 4/25/2012 Dr. P. K. Vasudeva 10 Green Subsidies Green Subsidies include subsidies that are both permissible but non-actionable and to which reduction commitments do not apply. These subsidies are exempt from reduction commitments, if the specific conditions prescribed by the Agreements are met: Government expenditure on agriculture research, pest control, inspection and grading of particular products, marketing and promotion subsidies.

11. 4/25/2012 Dr. P. K. Vasudeva 11 Financial participation by governments in income insurance and income safety-net programmes. Payment for natural disaster. Payment under environmental programmes. Structural adjustment assistance provided through producer’s operations Payments under regional assistance programmes.

12. 4/25/2012 Dr. P. K. Vasudeva 12 Blue Box Subsidies The blue box is an exemption from the general rule that all subsidies must be reduced or kept within ‘de minimis’ levels. It covers payments directly linked to acreage or animal numbers, but under schemes which also limit production by imposing production quotas or requiring farmers to set aside part of their land.

13. 4/25/2012 Dr. P. K. Vasudeva 13 Export Subsidies Developed countries are expected to reduce their export subsidy expenditure by 36% in six years, in equal installments form 1986-1990 levels. The volume of subsidized imports must also be cut by 21% over six years in equal installments in the same base period. For developing countries the percentage cuts are 24% and 14% respectively in equal annual installments over 10 years.

14. 4/25/2012 Dr. P. K. Vasudeva 14 The agreement also specifies that for products not subject to export subsidy reduction commitments, no such subsidies can be granted in future. The total outlay on export subsidies on agriculture products like wheat, coarse grains, meat, dairy products and sugar by the end of implementation period will be reduced from $22.5 billion to $ 14.5 billion of which European union will account for half.

15. 4/25/2012 Dr. P. K. Vasudeva 15 IMPACT OF WTO ON AGRICULTURE The implementation of the AoA was to bring structural change in the agricultural trade of the world, however, developed countries have not opened their markets as per the agreement. The average growth of developed country imports of agriculture products grew by about 1% only.

16. 4/25/2012 Dr. P. K. Vasudeva 16 Special Safeguard Measures The special safeguard (SSG) provision was introduced to allow countries (with no QRs for sound BoP situation) to impose additional duties in order to protect them from sudden import surges in terms of volume or low prices.

17. 4/25/2012 Dr. P. K. Vasudeva 17 SPECIAL / SENSITIVE PRODUCTS A certain number of products of the developing countries would be exempt from tariff reduction known as Special Products in order to protect and promote food production, livelihood security and rural development. The key issues here are associated with the mechanism to decide on country-wise crops. Developed countries based on political, social and cultural considerations have designated Sensitive Products which will be treated with less stringently.

18. 4/25/2012 Dr. P. K. Vasudeva 18 DOHA ROUND DEVELOPMENT AGENDA At the Doha Ministerial in November 2001 the 121 member countries had committed themselves on the following three pillars on agriculture besides TRIPS, GATS and S&D totalling negotiations on the 25 WTO agreements at the future Ministerial known as Doha Development Agenda:-

19. 4/25/2012 Dr. P. K. Vasudeva 19 DDA Three Pillars of Agriculture Achieving Market Access for all the countries Reduction of Domestic Support or trade distorting subsidies Phasing out of Export subsidies step by step.

20. 4/25/2012 Dr. P. K. Vasudeva 20 POSITION OF THE DEVELOPING COUNTRIES ON DOHA ROUND Safeguarding the interests of India’s low income and resource poor agricultural producers remain paramount for India. This cannot be traded off against any gains elsewhere in the Doha negotiations. The G-33 proposed at least 20% agricultural tariff lines as Special Products, at least half of which should be exempted from any tariff cut.

21. 4/25/2012 Dr. P. K. Vasudeva 21 Substantial and effective cuts in overall trade-distorting domestic support by US (70-75% cut) and by EU (75-80% cut), including resolving the issue of product-specific caps on AMS and in new Blue Box were emphasised by the G-20 countries. The collapse of the Mini-Ministerial WTO in Geneva on Doha Development Round after nine days of intense negotiations (July 21-29) confirms the solidarity of the developing countries.

22. 4/25/2012 Dr. P. K. Vasudeva 22 Collapse of Doha Round The negotiations broke down as the United States rejected the demand made by India and China that developing countries should be allowed to make use of special safeguard measures (SSM) in order to insulate their farmers from the sudden decline in the international prices or surge in import volumes of agricultural commodities.

23. 4/25/2012 Dr. P. K. Vasudeva 23 The US refused to agree to the proposals from India and China that they should be allowed to impose extra 25 per cent duties, if imports are up 15 per cent of farm products. The US wanted the trigger for extra duties should be given only after imports surge 40 per cent surge over the average of the preceding three years. By the time we have 40 per cent surge in imports our farmers would have committed suicide said the Commerce Minister.

24. 4/25/2012 Dr. P. K. Vasudeva 24 CONCLUSION The negotiations should continue as about 17 agreements out of twenty on TRIPS, GATS, NAMA, S & D had been accepted. The issue on Agriculture will also get settled with little more give and take by the developed and the developing countries for the sake of poor farmers and for saving the future of WTO getting collapsed once for all.

25. 4/25/2012 Dr. P. K. Vasudeva 25 THANK YOU

26. 4/25/2012 Dr. P. K. Vasudeva 26 WTO AND DAIRY INDUSTRY INTRODUCTION From iron deficiency to diabetes and cancer, the risks of drinking milk could outweigh its benefits, both for children and adults. However, an over dependence on milk in a child’s diet could lead to an iron deficiency. SOME FACTS India has emerged as the largest producer of milk in the world with annual production of 85 million tonne. Maintained a steady growth rate of 4 per cent though there is a decline 2 per cent in the global milk production Milk yield per animal is the lowest 2 litres compared to US 19 litres.

27. 4/25/2012 Dr. P. K. Vasudeva 27 Export of milk and milk products have been miniscule Our milk is laced with antibiotics, Indian milk has high counts of bacteria, pesticides and heavy metals. Milk quality is largely affected by diseases of the cow like foot-and-mouth disease, mastitis, hemorrhagic septicemia, anestrons, problems arising out of retention of placenta and milk fever. Mad cow disease is not there, because foreign cows are non-vegetarians and the Indian cows are vegetarians.

28. 4/25/2012 Dr. P. K. Vasudeva 28 US FARM ACT 2008 The Bill-officially titled the Farm Security and Rural Investment Act of 2002 and signed by the US President, Mr. George Bush, on May-13 provides for continuation of the existing Milk Price Support Programme (MPSP).

29. 4/25/2012 Dr. P. K. Vasudeva 29 Under THIS Act the US Department of Agriculture’s Commodity Credit Corporation (CCC) is committed to buy unlimited quantities of butter, cheese and non-fat dry milk (I.e. skimmed milk powder) from dairy plants at prices that enable them to pay a minimum support price for the milk supplied by farmers. The support price has, in turn, been fixed at $ 9.90 per hundred weight for milk containing 3.67 per cent fat, with CCC’s purchase prices for dairy products being set at levels “sufficient to enable plants of average efficiency to pay producers…. a price that is not less than the rate of price support for milk.”

30. 4/25/2012 Dr. P. K. Vasudeva 30 Considering that a hundred weight equals 100 pounds or 45.36 and one kg of cow milk is equivalent to 0.973 litres, this translates into an assured milk price of around Rs. 11 per litre at current exchange rates. Compare this to the Rs. 9.40-9.50 per litre rate that organised dairies are paying to farmers here for cow milk. Significantly, under the previous Clinton administration’s Federal Farm Act of 1996, the MPSP was to have been eliminated from January 1, 2000.

31. 4/25/2012 Dr. P. K. Vasudeva 31 The 1996 Act had been established an incrementally downward movement in the support price from $ 10.35 per hundred weight in 1996 to $ 9.90 hundredweight in 1999, after which the programme was to be discontinued altogether. This, however, did not take place and the programme was extended beyond January 1, 2000 at the support price of $ 9.90 per hundredweight.

32. 4/25/2012 Dr. P. K. Vasudeva 32 RECOMMENDATIONS Government to formulate mandatory quality standards for milk in line with the globally accepted norms Awareness should be generated from farm to processing levels for proper dairy management and strict adherence to quality standards. Standards for assessing the somatic cell count and (SCC) and total bacterial count (TBC) should be laid for ensuring public health and export quality standards.

33. 4/25/2012 Dr. P. K. Vasudeva 33 India should take up the case to Dispute Settlement Body (DSB) of the WTO against the US for repealing the US Farms Act 2002 to make our dairy industry more competitive in the International Market. Taxes and the Cess on the dairy industry by the State Governments should not be levied to make it more competitive