Written by Ajay Jakhar
November 20, 2014
We should implement subsidies that are inversely proportional to land operating sizes.
Indiaseemsrelieved,having convinced the United States to advocate on its behalf at the WTO regarding the issues arising from its food security programmes, while food-exporting nations are rejoicing at New Delhi signing on the dotted line without insisting on a reduction of farm support in developed countries. As we defend public procurement and stock holding, they will be looking at opportunities to export to India high-value produce like fruit, vegetables, milk, poultry and pulses.
Food prices have been rising for the past many years; more so since 2007. As a result, food-importing countries, usually developing nations, are not overly interested in subsidy reduction in developed countries, because this would increase the cost of their food imports.
Now that the trade facilitation agreement is inevitable, the government must insist on the removal of the many unresolved anomalies and ambiguities in the international trade architecture before a final agreement is inked. Farm support that increases production and skews the market price is considered trade distorting. At the WTO, the market price prevailing in 1986-88 is the “reference price” used for calculating subsidies. Had this reference price been updated — say it was the average price of the preceding three years — we would not be in any danger of breaching the WTO subsidy limit of 10 per cent. Logically, it shouldn’t bother anyone if our support price is less than the prevailing international price. Yet, other rice-exporting nations complain about our rice subsidies.
We could also evoke the WTO Agreement on Agriculture, where “due consideration is given to the influence of excessive rates of inflation on the ability of any member to abide by its domestic support commitments”. Inflation over the past 25 years (about 600 per cent) warrants our not being able to abide by domestic support commitments.