Critically examine the challenges faced by India in balancing its domestic agricultural policies with its obligations under WTO agreements.

Why?

The Cairns Group – comprising Australia, Brazil and Canada among others members — have claimed that India’s public stockholding (PSH) programme is highly subsidised and the farm support that India gives is “distorting” global food prices and “hurting” food security of other countries.

Approach:

• Introduce your answer by outlining the WTO’s Agreement on Agriculture and India’s alignment challenges due to its significant agrarian base.
• In the main body first address India’s struggle with subsidy caps, public stockholding norms for food security, market access and protection, phasing out export subsidies, etc. Next discuss India’s efforts like advocacy for the Doha Development Agenda, recalibration of subsidy limits, push for a Special Safeguard Mechanism (SSM), etc.
• Conclude by emphasizing the need for a balanced approach that protects India’s agricultural interests while meeting WTO commitments.

Answer:

The Agreement on Agriculture (AoA) under WTO deals with agriculture. It aims to reform trade in the sector by reducing subsidies, lowering trade barriers, and making policies more market-oriented.

India’s agricultural policies, particularly those related to subsidies, have been under scrutiny at the WTO due to concerns about market distortion. India, with a significant portion of its population dependent on agriculture for livelihood, faces unique challenges in aligning its domestic agricultural policies with the commitments under these agreements.

Challenges in Balancing Domestic Agricultural Policies and WTO Obligations:

• Subsidy Caps Under AoA: The AoA limits the amount of trade-distorting domestic support (Amber Box) that countries can provide. This limits the extent to which direct support can be provided to small and marginal farmers who need substantial support to be competitive.
  • India’s MSP (Minimum Support Price) and subsidies on fertilizers, water, electricity, etc. come under scrutiny for potentially exceeding the de minimis levels.
• Public Stockholding for Food Security: WTO norms restrict the volume and value of food stocks that governments can hold, which is critical for India’s food security programs.
  • India’s National Food Security Act has been a point of contention in WTO discussions.
• Market Access vs. Domestic Protection: Tariffication of non-tariff barriers has made some agricultural sectors vulnerable to imports, affecting local farmers’ incomes.
  • One of the reasons for India backing out of RCEP is to prevent import surges from countries like Australia, and New Zealand.
• Managing Export Subsidy Constraints: India aims to double its agricultural exports to USD 100 Billion by 2030. The phased elimination of export subsidies impacts India’s competitiveness in global agricultural markets.
  • In 2018, the US challenged various Indian export subsidy programmes as trade distorting, forcing India to revamp its export promotion strategy.
• Aligning Domestic Support with Green Box Subsidies: while ensuring the agricultural sector’s competitiveness and addressing developmental needs requires high investment in agricultural research and infrastructure.
• Non-Tariff Measures (NTMs): Overcoming trade barriers erected on sanitary and phytosanitary (SPS) grounds and intellectual property rights that have the potential to limit market access can be resource-intensive.
  • Export bans on Indian mango exports due to non-compliance with SPS measures.
  • India has actively fought against patents on traditional knowledge like turmeric and neem.

India’s Efforts to Address the Challenges:

• Doha Development Agenda (DDA): India has been pushing for the conclusion of negotiations that recognize the needs of developing countries in agriculture.
  • Strengthening Special and Differential Treatment (S&DT) provisions to ensure flexibility in support and address food security concerns.
• Addressing Asymmetries in the Agreement on Agriculture (AoA): the current criteria for domestic subsidies disproportionately benefit developed countries. India suggests recalibrating the subsidy limits to consider the subsidies on a per-farmer basis.
  • India’s subsidy to farmers comes in at $300 per farmer, compared to $40,000 per farmer in the US.
• Ensuring a Level Playing Field: India seeks stricter disciplines on all forms of export support, including export credits, government trading enterprises, and food aid, to prevent circumvention.
• Proposed Introduction of Special Safeguard Mechanism (SSM): that would allow developing countries to temporarily raise tariffs in response to sudden import surges or price drops, protecting local farmers from volatility and unfair competition.
• Strengthening the Dispute Settlement Mechanism: to ensure it remains effective and responsive to the concerns of all member states.

India’s efforts to negotiate for fairer trade rules and a permanent solution for food security illustrate its proactive stance in safeguarding its agricultural interests while adhering to global trade norms.

‘+1’ Value Addition:

• India had informed the WTO that the total value of its rice production in 2019-20 stood at $46.07 billion and that it gave subsidies worth $6.31 billion, or 13.7%, which is above the 10% limit.
• The “Peace Clause” agreed upon during the Bali ministerial in 2013 offers temporary protection from legal disputes over subsidies that exceed the WTO limits. However, India seeks a more permanent solution to ensure legal certainty for its subsidy programs.