Financial Daily from THE HINDU group of publications
Wednesday, May 08, 2002
Agri-Biz & Commodities - Agricultural Policy
Columns - Down to Earth
Two nations, two agricultures
THE conference of the US House-Senate on Farm Bill 2002 is reviewing the agreement announced by the negotiators in a news conference on April 26. The Congress will, most likely, approve the Bill and send it to the President, Mr George W. Bush for his assent and signature. The President is expected to approve it without any modification. The Farm Bill, with its text extending over hundreds of pages, will come as a revelation to those dabbling with Agricultural Policy in India.
That the representatives of the House and the Senate convened a conference for negotiating the farm policy itself would surprise Indian politicians and economists. That the Farm Bill is drafted on the basis of an agreement reached with the farmers' unions would be unbelievable to the Krishi Bhavan satraps. The successive National Agriculture Policy drafts have been concocted in India in great secrecy with very little consultation with the State governments and no contact with the farmers' unions whatsoever.
Now that the negotiations on the US Farm Bill have come to a settlement, the draft Bill is expected to be cleared in less than three months. That really is unbelievable. In India, no formal action has been initiated on the National Agriculture Policy document piloted by Mr Nitish Kumar in 2001. The national policy document put together by Mr Balram Jakhar, some years back, was simply allowed to lapse.
The US is among the top farm subsidy providers after Japan and the European Union. The amounts of farm subsidies given in the US total $300 billion. The Farm Bill 2002 provides for a further $173.5 billion an increase of 70 per cent in the spending on agriculture.
Subsidy rates for some commodity crops will be hiked by 10 per cent in a single stroke this year;
$94 million are provided for a programme for apples alone, $500 million for sugar and a whooping $4 billion to subsidise peanuts;
Even the relatively better-off growers of rice, corn, cotton and soybean get a bonanza. Of course, there is limit on the amount of benefits a single farmer can receive. The Senate had proposed a ceiling of $275,000 per farm per year. That was raised during the negotiations to $360,000. Corporate farmers have been given enough flexibility to circumvent even that limit which is the equivalent of nearly Rs 18 lakh. This kind of support from the state is beyond the wildest dream of an Indian peasant who would be overjoyed if he had an assurance of a bare Rs 18,000 per farm per year. The governmental support comes in various forms and modalities that fill up not only the famous WTO boxes blue, green and red but much more.
The Agriculture Ministry in India is contemplating abolition of the system of statutory minimum prices. The US Farm Bill introduces the concept of Target Prices and stipulates making up of the gap between the prices actually received and the target prices. This will take care of slumps in commodity prices resulting from not only seasonal but also cyclical fluctuations.
Agriculture is seen not only as a supplier of food, fibre, fuel and raw material but also as an important pillar of society. The concept of `multi-functionality' introduced by the European Union has been picked up and funding of conservation and rural development has been substantially enhanced.
Liberal assistance has been provided for livestock and crop losses due to natural disasters in 2001.
The rates of marketing loans are proposed to be raised for the first time since 1981.
The dairy producers are offered an improved nationwide safety net to protect them against contingencies like the `mad cow' epidemic.
All meats, fruits, vegetable, peanuts, etc., must show the country of origin on the labels. Only those food items can be labelled as originating in US as are made from plants and animals born, raised and processed in the country.
An elaborate system of trade promotion and food stamps for nutrition will ensure the wide availability of the American produce in the US and the world over.
The US Farm Bill could, in fact, shake the doddering sailboat of the Ministerial negotiations of WTO that have crossed Doha and is trying to shore up at Mexico.
So far the US has been demanding that the EU and the Japan disclose in full the details of all support to agriculture. The idea was to get all members of the WTO to respect de minimis levels of 5 per cent for developed countries and 10 per cent for the developing countries. With this Farm Bill, the US, in one stroke, has given up all its moral authority to cajole other recalcitrant countries into falling in line with the stipulations of the Marrakesh Agreements. Mr Pascal Lamy of the European Union is already howling protest that the US now pays three times more per farm than the EU. Even the French, normally in the forefront in mollycoddling farmers, would find it difficult to envisage munificence to agriculture on this scale.
What lies behind this Farm Bill? The developing countries, most of which have neither the fiscal ability nor the political will to subsidise their farmers on any significant scale, were hoping that the US and the EU can, somehow, be pushed to scale down subsidies to agriculture so that the international commodity trade can have a more level-playing field.
Even the public opinion in the US is shocked at the extent to which the government is venturing out to subsidise farmers. The Wall Street Journal has called the Farm Bill "A ten-year $173.5-billion bucket of slop". The criticism in other quarters is even more strident. The President of the National Farmers' Union is barely satisfied and has expressed the hope that the Farm Bill will be only the first step in the right direction.
Has Mr Bush made up his mind to scuttle the WTO negotiations and revert to a new bi-polar world in which China and the US can lord over the world on the lines of `Super 301' and `Special 301'? Is Mr Bush overplaying his hand to pressure Japan and European Union?
It may come out that the whole exercise of the Bill is meant as a tactical ploy that would put other WTO members on the defensive. If the US had to argue its case from starting point of present level of subsidies, it may end up somewhere very close to de minimis levels of subsidies. That would give rise to political difficulties.
The US administration was to start negotiations at levels of subsidies proposed in the Bill, that is, 70 per cent higher than the present level in the hope that at the end of all harsh negotiations it may end not too far below the existing levels of subsidies and still keep the negotiations going. The US Farm Bill should alert the Government of India and its negotiators to the high polemical level of WTO negotiations.
The two largest democracies of the world are India and the US. India has two-thirds of its population eking out a bare existence in agriculture. Less than 3 per cent of the US' population provides food, fibre and fuel not only to the American people but also for all the needy of the world.
The US switched to the policy of farm support after the Great Depression of 1929 and became a world farm power in just one decade. The farmer in India suffered under the British Rule and has been subjected to negative subsidies since Independence. The contrast is stark. The US Farm Bill should be made compulsory reading for Indian administrators.
(The author is Founder, Shetkari Sanghatana. He can be contacted at firstname.lastname@example.org)
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