The Hindu Business Line : `OECD farm subsidies taking toll on Third World farmers'

`UNFINISHED agenda' of the World Trade Organisation (WTO) is what the developing countries including India would have to focus on in the ongoing negotiations. These include reduction of all forms of export subsidies, harmonisation formula to bring down import tariffs to around 25 per cent, trade related intellectual property rights and market access for non-agricultural products.

At the seminar "WTO - Its role in trade liberalisation and emerging issues" organised by the Allana Institute of Management Sciences, Mr Sridhar, Executive Director, Export Import Bank of India (EXIM Bank) said that agriculture continues to face the worst barriers since the establishment of the general agreement on tariffs and trade (GATT).

The Doha mandate had called for major reforms in what are called the three pillars of global agriculture - export competition, trade-distorting domestic subsidies and market access.

Currently, according to the Organisation for Economic Cooperation and Development (OECD), the developed countries pay out nearly $1 billion (around Rs 4,525 crore) a day to their farmers in agricultural subsidies, which is almost "four times development assistance going to poor nations".

Total subsidy of OECD countries for domestic sugar producers roughly equals the total value of sugar exports from developing countries. "If these subsidies were removed, international prices of sugar would rise by about 40 per cent, increase world exports by 20 per cent and generate around $4.7 billion (around Rs 21,267 crore) for the poor in developing countries," he noted.

Another contentious issue is cotton, the US subsidy to its cotton farmers total $3.7 billion (around Rs 16,742 crore) per annum, three times as large as the US developmental aid to Africa and approximately 20 per cent of the world production.

"If the US and European Union were to abolish subsidies, world cotton prices would rise by 20 per cent. In the case of wheat, removal of subsidy by the US, EU and Japan is estimated to result in an increase in world prices of wheat by 10 per cent. The corresponding figure for rice is 16 per cent.

"It is worthwhile to note that top nine per cent of the US farmers receive 41 per cent of the total subsidies, the corresponding figures for EU and Japan are 15 per cent and 50 per cent respectively," he pointed out.

Mr Sridhar noted that the Ministerial Conference at Cancun was a setback to the ongoing negotiations and that the pace of negotiations in services was likely to slow down. He said the US and some members of the Cairns Group had also proposed `the harmonisation formula' to bring down import tariffs to around 25 per cent.

A draft had been prepared in February 2003 to give the developing countries some flexibility to safeguard their agricultural sector. The developing countries viewpoint is that they can consider reciprocating in market access only if they get adequate concessions and commitments by developed countries in the three areas of domestic support, export subsidies and market access.

He added that trade reforms need to be redirected on a different dimension - reduction in farm subsidies by OECD countries, liberalisation of services, enhanced market access to developed country markets and the need for all countries to adopt a domestic policy to enable expansion of global trade.

Mr Rafeeque Ahmed, President, Federation of Indian Exporters Organisation wondered whether "the trade liberalisation pursued by India as part of WTO commitments or autonomously has been effective and has produced results?"

He noted that India is one of the ten fastest growing economies in the world during the last decade. However India, which had a share of about 2.5 per cent of the world trade in the early 1950s had come down to0.5 per cent in 1990. It touched 0.86 per cent in 2003 and has set itself a target of touching one per cent of the world trade by 2007, which given the current trends appears achievable, he added.