The Hindu Business Line : Don't allow subsidy spat to derail farm trade reform

IT is unclear at this point of time how much should be read into the ongoing war of words between world's two important trade officials as to what constitutes farm support in developed countries. But, surely, what's clear is that, if not checked promptly, the unseemly debate between the European Union trade commissioner and the Director-General of World Trade Organisation (WTO) has the potential to derail the future progress in the very agricultural reforms countries world over are trying to work out.

The EU trade chief, Mr Pascal Lamy, has argued that the agricultural subsidy is really not as high as the OECD is making it out to be. He has contested the OECD's total support estimate of $318 billion for 2002 ($311 billion for 2001) on the ground that the number includes expenses other than governments' direct payment to farmers.

It is obvious, Mr Lamy's version of farm subsidy is limited to direct payments and does not include expenditure on several other (farm-related) heads such as `general services' and transfer from taxpayers to poor consumers.

However, according to Mr Stefan Tangermann, Director of OECD Food, Agriculture and Fisheries Directorate, the aim of his organisation is to measure the total amount of money transferred through agricultural policies.

These include not only direct payments but also related expenses that go to ensure higher prices for farmers. Many governments support farmers by propping up domestic prices, behind tariff barriers and through export subsidies, but also through public expenditure going directly to farmers, Mr Tangermann has pointed out adding that together, the producer support, general services support and tax payer transfer to poor consumers represent OECD's "total support estimate".

General services include expenditure on research and development, advisory systems and food inspection as also building farm-related infrastructure.

"Far from being misleading, it (the OECD subsidy figure) reflects the true overall value of money transferred through agricultural policies," Mr Tangermann has contended.

There is an obvious difference in perception between the two sides as to what constitutes farm support. There is an apprehension that this difference would merely divert attention from the real issue.

Keeping the support numbers aside for the time being, what is of crucial importance is whether or not such support (in any form for that matter) is distorting the world agricultural trade.

Commenting on the controversy, Mr Tangermann said, "the key dividing line to understand is not between government payments and price support, but between policies that particularly distort the markets and policies that interfere less with market forces, while also offering a better chance of achieving other important policy objectives in an effective way".

Admittedly, for most economies of world, the policy environment is becoming increasingly complex.

Countries have to strike a judicious balance between domestic compulsions and international obligations.

The trouble is, in doing this some are reluctant to change the status quo and are trying to find every conceivable argument that helps domestic compulsions override their international obligations. Polemics apart, it is necessary for the developing world to come together to fight the huge farm support extended by developed economies.

Such supports hurt resource-poor farmers in developing nations.

Ultimately, the question is not so much as the quantum of farm support and how much should be cut and how soon, but finding a quick and effective commitment to reduce all sorts of supports that cause distortion in global commodity trade. This should become an integral part of WTO negotiations.

More Stories on : Agricultural Policy | WTO

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