Economy

Rich nations have cornered 90% of farm subsidy entitlements: India-China study

Amiti Sen New Delhi | Updated on January 11, 2018 Published on July 23, 2017

farm-subsidies

Entitlements of developed countries need to be eliminated before other reforms, study suggests

Seeking to expose the double-standards of developed countries at the World Trade Organization (WTO), a joint paper by India and China has revealed that rich nations, including the US, the EU and Canada, have been consistently giving trade-distorting subsidies to their farmers at levels much higher than the ceiling applied on developing countries. Together, the developed world has cornered 90 per cent of total entitlements, amounting to a whopping $160 billion annually.

Distorting trade

Calling for the elimination of such subsidies, the joint paper, a copy of which is with BusinessLine, draws a list of the most heavily and frequently subsidised items for the US, the EU and Canada over the past two decades. The numbers reveal that subsidies for many items given by the developed world are over 50 per cent of the production value, while developing countries are forced to contain it within 10 per cent or face penalties.

“Developed members have more than 90 per cent of global Aggregate Measurement of Support (trade-distorting subsidies) entitlements amounting to nearly $160 billion…..which is beyond their de minimis. In contrast most developing members have access only to de minimis resulting in a major asymmetry in the rules on agricultural trade,” the paper, which was recently submitted to the WTO’s Committee on Agriculture, points out.

De minimis support indicates the maximum level of trade distorting subsidies that can be given by a country to its agricultural sector. (Aggregate Measurement of Support or AMS — measures to support prices and subsidies directly linked to production.)

While the de minimis level for developed countries is 5 per cent of the total value of agricultural production, for developing countries it is 10 per cent.

“On the face of it, the system seems fair to developing countries allowing them a higher de minimis level. But as the India-China paper reveals, the reality is different. Developed members are providing subsidies, which, at times, exceed 200 per cent of the production value, despite the 5 per cent de minimis prescribed,” a government official pointed out.

Rule helps rich nations

The WTO rules make it possible for rich countries to get away with such high subsidies as their historical bound AMS levels are high.

“Most developing countries’ AMS are bound only by the de minimis of 10 per cent, while many developed nations have their individual AMS levels bound at a much higher level. The discrepancies had crept in when the Agreement on Agriculture was being negotiated more than two decades ago, when developing countries were too naïve and inexperienced to notice it,” the official said.

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Published on July 23, 2017
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