Let’s up the ante on agriculture

The Economic Times, July 05, 2008

By Pradeep S Mehta

Marie Antoinette, the 18th century queen of France, famously asked the famished French citizens to eat cake if they cannot find any bread. The reaction of developed country members of the WTO and their businesses to legitimate and agreed, ‘less than full reciprocity’ (LTFR) condition in negotiating a balanced deal on non-agricultural market access (NAMA) appears no different.

The automobile lobby in India is already howling, because this could mean allowing import of auto components from other countries which are able to produce at a lower cost than our manufacturers. This is not to say that Indian manufacturers are not competitive, but inherently the cost of all inputs from energy to raw materials to finance is higher and they don’t have to deal with myriad bureaucratic hassles, all the time.

Worse is the possibility of allowing import of second hand cars, which is currently not allowed. The auto industry argues that import of second-hand cars is akin to import of toxic goods and hence cannot be considered at all. We already have a sufficient capacity in the country and are also exporting automobiles.

What happened at Geneva in the last week of June? The rich countries have upped the ante in the NAMA negotiations by insisting on working details on how a draft clause, hidden in an obscure para of the NAMA text of May 2008, should be adhered to by developing countries.

This is the so-called anti-concentration clause, aiming to severely restrict the flexibilities for developing countries in deciding which sensitive industrial products can be designated for reduced tariff cuts. The developing countries insist that there must be a trigger for determining which tariff lines in harmonised system (HS) classification will be eligible for the treatment of sensitive products.

In the recent negotiations, through their typical divide-and-rule ploys, they have weaned away Brazil and Mexico from the developing country camp, which was opposing this clause. Developing countries are back to being on the defensive.

Do we need to be defensive? If we have not learnt any lessons from the past GATT negotiations, we will. Instead, if we can act like the mature negotiators we ought to have become after the emergence of various groups like G-20 and G-33 in agriculture, NAMA-11 and most important, the new quad (US, EC, Brazil, India), we need not be defensive at all. In fact, there is a lot of room for offense here.

First, the agreed LTFR content was that the flexibility has to be real and meaningful. They can explain how that agreement will be thwarted by insisting upon triggers at 4- and 6- and national digit HS levels. There is enough scope of doing simulations, says the auto component sector in India, to bring home the point.

Second, they can use the ricochet action: ask the rich whether similar triggers should be put in the sensitive products in agriculture negotiations; they are likely to cringe at the possibility. If India has to accede to the anti-concentration clause in industrial tariffs on auto components, why should not, for instance, the EC abide by it in agriculture tariffs and subsidies in poultry or the US in dairy products or Norway in meat?

Third, agriculture continues to be the Achilles heel of the developing countries. The new US farm Bill and the new EC CAP are taken as such sacrosanct national compulsions that any argument about real cuts in subsidies is not even discussed seriously.

Why should this anomaly be tolerated? Let us bring up their own domestic compulsions: poverty reduction, rural development and small farm protection, small and medium sector enterprise development, industrial protection programmes, etc. There will be scores of such programmes, some of them even funded by donors from the developed country governments and charities. Let all these programmes be considered equally sacrosanct and built into the texts as non-negotiable.

Finally, the boxes in the agriculture agreement are strange, but now we understand the WTO jargon better. Taking a convoluted traffic light approach, three boxes determine how domestic support to agriculture will be allowed, regulated or prohibited.

The green box is for permissible subsidies, the blue box is for such allowed subsidies that are tied to programmes that limit production, and amber box is for every other subsidy that gets subjected to reduction commitments. Whatever does not get slotted in any of the boxes, but is a prohibited subsidy under the WTO subsidies agreement, is kaput.

The boxes fooled developing countries in the Uruguay Round; we should not be fooled again. The Agriculture Agreement limits what gets slotted in blue box and the green box. The green box is a broad concept that even the amendments proposed in the May 2008 text do not pin them down sufficiently.

The amber box is not defined anywhere; the Agriculture Agreement transfers all unlabelled domestic support (blue or green box) into it. It is time, that we insist upon a positive list for both these boxes so that items are not merrily added after the deal is done. The fact that Brazil had to fight a costly dispute to get market access in cotton, and even after winning the dispute has to search for items on which it can retaliate without affecting its own economy, should squarely prove the point.

For both the positive lists of green and amber boxes, any new entry should need re-negotiations. After all, this is what the NAMA (industrial market access) commitments entail. Any binding which a member wishes to increase has to be renegotiated with the rest of the members, which is the done thing under the WTO agreement.

The point is not what to choose, or whether to choose any of the above options. The point is that we should now show the maturity we have acquired by working together in various groupings and stand up to the rich by proposing tools as beneficial to us as they use. This is the end game, some say. Let this be the start of the real game, the game where equals meet with equally profound arguments backed by equally hard evidence of the need for the success of the argument.

The author is Secretary General, CUTS International, a leading research, advocacy and networking group and can be reached at psm@cuts.org

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