• kewal sethi

wto and subsidies

              wto and subsidies

india has refused to endorse the WTO proposals re so called trade facilitation agreement. understandably united states, european union and other developed countries are livid with anger over the refusal. it hinders their prospects of flooding the developing countries with their goods, especially agricultural products.

surprisingly the english press has joined them in denouncing india's position. writes devashish mitra in indian express, "it is difficult to understand how any sensible government be against TFA".  his complaint is that "the government of india guarantees farmers a minimum support price which is higher than the market price." the write up goes on to denounce indian capacity to stop the rotting of food grains procured at these higher prices. the leakage in PDS system is also mentioned. and finally it threatens that india will end up spending for defending litigation following this decision. he holds that this is a populist measure, not reformist which modi promised.

the indian side of story is not even mentioned and is dismissed as populist measure. it is as if the welfare of the farmers does not matter. it does not – to united states and allies. but does it not affect indian columnists. why do they blindly adopt whatever trash the foriegners throw up?

consider subsidies. the US government continues to subsidise its cotton farmers – $24 bn over the past 10 years – despite the world trade organisation ruling some of these subsidies illegal. and when the WTO backed brazil's case that the subsidies were damaging, the US government simply offered to pay subsidies to brazilian farmers too. america's payments to its farmers are designed to shield them from the volatility of cotton prices. But they also enable the US to export cheaply, depressing the price for other cotton producers in some of the poorest regions of the world and leaving them unable to compete with their richer american counterparts. and it is not only cotton, maize, wheat etc. are also subsidised.

the same subsidies are considered to be harmful if indian government pays the farmers. how does it matter if the farmers sell their product at 400 per quintal and get rs. 200 as cash subsidy from government or the government purchases the product at rs. 600. the net effect is same.

it is also to be noted that after brazil victory over cotton subsidy and US reluctance to stop them, brazil threatened to lift IPR over pharmaceuticals. this was good enough for US to consider reducing cotton subsidy in may 2010, but then US is still considering it after four years.

and it is not only maize, united states currently pays around $20 billion per year to farmers in direct subsidies as "farm income stabilization. corn consumes double the amount given for cotton. wheat and rice consume about $ 2.8 billion each and soyabean $ 1.5 billion. critics argue that wealthy countries, that can afford domestic subsidies, promote poverty in developing countries by artificially driving down world crop prices. it would be recalled that in 2006, talks at the Doha round of WTO trade negotiations stalled because the US refused to cut subsidies to a level where other countries' non-subsidized exports would have been competitive.

all this is not unknown to the indian capitalist press, still they carry on. it is also made out as if india is alone in rejecting TFA because of subsidies. bolivia, cuba, venezuela are also amongst those who are against TFA but it is not mentioned. the cotton subsidies are also affecting african countires. corn subsidies brazil and man other cane producing countries. but all this is not mentioned. in fact, it is wrongly mentioned that india is reneging on its pledge in bali re TFA. what happenned was that india had agreed to separate discussions on this issue. if any understanding was there that india would agree, the previous government did not take nation into confidence.

what is worrying is that all this criticism is done in the name of 'reforms'. the bjp government is chided that it swears by 'reform' but is not going by it. it is as if reform means 'hurt the indian producer as much as you can' so as to please the developed countries. what do capitalists get out of it? cotton prices may enable them to increase their profit margins in cloth but that is all. what they do not understand is that if you reduce the purchasing power of the farmers, you depress markets. eventually the cash subsidy will come out of pockets of their city bred cutomers which will, in its turn, result in weak markets there also. they are shortsighted eyeing the immediate profit they may get.

time that entire gamut is seen in its correct perspective. slogans will not do, neither 'populist', nor 'reformist'. only the 'pragmatic', which will serve the people of india, including the farmers, will do. 

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