They follow policies of giving massive budgetary supports to their farmers. Europe spends half of its budget — $50 billion — on agricultural support and the US Farm Bill approved last year entails a support operation of $300 billion for over a six-year period.

India is a special case among the developing countries where pro-industry policies have assumed an anti-agriculture bias since decades and its farmers suffer from negative subsidies or net taxation.

The US and the CAIRNS group have been the prime movers of globalisation in agricultural trade under the aegis of the WTO.

The Agreement on Agriculture (AoA) of the WTO sets specific targets and a timetable for scrapping of import barriers and export subsidies, lowering of tariffs and scaling down of domestic subsidies.

The richer foursome quad countries not only have had high levels of domestic support but also complex systems of reaching the farmers' financial assistance.

These governments finance out of the budget various common services and infrastructural facilities. In addition, they give subsidies based on the quantum of production or quantum of production foregone as also export subsidies.

The delegates of the richer countries at the Uruguay Round of negotiations cleverly introduced into the text of the AoA the main categories of subsidies as being minimally distortive of trade and, hence, permissible as `Green' or `Blue' box subsidies. It is mainly the subsidies given in the form of price support that became targets for reduction.

The post-Marrakesh (1995) experience shows that the richer countries have serious social and political reservations about respecting their commitments under the AoA. They have been trying to dodge the commitments and fiddling with various coloured boxes, transferring subsidies from the Amber box to the Green and Blue boxes.

At Doha (November 2001), the developing countries were keen on reviewing the performance on past commitments while the richer countries had plans for enlarging the agenda.

The Doha declaration succeeded in keeping the process of negotiations alive but it became quite clear that the WTO negotiations would be in trouble if the richer countries did not accept to scale down substantially their agricultural subsidies.

The quad countries used their extensive apparatus for economic research and to claim that each of them was a pious saint fulfilling its commitments to the WTO in both word and spirit while the others were flagrantly violating them.

The voluntary declarations made by different countries ceased to be taken at their face value and it looked as if the WTO would have to develop, apart from its dispute settlement mechanism, a system of inspection and independent verification of the situation of each country as regards its international commitments (see ``Trading Blind-folded'' in Business Line May 7).

The US Trade Act of 1974 had a provision requiring the President to determine, after conclusion of future agreement, whether any major industrial country had failed to make concessions substantially equivalent to the US concessions.

A similar legislation in 2004 would have been disastrous, not only for the WTO but also for all international agreements, particularly in the post-Iraq scenario.

The US Congress has already voted through over $190 billion of farm subsidies over the next decade and the US officials continued to maintain that despite this massive hike The US farm subsidies were just about half of those in Europe.

The EU joined the GATT negotiations, as a union, only in the fifth GATT Round (1960-62). The European Economic Community has followed policies on encouraging agricultural production over the last 45 years through massive subsidies related to levels of production. France, Spain, Portugal have largely been the beneficiaries while Germany has been carrying the fiscal burden.

It had serious difficulties taking unilateral initiatives in reducing subsidies as the farm community was addicted to them, the problems created by mountains of butter and lakes of wine notwithstanding.

It had additional difficulties because of the adoption of common currency and the prospective enlargement of the union by addition of 10 member countries to the existing 15.

The approach of the next ministerial meeting of the WTO at Cancun in September 2003 forced the ministers of the EU to take a bold step.

What they have agreed to do is to keep the total amount of farm subsidy in Europe constant at about $50 billion; but this amount will cover the enlarged union of 25 countries.

More important, they have agreed to delink farm subsidies from levels of production that have in the past resulted in overproduction and dumping in the developing countries.

This will be replaced by a single payment to farmers, conditional upon environmental considerations. There has been hue and cry in Europe itself. Milk producers in Ireland are protesting, environmentalists are unhappy.

It is feared that some of the member countries may find it necessary to continue the old system of production-linked subsidies, lest the farmers actually start abandoning land and farming.

The French — the major beneficiaries — have agreed to give the new experiment a trial and the German paymasters are willing to go along. That is quite an achievement.

Obviously, it would have been great had Europe done more to scale down subsidies. It is understandable it could not do more.

It needs to be appreciated that it has stolen march over both Japan and US in taking the first step towards the realisation of WTO dream; it has earned its passage to Cancun.

It is not meant to be a unilateral disarmament; it is a clear signal to other quad countries that they should come forward with concrete measures for lowering hurdles that hamper free international trade in agricultural commodities.

In all this darkness, the European decision is like the light at the end of the tunnel.

If one of the quads has got ready to reform its agricultural subsidies, it is only a matter of time before the others follow suit. Indian farmers, suffering from negative subsidies as they are, had put heir hope in this kind of a breakthrough, and it has finally come.

The decision of the European agricultural ministers proves again that freedom will have its way, no mater how arduous and painful the hurdles.

(The author is founder, Shetkari Sanghatana. He can be reached at sharad@mah.nic.in)

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