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Ranabir Ray Choudhury

DURING the past week, the most important development that has occurred at the ongoing agriculture negotiations under the auspices of the WTO is the joining hands of member-countries such as India and China with the Cairns Group, essentially an assemblage of leading farm products exporters. This group — which accounts for 60 per cent of the world's rice production, 35 per cent of wheat production and 57 per cent of sugarcane output — comprises economies such as Australia, New Zealand, South Africa, Brazil and Argentina.

The entente is a big splash on the horizon of the tough, ongoing negotiations mainly because it signals the coming together of a powerful group of countries as a counter to the collective economic might of Brussels and Washington. However, the real value of the alliance does not lie in its immediate impact on the negotiations, which may be substantial, but on its durability because the basic interests of the Cairns Group are not identical with those of economies such as India, especially on the farm sector. In fact, this embedded division is clearly reflected in the nature of the agreement which the 13 member-countries cobbled together last week. The thrust of the proposals — presented to the WTO General Council on August 20 — is on elimination of trade-distorting subsidies, both at the domestic level and for exports, with the principal objective of prising open the market for agricultural products of the developed economies. As for the proposed tariff reductions, the Commerce Minister, Mr Arun Jaitley, has said that for developing countries they "would be based on the Uruguay Round formula along with a provision for special product and special safeguard mechanism". For developed economies, a "hybrid formula" of tariff cuts has been suggested which would include a combination of the so-called "Swiss formula" and the Uruguay Round formula along with zero tariff in several cases.

The convergence of the stand of the Cairns Group and the developing economies on, say, the "domestic support" aspect of agricultural subsidies extended by the developed economies is adequately revealed by the official stand of the Cairns Group on the subject. Thus, the negotiation proposal of the Group says: "Continued high levels of domestic support since the end of the Uruguay Round reflect the failure of the Agreement on Agriculture to alter attitudes at the heart of agricultural trade policy making. The Agreement does not adequately address the food security and development concerns of developing countries. Real cuts to distorting support along with improved disciplines on domestic support will be fundamental to agricultural trade liberalisation and a successful Doha Round outcome".

The proposal adds: "While the Green Box provides the scope necessary for Members to pursue legitimate non-trade concerns, since the conclusion of the Uruguay Round the Green Box has been abused. Provisions must be tightened to ensure that measures which do not meet the fundamental criteria that Green Box payments are non-, or at most minimally, trade or production-distorting are treated as distorting support".

On the Green Box issue, a WTO secretariat backgrounder says that to qualify for the Green (that is, permitted) Box, subsidies must not distort trade, or at most cause minimal distortion. Further, they have to be government-funded and should not involve price support (Annex 2 of the Agreement on Agriculture). The point is made that, in the current negotiations, some members argue that some of the subsidies listed in Annex 2 may not meet the criteria of the Annex's first paragraph. In fact, trade distortion caused by the subsidies may be more than minimal because of the large amounts paid or because of the nature of the subsidies themselves.

Providing music to developing economies, the Cairns Group negotiating stand continues: "Substantial reductions in distorting support will lead to more open and efficient markets to the benefit of all Members, specially developing countries. In addition, special and differential treatment measures are proposed. This will enable developing and least developed countries to address their legitimate and varied needs, including agricultural and rural development, food security, and subsistence and small-scale farming for the development of domestic food production. An important complement of special and differential treatment is achieving the elimination of all trade and production-distorting domestic support. The Cairns Group will actively engage with developing countries on concrete proposals on special and differential treatment".

This is all very good, but for New Delhi the real problem is that the Cairns Group will do all to sell its farm products in the huge markets of India and China. For India the protection of its farming community is crucial not merely because of the long-term "livelihood security" aspect concerning millions of people but also because of the short-term imperative (in view of the coming elections) of not being seen to take any step on the WTO front which would go "against the interests" of the farmers. This is why New Delhi has been against sharp cuts in import tariff on agricultural products, a stand which cannot be music to the Cairns Group.

The other danger facing New Delhi is that, with the formulation of a joint US-EU stand, every effort will now be made by the developed members to ram through the modalities of farm negotiations. As it is, Australia, New Zealand and Canada are reported to have been persuaded by the EU's Pascal Lamy and the US's Robert Zoellick not to support the August 20 agreement, a move which may be built upon now with the pressure being piled on smaller developing economies which need largesse from the West. The battle has been joined on the farm front and New Delhi must not make a faux pas or be hustled into concessions which cannot be of any help to its interest.

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