The Hindu Business Line : `Farm export subsidies must be on per unit basis in WTO'

THE Federation of Indian Chambers of Commerce and Industry (FICCI) has emphasised the need for limiting export subsidies on agriculture products on a per unit basis in WTO, besides commitment in value and volume terms.

Under the existing rules, the World Trade Organisation's member countries are required to carry out reductions in their aggregate value of export subsidies and also in terms of volume exported. But there is no limit or ceiling on export subsidies provided on a per unit basis.

In such a scenario, it is quite possible that a country may provide export subsidy in accordance with its committed volume in Agreement on Agriculture (AoA) of WTO. However, in the process, it may subsidise fewer exports at higher subsidy rates on per unit basis, which may be targeted for a particular export market.

FICCI also feels that the practice of "rollover" of subsidies should be addressed in the current negotiations. Many developed countries have provided higher export subsidies than those committed by them on annual basis under AoA, during its implementation period - 1995-2000. This higher-than-annual committed amount was permitted under AoA by way of rolling over to the subsequent year the unused amount of subsidies or volume in the previous years. This has defeated the cause of reduction of export subsidies in WTO.

Currently, 25 WTO members can subsidise their agricultural exports belonging to 22 product categories. The categories are wheat, coarse grains, rice, oilseeds, vegetable oils, oilcakes, sugar, butter and butter oil, skim milk powder, cheese, other milk products, pig meat, poultry meat, sheep meat, bovine meat, live animals, fruit & vegetables, tobacco, cotton and wine. The European Union is the largest user of export subsidies, accounting for more than 70 per cent of world total.

Prior to Cancun, the G-20 coalition of developing countries had suggested phasing out subsidies under a two-track approach. In the first phase, a shorter period, members would phase out the export subsidies on products of interest to developing countries. In the second phase, longer period, members would phase out export subsidies on other product categories. In response, the EU had asked for a list of products from developing countries that are of interest to them and for which export subsidies would be phased out by the EU in the first period.

For some of these products the subsidy level as measured by Export Subsidy Equivalent (ESE) is very high in developed countries (ESE is the percentage of per-unit subsidy to world price). And India's bound tariff for these products may not be sufficient to neutralise the effect of export subsidies fully.

FICCI said that while the overall thrust has to remain on the eventual elimination of all forms of export subsidies as mandated by the Doha Ministerial Declaration, in the interest of taking the negotiations forward, India could examine the option of phasing out of export subsidies on a set of products in the first period. Such an option may also be complemented by fixing export subsidies on per unit basis, curbing the practice of "rollover" and choosing the appropriate base for reduction of export subsidies, as suggested earlier.

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