By Devanshee Dave
Putting aside border tensions, India and China have come together to challenge the WTO’s (World Trade Organization’s) decision to favour the provision of subsidy benefits for agricultural products. It grants advantage to developed nations like US, EU, Canada, compared to developing nations like India, China and Indonesia. The papers were promulgated in the recent meeting of WTO in Geneva on 17th July 2017. The paper was presented at the WTO meeting to fight against the provision of subsidies to developed countries, and it is hoped that the outcome will support their respective domestic market.
The India-China paper circulated in the WTO meeting questioned the flexibility given to developed countries which allow them to focus their subsidies on few farm products. Biasness in subsidies also provides those developed countries more policy space, provoking hindrance and deformation in global agriculture trade. The subsidies provided to the developed nations under this flexibility amounts around $160 billion, which is more than 90 percent of the total global entitlements. The paper has challenged the inequalities present in the WTO rules, which favours developed nations. The Indo-Chinese paper has also been backed by other developing nations such as Indonesia, Philippines, Bolivia, Uganda and Turkey.
The blatant bias
According to The Economic Times, the joint paper by China and India addressed some examples where the subsidies given by developed nations exceeded the value of production. For example, the subsidies given to tinned pineapple and cotton to the European Union, subsidies to mohair and wool to the United States, and tobacco subsidy to Canada in 2009 was more than thrice of the mass value of production.
On the other hand, most of the developing nations can’t provide such product specific subsidies for more than 10 percent of the value of the agriculture products as per the WTO rules. Developed nations do not have to abide by these rules as they fall under the ‘Green Box’ category. There are certain specific criteria to be eligible for this category, and all developed nations and some developing nations come under it. This category is exempted from any reduction commitments on subsidies, which can also be increased without any financial limits. Thus, it favours them in terms of exporting those farm products. It should be noted that in most developed nations, agriculture is a commercial occupation and only 5 percent of the total population is dependent on it for its livelihood. Whereas in developing nations, agriculture is the primary livelihood for more than half of the population. Ergo, these subsidy policies affect the local markets in developing countries adversely.
A backup solution?
WTO facilitates its member countries with the option of safeguarding against imports due to subsidies. Under which any country can convert a subsidy into Actionable Subsidy. It is a privilege given to countries to protect their local markets from the adverse effects of exporter countries. It stipulates that within 60 days the dispute settlement body of WTO will give its decision and the importer or exporter countries are given remuneration accordingly. In addition, if the domestic market is under threat of a surge in imports of that product, the WTO member can restrict imports of that product temporarily. This is called ‘Safeguarding Action’.
India and China have circulated the paper in WTO meeting to take a stand against the inequalities of rules in WTO together. But if in case that doesn’t work out positively, the affected countries can opt for the above-stated actions as well. Unfortunately, it will only provide temporary relief in the international market. The next Ministerial meeting of WTO in December this year will defiantly be a game changer.
Featured Image Source: Peter Kleinau on Unsplash
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