The Trade Locusts

Does the Indian government’s hasty and total submission before the wto spell doom for a 550 million rural populace dependent on the farming, fishing and dairy sectors for its livelihood? Alarm bells might not be ringing yet, but the feedback from agricultural experts is that last December, India’s negotiating team at Seattle sacrificed the nation’s agricultural interests in return for a few kudos from the developed world.

Nothing else explains the lifting of import restrictions on food produce and allied products. Says eminent agricultural expert, M.S. Swaminathan, "With the import of agricultural produce and products, our farmers will be badly hit." What’s also shocking is the commitment made to the wto which puts the bound rate (maximum import duty which India can impose) on rice, including broken rice, at zero per cent! Milk, maize, jowar and bajra are also in the zero per cent import duty bracket. Poultry and egg products are on the Open General Licence (ogl) attracting import duties between 15 and 40 per cent. Add to this a host of vegetables and fruits for which a very low tariff has been agreed upon and the Indian farmer’s horror story is complete.

The lifting of import restrictions and fixing of import tariffs was done with an element of secrecy. The farmer who’ll have to bear the brunt of the imports hasn’t been consulted. Neither have middle-level entrepreneurs been informed of how their investment in the marketing of Indian farm produce could be hit in a year’s time. Points out an official at the National Dairy Development Board (nddb), "There’s an element of secrecy about the entire wto business. Even we’re not clear about the policy, leave alone the millions of families making a living out of two or three buffaloes."

Though a government organisation, the nddb has raised objections against the trade-off in milk. As a result, the tariff on milk has been revised for Canada and a few EU countries. The first 10,000 tonnes of milk powder can now be imported at 15 per cent duty and thereafter at a 60 per cent duty. But this is a temporary arrangement and the bound duty of milk still remains at zero per cent.

Explains an agriculture ministry official, "After having signed the agreement with the wto, negotiations are now being held with individual member countries. So when you ask for protection for a particular sector you have to trade-off with reduction of tariffs in other areas or in the opening up of another section of the market." Thus for giving protection to milk, tariffs have been lowered for eight items in the fruits and vegetables category. The net result of the import tariff ceiling agreed upon by the government is that the Indian farmer stands unprotected and pitted against organised farmers of the developed countries who enjoy huge subsidies. As per wto figures, the annual agricultural subsidies provided by countries belonging to the Organisation for Economic Cooperation and Development (oecd) is a whopping $362 billion. While India’s farm subsidy bill, which is being sought to be cut further in the coming budget, rests at approximately Rs 4,500 crore.

This subsidy figure for oecd countries does not include the huge investments made by the state in agricultural infrastructure and R&D. In India, a big chunk of subsidies goes towards fertilisers, electricity, irrigation and credit. Ever since 1991, the government’s policy as dictated by the wto’s Agreement on Agriculture (AoA) has been to reduce these subsidies. This year too, the pre-budget feedback from sources in the finance ministry is that subsidies to the agriculture sector will be further reduced.

Under the AoA, developed countries were to reduce their Aggregate Measure of Support (ams) by 20 per cent by 2000. But agriculture ministry sources point out that in practice the support to farmers in the West has only increased. This is being achieved by increasing direct payments to farmers which are not categorised as subsidies. Also, the support being provided to agriculture exports has been split under producer and processor subsidy to mask the total volume of support being provided to the farmer. The volume of subsidies given to the dairy sector in the developed world is an eye-opener. The producer subsidy figure for 1997 was 82 per cent in Japan, 59 per cent in Canada and 54 per cent in the EU. In addition to this, the export subsidy in the US per tonne of milk powder was $875, while in the EU it was $811 per tonne. Such levels of subsidy are not available to Indian dairy producers.

Very clearly, the intention of the oecd countries is to tap the huge food market in India and other developing countries. The British consultancy firm Mckinsey India, has estimated that the Indian food industry will cross the Rs 560,00,00 million mark at the end of 2005. The understanding is that it’s the food sector that’ll provide the big market in the future, hence the heavy subsidies provided in the West. The one-sided laws which make dumping of heavily subsidised agricultural products the prerogative of the developed world is part of the attempt to get a share of this market pie. Points out trade policy analyst Devinder Sharma, "What the US and the EU countries want is an entry point into our market. Let’s be clear, they are coming here for making money. Once they’re in, our farmers will have no choice but to stop cultivation."

What happens when an agriculture sector is opened to free imports is illustrated by the Sri Lankan experience. Nestle Sri Lanka held the monopoly in the milk trade in that country for well over a decade. When Chandrika Kumaratunga took over as president, she chalked out a plan to make Sri Lanka self-sufficient in milk. The nddb was roped in and a joint venture, Kiriya, was set up with the Sri Lankan government. The idea was to set up milk cooperatives and trigger off an Operation Flood across the island. However, since the project would hurt many business interests, Colombo is under pressure to abandon the scheme and restore the monopoly of private trade.

According to scientists at the Indian Council for Agricultural Research (icar), the Indian problem is magnified because of the scale of the country and its vast population, more than half of which is involved in farming. The profile of the average Indian farmer is a lot different from his US counterpart. While the average holding of the Indian farmer is less than half a hectare, farms less than 1,000 hectares are seen as falling into the small farm category in the US. Points out an agricultural scientist, "The scale of production is such that it far outstrips the demand. This leads to a surplus for which a market has to be found." Wheat, maize and coarse grains like millet grows freely in the US and EU. India has put maize and millet in the zero import tariff category even though these cereals are cultivated by second-rung farmers, and in poorer states like Bihar, Orissa and MP they constitute the staple diet. Wheat imports have been placed at the 50 per tariff slab. In sharp contrast, the average import duty slab in oecd countries is 214 per cent for wheat and 154 per cent for maize. Clearly, when it comes to themselves, countries of the north have ensured that they won’t have to allow imports from the south. So. India’s agricultural exports have gone down by 100 per cent ever since the opening up of the markets began.

As intriguing as the zero import duty on coarse cereals is the zero tariff on rice, which is the most widely farmed crop in the country. Paddy is cultivated in close to 70 million hectares of land. Wheat cultivation involves only half this acreage. The zero per cent imports may not have its impact immediately since there is a shortage in the international rice market. But in the years to come the paddy farmer could also be threatened. Says Amrita Patel, current nddb chairman, "We are already depending on imports to sustain national oil consumption. It should be a lesson as to what can happen. While we are confident that our dairy industry can survive competition, a series of bad years or a slide in international prices can trigger off the same vicious cycle that we see with oil." She reiterates what perhaps is the basic issue, "We have to remember that, fundamentally, our people live in villages and we remain a nation that depends on agriculture. Modernisation of our economy should not mean the abandonment of our rural people."

Health standards referred to as sanitary and phyto-sanitary measures (sps) have often been used to block imports of Indian products. At the same time, genetically engineered produce, which confronts stiff consumer resistance in the West, has been allowed to be dumped into the country. Indian goods like marine products have been rejected on the cleanliness count. As for milk, the stipulation is that that the udder must not be touched by hand and that milk drawn by lactating machines alone is fit for western consumption. However, nddb has been able to convince the Arab nations about the quality of Indian milk. To ensure they gain a foothold in third world markets, the oecd countries have worked the agricultural agreement of the wto to their advantage. ‘Minimum access’ is the term coined in the agreement. This relates to allowing a minimum flow of imports even if there is a surplus. Minimum access is defined as a percentage of domestic consumption which must be allowed in as imports. The parameters have been so defined that access in practice is more a prerogative of the developed world.

So where have the Indian negotiators failed? Delegation after delegation has bowed before the oecd countries while terms were set to the advantage of the developed world. All through, the public was never taken into confidence over the complex agreements arrived at. This is a trend that still persists. Unlike the politically powerful sugar lobby which can arm-twist the government into higher protectionist import tariffs, the huge population of marginal farmers remain ignorant of the decisions being taken by their political masters.