India Intelligence Report

   Farm Sector Disagreements Stall WTO



  • India objected to developed nation moves to get tariff advantages without any concessions on agriculture

  • Position is supported by 110 developing nations

  • G-6 nations may meet again later this month to salvage the deal. Failure will be disastrous to everyone and worse for developing nations

In further hardening of stance,  India has rejected heavy concessions from developing nations while only few concessions are forthcoming from developed nations especially in access to markets for agricultural and industrial products. The WTO argument has been stalled over what needs to be negotiated first—industrial liberalization by developing nations or agricultural subsidy shedding by developed nations. The developing nations say that the developed nations need to first eliminate farm subsidies and provide access to non-agricultural markets before they will open up market access for industrial goods in their nations. The developed nations refuse to eliminate farm subsidies but want the developing nations to open up their market. Moreover, they are also trying to gain tariff reduction exemptions for their products.

The mini-Ministerial meeting of G-6 nations of the WTO in Geneva ended in a stalemate with the US refusing to concede reductions in domestic support for its farmers. India vehemently argued that “interests and concerns of farmers, especially those relating to subsistence and livelihood” are non-negotiable for developing countries as a whole. The US and the EU farm tariffs and subsidies is valued at $365 billion a year and this is completely unacceptable to India and other developing nations. India’s position is overwhelming and unprecedented supported by developing countries, cutting including the G-20, the G-33, African, Caribbean, Pacific (ACP) countries, the Small and Vulnerable Economies (SVE), the grouping of 11 countries to negotiate non-agriculture market access (NAMA-11), the cotton group and the Caribbean Community and Common Market (CARICOM).

In earlier rounds at Doha and Honk Kong, all nations had agreed that developed members should provide for substantial and effective cuts in trade-distorting support because it was not fair to expect developing countries refuse to pay a price for the elimination of distortions that affect global trade in agricultural products. Nath rejected attempts by developed nations to re-write the Hong Kong declaration of 2005, the July Framework of 2004 and the mandate of Doha itself.

Before the discussions, Nath had written to trade ministers of member countries at the WTO asking for prioritized effort to handle the challenges of the Doha Round “frontally and substantially.” In a philosophical mood, he questioned "What does development mean?” and in rhetorical fashion said “Surely, it cannot mean displacement of subsistence farmers and de-industrialization of developing economies.” Highlighting the differences of what is at stake for developed and developing nations, Nath wrote for developed nation “sensitivities” translates to “commercial issues” while for developing countries “sensitivities involve the survival of their poorest citizens, the bulk of whom depend on agriculture for their livelihood.” India’s argument is that while commercial considerations can be compromised the livelihood and existence of the poor cannot. And, this is why developing nations have been “insisting that the overall tariff reduction commitments by developing countries should at most be two-thirds of those of developed countries” for agricultural products. For industrial tariffs, Nath warns that "An over-ambitious programme of tariff liberalisation can permanently foreclose the possibility of industrial development in many developing countries — in some cases actually leading to de-industrialisation.” He argues that developing countries should not be prevented from developing their infant industrial sectors. About services, developing nations say that movement of goods was linked to movement of people and complain that developed nations’ refusal to honor non-immigration commitments claiming local sensitivities precludes possibilities to negotiate a mutually acceptable solution.

Since there was non unanimity within the G-6 nations, the principal group comprising the US, the European Union, India, Brazil, Australia and Japan India public felt that the negotiating space was shrinking and walked out of the meeting. With the Geneva collapse, the prospect of completing the Doha Round by December 2006 looks bleak. It is also unlikely that special trade powers granted to the US Administration will be extended. However, WTO chief Pascal Lamy said that the Doha round was in crisis after ministers failed to achieve a breakthrough, but that an accord was still achievable as the gaps between the various positions were not "unbridgeable". European Union chief trade negotiator Peter Mandelson said the WTO talks aimed at saving its Doha round had been not a “success or disaster.”

On returning to India, Nath said that he hoped that “there is another meeting by the end of this month” and that if “developed countries are seeking market access, if they are seeking to enter Indian market, which destabilises Indian farmers then it is not possible to have an agreement.” India is looking to grow at 8-9% per annum and with WTO, the expectation is that the economy may grow at 10-11%. However, intransigent negotiation by developed nations would mean that Indian economy may actually slow down to 4-5%. India’s perception is supported by 110 nations.

The cost of failure of the agreement will be very high and will be harsher on developing nations.