WTO wars: Brazil-EU paper on farm subsidies is a reaction to India-China paper

Brazil and the European Union (EU) have come together on a full blown offensive at the World Trade Organization (WTO) against farm subsidies in developing nations in response to a similar joint move by India and China.

“Such tactics should have been expected by India as the Brazilian proposal move is a response to India and China’s joint targeting of indirect farm subsidies given by developed economies.”, a senior Geneva based diplomat said under conditions of anonymity.

India and China, in spite of recent hostilities on the border issue at Doklam in Sikkim, had two weeks back, submitted a joint paper at the WTO proposing that developed nations stop giving their agriculture enhanced support. This is done through a major flexibility whereby resources can be concentrated upon a few products thereby distorting the prices and competitiveness. The proposal had been supported by developing nations such as Indonesia, Bolivia, Philippines and Turkey, among others, said persons in the know.

The Brazilian response came a day later in the form of a joint paper with the EU which targets all forms of subsidies apart from those under Minimum Support Price scheme. It also calls for a clampdown on exports of food stocks meant for public stockholding. This includes a grant for pest and disease control, and infrastructure and marketing services, among others.

 

On this issue, India has also recently informed the WTO that its farm subsidy did not go beyond the permissible limit between 2011-12 and 2013-14. This reaction is the result of developed countries repeatedly arguing that farm subsidies have been increasing in India.

New Delhi told WTO that input subsidy, which includes those for fertilisers, irrigation and electricity, fell to $22.8 billion in FY2014 compared with $29.1 billion in FY 2011, a senior government official said. These are part of the ‘green box’ or non-trade distorting subsidies that are allowed without limits for countries such as India which has millions of poor farmers.

The move by the world’s largest and third largest exporter of food products – the European Union and Brazil respectively – are expected to churn discussions on farm subsidies before the WTO ministerial conference gets underway in Argentina coming December.

The agri-food sector includes 22 million farmers and agricultural workers in the EU which in turn support around 44 million jobs in food processing, food retail and food services, according to the European Commission.The EU is also a net exporter of food and drink, exporting goods for more than €130 billion per year.

On the other hand, agrifoods exports from Brazil totalled more than $ 78 billion, according to estimates by the Food and Agriculture Organization of the United Nations. Farming accounted for almost a third of GDP, once everything from agricultural inputs to food processing and distribution is included.

Developed countries are against input subsidies such as those given for power, logistics and electricity, among others.

Agri headache

Following India’s agreement with the US on the issue in 2013, the Bali Ministerial Conference came up with the “peace clause” that permitted uninterrupted implementation of India’s food security programme till a permanent solution was found. This allows India to procure and stock foodgrain for distribution to the poor without being penalised by WTO members even if it breaches the 10 per cent subsidy cap prescribed by the multilateral trade body.

For a permanent solution, India has proposed either amending the formula to calculate the food subsidy cap of 10 per cent, which is based on the reference price of 1986-88 or allowing such schemes outside the purview of subsidy caps.

Special safety mechanism

The last ministerial conference at Nairobi in 2015 only recognised the rights of developing nations to have recourse to the special safeguard mechanism (SSM). While this is subject to further negotiation, hopes for a solution in the near future are tied to developed nations, which are against the move. “Most notably, France and the US continue to pose a serious challenge to the move,” said Sachin Chaturvedi, director-general of trade think-tank RIS.

A long-standing demand of developing nations, the SSM allows countries to temporarily raise tariffs to deal with surging imports and subsequent price falls. “We have not received positive feedback from these nations,” an official said.

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WTO wars: Brazil-EU paper on farm subsidies is a reaction to India-China paper

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