Global Policy Forum

By Paranjoy Guha Thakurta

Setting aside ideological divisions, observers in India have endorsed the government's decision to quit the Doha development round of the World Trade Organisation, rather than compromise on the issue of the West's agricultural subsides that endanger the livelihoods of hundreds of millions of farmers in India and other developing countries.

The Doha round of talks officially collapsed on Monday, in Geneva, at a meeting between representatives of the G6 countries (comprising Australia, Brazil, the European Union, Japan, India and the United States) and the WTO director general Pascal Lamy when the U.S. refused to bring down subsidies for its farmers. The EU was willing to make substantial cuts but much time was spent discussing the key U.S. demand -- the lowering of import duties on agricultural as well as non-agricultural products.

Bitter bickering followed the failure of negotiations. The EU Trade Commissioner Peter Mandelson has been quoted as saying that Washington was asking "too much from others in exchange for doing too little themselvesí this is not my definition of leadership". The U.S. described these allegations as "false" and "misleading".

When asked how long it would take for the WTO negotiations to resume, India's federal commerce minister Kamal Nath said: "It could take anywhere from months to years." He added: "Unfortunately, one member (meaning, the U.S.) is unable to make any effective reduction in trade distorting subsidies, but at the same time is insisting that developing countries open up their markets to provide access to their subsidised products."

India is now seeking alternatives to talks at the WTO in bilateral trade agreements with various groups of nations. Nath stated in Parliament on Wednesday: "To address India's core concerns and interests, including protecting the interests of farmers, we have formed alliances with like-minded developing countries, including the G20 (Group of 20 developing countries) on agriculture and the G33 on special products and the special safeguard mechanism, and the NAMA-11 (or the 11 countries involved in negotiations on Non-Agricultural Market Access) on industrial tariffs.

"Specific and detailed proposals have been made by these groups in the negotiations. India has also been playing a key role in further strengthening developing country coalitions by bringing together G20, G33, the African group, ACP countries (African, Carribean and Pacific countries associated with the European Union) and the LDCs (least developed countries) to reinforceí  (one another's) position on issues of mutual interest."

What Nath is alluding to is simply that the rest of the world seems united in opposing the U.S. for its refusal to cut farm subsidies. "It's two percent of the American population or less than six million farmers versus at least half the rest of the world or three billion people who depend on agriculture for their livelihood, including more than 60 percent of India's population or 600 million people in this country alone," avers Biswajit Dhar, head of the Centre for WTO studies at the Indian Institute of Foreign Trade in New Delhi, in an interview with IPS.

Not just academics, representatives of business associations too support the Indian government's position. "It is rare that one sees 100 percent consensus in a democracy like India, but on the question of farm subsidies the country appears completely united," Vivek Bharati, national policy advisor to the Federation of Indian Chambers of Commerce and Industry (FICCI) told IPS.

At the same time, analysts argue that the dispute over farm subsidies is unlikely to have a negative effect on India's trade relations with the U.S. Speaking to members of the American Chamber of Commerce in New Delhi this week, Geoffrey Pyatt, Charge d'Affaires of the U.S. Embassy in New Delhi, said: "The U.S. is disappointed that the G6 was not able to reach an agreement on the Doha round. We went to Geneva prepared to reach an agreement that would benefit all economies and lead to a significant reduction in poverty around the world. President (George) Bush has repeatedly said that the U.S. is ready to eliminate tariffs, trade-distorting subsidies and other barriers to the free flow of goods and services as other nations do the same."

However, the U.S. has come in for severe criticism in India and elsewhere for its intransigence on the issue of reducing subsidies to its farmers. ActionAid's international director John Samuel was quoted on Wednesday in an IPS report saying: "The interests of 90 percent of poor farmers were being threatened for the sake of 2 per cent of the rich farmers." He said that the deadlock marked only a "semicolon in the process of multilateral world trade talks, not a full stop".

Bharati contends that Indian agriculture could become internationally competitive only if there was a level playing field. "More than even export subsidies, domestic subsidies in the U.S. are distorting trade in agricultural commodities making its impossible for developing countries like India to compete on an equal footing," he said, adding that in the Hong Kong ministerial meeting of the WTO as well as at Doha, it had been clearly recognised that developing countries would receive "differential treatment" even as far as NAMA is concerned.

"In this battle of unequals, developed countries should first open their markets to labour-intensive products in which developing countries have competitive advantage," said Bharati who represents one of India's largest business associations. He said developed nations were raising issues relating to average customs tariffs whereas the key disputes concerned peak tariffs not average tariffs.

Dhar illustrates the point by highlighting how exports of buffalo meat from India to the U.S. attracts customs duties as high as 400 percent. "As far as agriculture is concerned, India's concerns go far beyond trade -- it's a question of the country's food security and the livelihoods of hundreds of millions of farmers here," he observes, adding that Nath has no choice but to take the stance he has, despite the minister's reported preference for free market-oriented policies.

"The U.S. preaches the virtues of free market capitalism to the rest of the world but the question that arises is: What is the role of subsidies in a free market economy?" Dhar asks. He pointed out that the subsidies received by each and every cow in Europe would enable the animal to fly business class around the world each year.

India's position on farm subsidies is a consequence of the current crisis in the country's agriculture sector. More than half of India's one billion-plus population depends on agriculture though the sector's share in the national GDP has declined to 20 percent from 40 percent over the last decade. In recent years, India's agricultural production has been increasing by less than two percent a year whereas the economy as a whole has been growing by eight percent. India's federal agriculture minister Sharad Pawar confirmed in May that between 1993 and 2003, at least 100,000 farmers had killed themselves because of their inability to repay loans.

The Indian media continues to regularly report on suicides in the Vidarbha region in the western part of the country, where 655 farmers have killed themselves mostly by consuming pesticides, in the last two months alone. Prime Minister Manmohan Singh recently visited the region to commiserate with farmers. Pawar has gone on record stating that as many as 16,000 farmers continue to commit suicide each year in 32 vulnerable districts in western and southern India in the provinces of Maharashtra, Andhra Pradesh, Karnataka and Kerala.

"The Indian government's decision to refuse to negotiate further on the issue of farm subsidies was a correct one," said Dhar. "What was on offer in the negotiations was way below our minimum expectations. No deal is better than a bad deal," he said, adding that the total quantum of farm subsidies given by the developed OECD (Organization of Economic Cooperation and Development) countries works out to 340 billion US dollars a year or almost a billion dollars a day.

Bharati of FICCI adds that negotiating new issues at the WTO is meaningless since developed countries led by the U.S. are refusing to stick to commitments made in the past. "The Doha round made development its centrepiece, but the American position on agricultural subsidies has virtually signalled the end of negotiations," he said.

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