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Carve-outs that distort by TS Vishwanath

India’s negotiating strategy on agriculture at the World Trade Organisation (WTO) seems to be moving from a defensive to a more engaging position with the release of two interesting discussion papers by the Centre of WTO Studies of the Indian Institute of Foreign Trade (IIFT).

The two studies that were released by India’s chief negotiator at the WTO this week are a signal that India may now move towards seeking answers from the developed countries in the sensitive area of farm trade. The release of the papers is timely since the WTO negotiations are back on track again with trade ministers agreeing at Davos to try and complete the Round in 2011.

One of the papers points to carve-outs sought by some developed countries — including the US, the European Union, Canada, Switzerland, Norway and Japan – to protect domestic concerns and possibly continue to subsidise and distort agricultural trade. The second paper seeks a greater role for New Delhi in the negotiations between the US and the four cotton-producing nations of Burkina Faso, Benin, Chad and Mali, since India has the potential to be a global cotton exporter.
Till now, India has primarily, as a member of the G33 on agriculture, focused on issues such as special safeguard mechanisms and special products that are available to the developing countries to defend sensitivities of millions of resource-poor farmers.

While India’s primary interest of safeguarding small farmers’ interests will remain high, the two academic papers also reflect the need for India to seek market access in other countries for products of interest in the farm sector.

The two papers primarily point to two factors. First, if the current text of 2008 on the table is accepted by WTO members, then the developed countries will continue to safeguard products of interest to them by denying market access. Second, they will have the ability to distort agricultural trade through cheaper exports backed by subsidised agriculture.

This may mean that the Doha Round’s primary objective to address higher market openings for farm trade, which is vital for the developing and least developed countries, may not be addressed if the current proposal on the table is accepted without changes.

Interestingly, the developed countries are of the view that the current text of 2008 on the table does not as yet fully reflect their needs in the agricultural sector. However, analysts are of the view that further changes to the text to accommodate the developed country needs may make the deal far worse for the developing and least developed countries. It is, therefore, significant to note, as the authors pointed out when the papers were released, that despite the presence of the carve-outs in the current paper, the developed countries seem to be holding back progress on the negotiations.

The paper on carve-outs does not take into account the distortion to global trade by the developed countries but only points to the possible impact on market access while exporting into these markets. But it covers a wide range of products ranging from corn and wheat to soybeans, rice, peanuts, sorghum, barley and oats besides beef and fruit like apples, apricots, cherries and citrus fruits for processing.

The paper shows that the number of products for which distortion would continue is large and will certainly hurt the future interests of the developing and least developed countries, which are seeking a pie in the global trade for farm products.

Agriculture and industrial goods are the two pillars on which countries will need to move forward first to conclude the Round. The next set of modalities on these issues is likely to be prepared by the chairman of the negotiating groups in Geneva over the next couple of months and it will be important for the developing countries to ensure that the new texts do not undermine the development objective of the Doha Round.

The farm sector is a politically sensitive area for all countries and unless these negotiations do not match the expectations of members, it will be difficult to conclude the Round. The IIFT paper throws the ball back to the developed countries to respond.