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Why India should expose US hypocrisy on cotton subsidies at the WTO -Sachin Kumar Sharma & Parkhi Vats

-Financial Express

Trade and World Trade Organisation (WTO) discussions thrive on perception. Recent actions by the US seek to portray India as flouting WTO rules and distorting the global market by providing huge subsidies to cotton. Left unchallenged, the hypocrisy of the US narrative on cotton could sway WTO members, particularly the cotton-producing African countries.

So, what is the fracas on India’s cotton subsidies all about? Shorn of legalese, the US has made a counter-notification at the WTO, alleging that India’s subsidies to cotton have breached the limit of 10% of the value of cotton production, as stipulated in the WTO’s Agreement on Agriculture.

The US contends that, during 2010-16, India’s market price support to cotton was 53% to 81% of the value of the annual production. On the other hand, in its notifications, India has claimed that the market price support has rarely exceeded 1.4% of the value of production during 2010-16.
 
What explains the reality behind these sharply divergent statistics? The explanation lies in three variables used in calculating the domestic support for each product under the WTO’s Agreement on Agriculture.

First, which currency to use in calculating the domestic support?
Second, what is the production eligible to benefit from the minimum price support?
Third, how many units of raw cotton are required for producing one unit of lint cotton?

While India has calculated the domestic support to cotton in terms of US dollars, the US insists that the calculations should be done in Indian rupee. Contrary to what the US insists, the methodology for calculating domestic support under the Agreement on Agriculture is not prescriptive. It provides a country the flexibility to choose the currency for calculating its domestic support.

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