India, WTO, and the Farmers’ Concerns

Syllabus: GS3/ Agriculture

Context

• Farmers protesting at the Punjab and Haryana borders have demanded India’s withdrawal from the World Trade Organization (WTO) and suspension of all free trade agreements under the Agreement on Agriculture (AoA), citing adverse impacts on Indian agriculture.

About the World Trade Organization (WTO)

• What is WTO?
  • WTO governs global trade rules and is the successor to the General Agreement on Tariffs and Trade (GATT) established after WWII.
  • Established: 1994 through the Marrakesh Agreement, with 123 founding countries.
  • India’s Membership: Since January 1, 1995.
• Current Membership:
  • 164 members (including the EU) and 23 observer governments (e.g., Iraq, Iran, Bhutan, and Libya).
• Significance of WTO:
  • Facilitates global trade through agreements.
  • Mediates trade disputes.
  • Supports developing countries in integrating with global trade.

Agreement on Agriculture (AoA)

• Objective:
  • Reform agricultural trade for a fair, market-oriented system.
  • Enhance stability and predictability for importing and exporting nations.
• Scope:
  • Covers basic agricultural products, processed products, wines, spirits, tobacco, and fibers like cotton.
• Pillars of AoA:
  • Market Access: Removal of trade restrictions like tariffs.
  • Domestic Support: Subsidies that distort trade, categorized into Amber Box, Blue Box, and Green Box.
  • Export Competition: Regulation of export subsidies.
• WTO Subsidy Categories:
  • Amber Box: Trade-distorting subsidies, subject to reduction.
  • Blue Box: Minimally trade-distorting subsidies tied to production limits.
  • Green Box: Non-trade-distorting subsidies permitted without limits.
  • De Minimis Clause: Developing countries can maintain Amber Box subsidies up to 10% of agricultural output value.

Concerns Raised by Indian Farmers

• Impact on Indian Agriculture: AoA disproportionately favors developed nations, undermining the competitiveness of small-scale Indian farmers.
• Subsidy Reduction and Rising Input Costs: WTO caps India’s subsidies at 10% of agricultural output, restricting support for farmers amid rising costs for inputs like fertilizers and seeds.
• Dumping of Cheap Imports: Developed countries’ subsidized agricultural exports flood Indian markets, driving down domestic prices and hurting local farmers.
• Food Security Concerns: AoA rules limit subsidies critical for ensuring food self-sufficiency, risking greater dependency on imports.
• Role of Minimum Support Prices (MSP): WTO views MSP-linked subsidies as trade-distorting, posing a potential challenge to India’s MSP system for farmer welfare and food security.

Other Key Challenges with WTO

• Dispute Settlement Mechanism: India frequently faces trade disputes as both complainant and respondent.
• Unilateral Protectionist Measures: Developed countries often resort to such measures, undermining multilateral agreements.
• Definition of ‘Developing Country’: WTO includes major economies like India and China as developing countries, creating additional pressures.
• Subsidies and Fisheries: WTO pressure to reduce subsidies in agriculture and fisheries conflicts with India’s focus on self-reliance.
• Peace Clause: Protected subsidy programs started before 2013 but are insufficient for India’s evolving needs.

India’s Vision for WTO Reform

• Reviving Multilateralism:
  • Ensuring that all member countries, not just dominant trading blocs, have a voice in decision-making.
• Addressing New Trade Issues:
  • Developing frameworks for digital trade, data governance, and sustainability.
• Strengthening Dispute Settlement Mechanism:
  • Advocating for a functional Appellate Body to ensure fair and predictable trade resolutions.
• Agriculture-Specific Reforms:
  • Special Safeguard Mechanisms.
  • Public stockholding for food security.
  • Fair treatment of subsidies.

Conclusion

• India’s relationship with the WTO reflects a delicate balance between protecting its developmental priorities and participating in global trade. While WTO agreements like AoA present significant challenges, India’s proactive stance and call for equitable reforms demonstrate its commitment to shaping a more inclusive global trade framework. 
• Addressing farmers’ concerns, safeguarding food security, and ensuring fair trade practices will be pivotal as India continues to champion its interests in the global arena.

Source: IE