Asphyxiating Agriculture

Pratyush Nilotpal


The Uruguay Round Agreement on Agriculture, which entered into force in 1995, alongwith other UR accords was a decisive step in terms of future trade liberalisation. It was a historic shift in the way agriculture was dealt with in multilateral trade agreements. It aims at a progressive reduction on protection and subsidisation of the agricultural sector by the WTO members.


The agreement incorporates three broad areas of commitments namely :

(i) Market access (ii) Domestic support, and (iii) Export subsidies.


Market Access


The agreement requires all the WTO members to convert non-tariff barriers to tariff and to reduce them by a simple average of 36 percent over six years (with a minimum tariff reduction per tariff line of 15 percent).

It means that, no country will have the authority to restrict import or export of any commodity; neither a government can put restriction on the quantity of export or import. The import of about 2700 items in India is covered under some sort of quantitative restrictions out of which 825 are agricultural commodities. It is feared that removal of QRs would hit our producers and impair the growth prospects of the farm sector.


Removal of QRs might lead to dumping and transfer of excess production by exporting countries, which would impact high instability in the farm income of domestic producers. At the same time the removal of QRs might benefit the consumers and safeguard food security in the event of domestic shortages.


However QRs can be replaces with high import tariffs to restrict imports. But where non-tariff barriers restrict imports the agreement requires that importing countries offer minimum access of usually 3 percent of consumption rising to 5 percent over six year implementation period for agreement.

Domestic Support


This agreement has two main aims : firstly to identify acceptable measures that support farmers and secondly, deny unacceptable, trade distorting support to the farmers.


Domestic subsidies are to be cut by 20 percent for the devloped countries and 10 percent for the developing countries from the average levels of support aggregated across all commodities for the base period 1986-88. Support reduction commitments are also to be made over the six-year implementation period on the basis of this aggregate measure of support (AMS).


Since the US and EU support spending was well under agreement limits, no reductions in support were required. For India, since the AMS is below the deminimus mark, there was then  no need to undertake any reduction.


The minimum support price (MSP) every year is much above that recommended by the Commission on Agriculture Costs and Prices (CACP). Higher support prices mean that overall market prices also shoot up. Thus having negative impact on our own export potential. Despite knowing it fully well, only 10 percent of the total produce of wheat and paddy is purchased under the price support scheme. The state governments resort to cheap populist measures and declare bonuses over and above the MSP.


The US and EU at present offer huge agricultural support of $19 and $ 61 billion respectively. They will continue to offer huge agricultural support after the mandated AMS reduction by 2000. They can offset this reduced competitiveness by compensating their farmers with significant export subsidies. The only export subsidy offered in India is that of section 89 HHC of the Income Tax Act. New export subsidies cannot be introduced, as they would be WTO inconsistent.


Export Subsidies


The agreement requires that export subsidies be reduced by 21 percent in terms of quantities and by 36 percent in terms of budgetary outlays by the end of the six-year implementation period. The WTO members may continue to use their existing export subsidies within the established limits but they cannot introduce any new export subsidies.


The agreement is virtually non-existent in India as the country is giving far less subsidy than limited by the WTO.


The WTO proposals on agriculture are marred with ambiguity as well as inconsistent with the age-old Indian mode of farming and tradition. In fact it has been a general view among all the economists and political scientists that Asiatic mode of production is quite different from that practised in Europe or the US. The WTO, and other Brettonwood institutions give scant regard to different agrarian relationship and societal norms in India and other Afro-Asian societies which are different from that of European and the US. For these institutions and their policy makers the entire world mechanism should be uniform, if they are not, the  market would make them.


The manifestation of globalisation syndrome in Agriculture sector is to be seen in terms of increasing centralisation of market and the shift from food to cash crop. All over the country, there has been a marked decline in acreage once under food crop cultivation now in favour of cash crop.

A recent study has revealed that in Central India (Narmada Valley belt) pulses have been pushed out by soyabean, Madhya Pradesh alone witnessed dramatic expansion of acreage of soyabean cultivation to 48 lakh hectares. Apart from the adverse effect this process would have on the nutrition-value and on the price of the pulse.


It is the soyabean trade that is worrisome. Soya seeds are supplied by the cartels that have soya oil extraction plants in some areas of Madhya Pradesh, the farmers are under obligation to sell their produce to the same companies that have supplied the seeds. The produce is used for the extraction of oil and preparing into cattle feed for export. Soya oil is not a cooking medium for most of the households of the country, yet it is being deliberately dumped in the market, in direct competition with the traditional cooking mediums. The soya oil companies are mostly owned by the MNCs while the traditional cooking oils are still processed by small and marginal entrepreneurs, who are in no position to counter the onslaught.


The case of rice crop is even more intriguing. The multinational agro giants have patented those varieties of this crop, that for centuries were known to the Indian farmers. They have promoted single line seed across the country bypassing the age-old tradition of Indian farmers of a wide range of seeds, suited and adapted to different micro eco-systems and rainfall conditions. The situation becomes all the more serious given the fact that now these companies have resorted to stealing the country seeds through unethical patents.


The spectre of terminator seeds is haunting the entire Third World. These seeds are genetically modified variety of crop seeds, that can germinate only once. The seeds cannot be used for subsequent sowing. Thus preventing farmers to their own seeds  for replanting and forcing them to buy seeds again and again from the TNCs. The Indian government, for the benefit of Monsanto, thought it fit to allow field testing of its genetically modified cottonseeds. The plants were uprooted by militant peasants and after a spate of agitation by farmers, unions and other NGOs. The same Monsanto as reported has applied for bringing in genetically modified varieties of rice and sugar cane.


Even as the Third World community is still trying to grapple with the spectre of terminator seeds the multinational seed giants have applied for patents of new type of genetically modified crop, dubbed as traitor technology. Canada based Rural Advancement Foundation International (RAFI), has been active in tracking and exposing such activities. According to RAFI if left uncheked, the Traitor Technology could by the year 2010 easily dominate and control nearly 80 percent of the world’s seeds market through transgenic seeds, and increase the dependence of farmers on these seed supplies, fertilizers, herbicides and pesticides (produced and marketed by the same firm).


It is these agro industrial firms that are lobbying intensively for freehand behind the provisions of the WTO, depriving the Indian farmers of the freedom to choose what to grow as also to keep the produce for the next season, while filling their own coffers.


The US agro-giant Monsanto has acquired sizabel stakes in Mahyco, which has emerged as the largest seed business house in the country.

While at one hand such vital developments are taking place on the other hand there is a severe dearth of data and research being done on the impact of the WTO on Indian agricultural sector. It is intriguing to note that most of the research works are being done and funded by institutes like Ford Foundation. Such studies are heavily biased. Even the Indian government has not started taking the issue seriously. It is yet to announce any firm policy on it.


The most worrisome part is bringing agriculture on the agenda during the millennium round. Major argicultural exporters like Australia. Argentina, Canada, and New Zealand are advocating for liberalisation of agriculture on the lines of the liberalisation that has occured in other sectors. If the above countreis succeed in their endeavors it would be a major loss to the Indian agriculture sector. The total liberalisation of agriculture would mean exposing the vast majority of small and medium peasants to face the competition and price mechanism of the multinationals, a competition that even the European Union is not willing to face.


The EU has been pushing India to adopt a common position on the issue. Senior officials confirmed of having held discussions with their Indian counterparts in Geneva in June 1999. The talks were held on the margins of the meeting of the WTO committee on agriculture at the world trade body’s headquarters.


The EU is not comfortable with the idea of liberalising its agriculture and hopes to block the issue with the help of India and the other Third World countreis. It is lobbying hard to protect its farmers. Yet when it comes to other sectors of economy it is the most vocal votary of ending all QRs and allowing its companies to exploit the markets of the same hapless Third World with whom it wants to contain the agricultural exporter countries and also the US. A glaring example of European double  standard!


To quote an EC official: ‘‘India has a very large number of small farmers who cannot stand up to competition from multinationals, if farming market was totally opened as some members want.’’