India’s WTO stand and reasons for it are only justified

A famous Marxist thinker of erstwhile USSR had a principle which was to repeat lies consistently till the Diaspora starts believing in what you are saying & accepts such false statement as your new truth. Such was the charisma of the principle that the Bengal Marxist leaders used it to the maximum and successfully ran government for more than three decades. WTO case is exact copy paste of such principle.

There can be some thinkers aka economists and emerging market advisors who support the western concept and are extremely vocal not because of the fact that it has logic, but just because they are the very constituencies who will generate revenue for his own business! You think I am being extra critical? Lets judge after reading the logic of India’s stand below-

1. India’s food security and stockholding program uses precisely the same policies that the United States used in its early farm policy coming out of the Great Depression. Exactly the same: price supports, food reserves, administered markets, subsidies. This famine avoidance strategy have worked for US, they have used it for more than almost a century now, then what is wrong if India follows the same path?

2. Across the developing world, millions of people, most of them poor, still do not have basic and minimum access to food. According to the FAO, 868 million were undernourished in 2011-12, of them 304 million in South Asia and 234 million in Sub Saharan Africa. Even more disturbing is the fact that nearly 3.1 million children under the age of 5 die each year because of poor nutrition (Hunger Statistics, World Food Program 2013).At the same time, in a volatile global economy, millions of small farmers are engaged in precariously poised food production that provides them essential livelihoods and caters to their own as well as their country's food requirements. Eradication of global poverty and hunger would not be impossible without addressing these concerns. Are these concerns more important or the revenue of few trading agencies?

3. The allowed levels of trade-distorting support – the Aggregate Measure of Support (AMS) – for the US is about $19 billion. Why so high? The reason being level was set back in 1994,based on the prevailing high levels of US support, and was reduced only twenty percent since then. What about India? Like 61 of 71 developing country WTO members at the time, India’s AMS is zero. Like most developing countries, it couldn’t afford such expensive policies. Now such countries are punished for their past good behavior.

4. The United States has been unfairly notifying the WTO of its trade-distorting subsidies for years. A WTO dispute panel ruled that insurance subsidies and direct payments should count as trade-distorting subsidies because they go to producers of a defined set of crops. If one counted such payments correctly, US AMS notifications for 2010 would rise from $4 billion to $15 billion.

5. India’s procurement program and stockholding is for domestic producers and for domestic consumption. Where is the trade distortion? Whereas US subsidies – AMS and Green Box – go to crops like corn, soybeans, wheat, and cotton that are heavily exported.

6. Not only are those crops exported, corn and soybeans serve as inputs for livestock feed, and corn is the main input for ethanol. Input subsidies should be notified as trade-distorting, yet these are treated as non-trade-distorting subsidies. The US exports both meat and ethanol.

7. The US is calling India out for its food security program even though India has ten times the beneficiaries, provides less than one-quarter the food, and spends one-sixth the amount per person. The United States spends about $75 billion per year for its Supplemental Nutrition Assistance Program (SNAP), the main domestic food aid program. That provides on average 240 kilograms of grain for each of the 47 million beneficiaries, valued at $1,608 per year. Before expanding its food security program, India was reaching 475 million much hungrier people with food aid of just 58 kilograms per person, valued at roughly $27 per year.

8. In 2005, the WTO committed itself to resolve the issue of the US’s trade-distorting cotton subsidies “in an expedited manner”. Eight years later, Africa’s cotton producer s are still waiting for US compliance. In Bali, the US has offered nothing on cotton, continuing the damage to some of the world’s poorest farmers.

9. India’s simplest demand is truly simple, if technical. Its administered prices for farmers are calculated as subsidies by comparing them not to market prices in India but to an international “reference price”. That reference price is archaic, from 1986 to 1988. Inflation since then has been about 500%, so any price today will look like a high support price and will result in a high subsidy estimate. India asked simply that the reference price be updated for inflation, so its administered prices can be compared to something vaguely resembling current market prices. No go, says the US. Never mind that those 1986 to 1988 reference prices were even lower because the US and the EU were at the time dumping huge surpluses on the international market, crashing the prices.

10. Last but not least is the audacity of calling for a Peace Clause at all. Peace Clause? Really? For those who don’t remember recent history, the US and the EU imposed a Peace Clause in 1994 at the end of the round of negotiations that launched the WTO. It protected them from WTO suits over their hugely distorting subsidies. How long did it last? Nine years, and it covered Subsidies and Countervailing Measures. The current Peace Clause being offered to India and the G-33 countries is just four years, excludes the subsidies measures, and expires even if there has been no resolution of the outstanding Doha issues. Instead of “special and differentiated treatment” for developing countries, India gets special and differentiated punishment.

I can go on and on adding atleast 15 more reasons to my list. Can those enlightened emerging market advisors show us reasons of why we shouldn’t now say that you are simply playing to your prospective customers by supporting this old Marxist principle of repeating lies!

Thanks and regards

Anirban Chakrabarty

-9163395713