The foremost trigger point of WTO?s recent dispute at Geneva was the passage of the Indian Food Security Act (FSA) last year. The FSA deepens India?s non-compliance of domestic support with WTO guidelines. It will be bizarre to expect that WTO will ever endorse India?s absurd Act and more so because it is bound to intensify market distortions within and outside India. Ideas of India endorsing its sovereignty unilaterally, when it affects other sovereign nations, are no longer tolerated in a globally-connected world. More multilateral hostility will be directed towards India if the Trade Facilitation Agreement (TFA) is linked to the resolution of domestic support matters. Surely, India is not in breach of any ?direct trade-related subventions?.
The FSA, when implemented, will lead to excessive public procurement, starving local market and higher inflation, thereby making exports also unviable. If cereals are distributed with 50% leakages at R2-3 per kg, targeted beneficiaries are not helped but illicit diversion to exports can take place. Non-supply of information by India on domestic support under the peace clause applicable till 2017 as agreed in Bali should not be violated.
At the same time, developed nations are merely focusing at WTO-compliant local subsidies vis-a-vis India while ignoring any penalty or sanctions on Black Sea countries for the criminality of Crimea or for downing of MH17 or on acts of terrorism elsewhere. Will WTO continue to look the other side when China rejects or defaults millions of tonnes of corn or soy shipments under phyto-conditions or so-called tainted GMO strains? Why Thailand hasn?t been reprimanded for over-invoicing paddy procurement, booking unaccounted losses of billions of dollars and now distorting world?s international rice trade? All these are trade-related dilemmas and should be comprehensively dealt by WTO.
Another reason for targeting India is its export of around 54 million tonnes of agro-commodities in the last two years and the perception of developed countries? shrinking market slice. The decline in share is due to abundantly cheap supplies of corn and soy available from South America caused by extensive cultivation/yield of GMO crops. Likewise, cheaper shipments of wheat and corn from Russia/Ukraine have captured their traditional markets with lower unit value realisations. Thus, affected nations will use all their might to ensure that the rule book of WTO is adhered to.
In 2014-15, Indian shipments may be about 20 million tonnes due to the weaker monsoon but the quantum of export may pick up in subsequent years. There is no dumping of Indian agro items in the international market, as alleged. On the contrary, India has strategised and exploited niche market conditions, while supported by weaker currency. Its MSP of wheat and rice is aligned with international values. India?s top ranking in rice export, after 2011, is due to messy non-Basmati rice policies of Thailand, logistical advantage with the Middle-East and Africa, development and acceptability of high-yield Pusa-1121 varieties of Basmati rice by IARI, and rupee payment facilities with Iran (thrust by US sanctions). The entire rice export has originated from the open market and not from public stock holdings. Where is dumping?
Likewise, wheat export is taking place simultaneously both from private market and FCI at prices sometimes better than US/EU/Black Sea/Australia. For exports from FCI, there is a full transparency on export tenders awarded to the highest bidders. Even nominal minimum export price (MEP) of FCI takes into account acquisition costs and logistical expenses minus taxes. Local taxes aren?t exported and are subject to refund even to private exporters. Wheat export is at even keel with private trade. Where is dumping?
In last 4-5 years, corn production has risen from 18 to 22-23 million tonnes and Indian exports of 3-4 million tonnes per annum are feasible from private market. Soymeal and rapemeal exports of similar tonnages have been regular features by privates. The only hiccup is a short-term decision of raw sugar subsidy which is being reviewed.
Indian government?s inflexible position on the FSA and therefore on the TFA is in contradiction to the proclaimed agenda of reform of the BJP for PDS and FCI. If penal provisions of WTO are applied, about 30 million tonnes or more of India?s agro exports are at stake. An amicable solution of offering cash transfers has been made. In addition, dispensing arbitrary powers of cargo rejections (as seen in China), penalising acts of violence (as seen in Black Sea or elsewhere) and castigating those who fix MSP much above market price (as done by Thailand) may also form part of TFA/WTO.
Tejinder Narang
The author is a grains trade analyst. Views are personal
