Declining Indian Agricultural Trade in an Unequal World

Abstract

The Uruguay Round established rules that were expected to improve market access for agricultural products and reduced export subsidies and domestic support payments as an opportunity to level the playing field. Major global economic benefits were predicted from the establishment of WTO and Agreement on Agriculture (AoA). But what has happened since the Uruguay Round? Industrialized countries systematically use sub-sidies to skew the benefits of agricultural trade in their favour. The overall level of support to agriculture in these countries has fallen very little. What does free trade mean in a context where the world's largest ex-porter of dairy produce, the EU, is providing subsidies in excess of US $300 billion a year? India is the num-ber one producer of milk and yet cannot compete. The European Union and the United States have invented a category of support—known as the Green Box and the Blue Box in WTO talks—deemed to be decoupled from production and therefore exempt from cuts in subsidies. The persistence of high trade barriers as well as regulatory controls related to food safety and environment make trade rules unfair. The overall feeling is that AoA is an ‘unequal treaty’ as high support continues in OECD countries. There is no level playing field. Agricultural surpluses in rich countries, generated through protection and subsidies and then dumped onto world markets, have hurt agricultural development in developing countries. Developing countries as a whole are projected to increase their net imports of cereals for all purposes to a total of more than 200 million tonnes of net annual imports from the developed countries by 2020. Developing countries like India will become net agricultural importers. It is argued that the Uruguay Round agreements did not go far enough in reducing trade barriers in developed countries, to have a significant impact. It did, however, establish a framework for negotiating further reductions in support. The Doha Round offers the opportunity to level a tilted playing field. Equally important is India improving its own agricultural policies. For years we have discriminated against agriculture.