While the new WTO deal agreed in Geneva on August 1 continues to be applauded in Pakistan by the government functionaries on an assumption that it promises numerous benefits to the country's economy, such a chorus seems to have come to a halt in India.
The chanting, begun by commerce minister Kamal Nath himself, scaled down when the agriculture ministry, after having gone through the details of the document, said that what was signed by India at Geneva was "a sell-out".
The ministry has now prepared a note for the prime minister that says that the country which played a key role in the finalization of the deal had in fact conceded much more than it got.
The clash between the two ministries over India's role at Geneva has triggered a hectic debate over how favourable the new WTO agreement is for the developing countries and that maybe they may have been cheated in the maze of legalities and confusing text and language by the rich countries.
The Economist, London, says, "The agreement has loopholes and exclusions that could end up undermining the benefits of the Doha round. America, for example, has managed to exclude its 'counter-cyclical' payments to farmers (made when prices are depressed) from the definition of agricultural production subsidies.
And many poor countries will be exempt from the requirements of lower tariffs. While some of those countries see this as "a coup" that will "protect" their industry for longer, in practice it means their consumers will have to pay more for their goods."
Davinder Sharma, an eminent Indian journalist and activist, says: "Even the WTO Director-General Panitchpakdi may not be aware as to how simple and universal business trick has been effectively used" by the rich states to clinch the deal.
The US Trade Representative Robert Zoellick and (the outgoing) EU Trade Commissioner Pascal Lamy, he says, have managed successfully to "hoodwink" the developing country negotiators who then went back more than satisfied with the "empty promise" of reduction in contentious agricultural subsidies, but in reality "getting a legal stamp of approval" from them that allows them (rich countries) to increase subsidies.
It goes without saying that any significant cut in the farm subsidies will be politically suicidal for the rich countries, more so in a year of election. President George Bush can never hope to fare better after agreeing to reduce subsidies for his farmers.
Similarly, European nations, especially France, Germany, and the Nordic countries would have landed themselves in a political turmoil the next day had the July framework agreement really meant any drastic cut in subsidies. That there has been no political reaction in any of these countries is an indication that they have managed to protect their subsidies.
CAFOD, a development NGO, says: "Rich countries can drive a horse, cart and several herds of well-funded cattle through this agreement. The deal includes major loopholes that allow developed countries to continue subsidizing at a very high levels... one striking feature is that economic power bends the applicability of WTO rules. Poor countries face the twin obstacles of chronic poverty and weak promises as they try to increase their share of global trade".
The loopholes are there in the details. For instance, Paragraph 7 of the 'Framework for Establishing Modalities in Agriculture' of the agreement says: "As the first instalment of the overall cut, in the first year and throughout the implementation period, the sum of all trade-distorting support will not exceed 80 per cent of the sum of Final Bound Total AMS (Aggregate Measurement of Support), plus permitted de minimis, plus the Blue Box at the level determined in paragraph 15."
And the para 15 says: "In cases where a Member has placed an exceptionally large percentage of its trade-distorting support in the Blue Box, some flexibility will be provided on a basis to be agreed to ensure that such a Member is not called upon to make a wholly disproportionate cut."
Reading the two paragraphs together one comes to the conclusion that all the efforts made by developing countries to see that trade-distorting Blue Box is removed has been nullified.
In fact, the Blue Box stands strengthened. This allows the developed countries to shift a large chunk of its agricultural subsidies (under the Green Box and Amber Box) to the Blue Box.
In other words, says Davinder Sharma, the advantage that developing countries had gained with the termination of the Peace Clause on Dec 31, 2003 has been negated. They will now be confronted by an equally detrimental Blue Box.
The Peace Clause, named so, was actually Article 13 of the WTO Agreement on Agriculture, entitled "Due Restraint" which prohibited countries from challenging other countries' use of export subsidies and domestic support programmes that were otherwise permitted under the agreement's rules.
It was part of the bargain struck by the European Commission and the United States to break the deadlock on agriculture during the Uruguay Round. The failure to make progress on agriculture threatened to derail the many other negotiations in progress.
This clause was, of course, unpopular with developing countries' negotiators but there was little option before them in order to secure an agreement and, hence, they accepted it as a necessary evil.
The new framework accord actually provides a cushion to the US and EU to raise farm subsidies from the existing level. It is obvious that the first instalment of a cut in subsidies by 20 per cent is not based on the present level of subsidies but on a much higher level that has been now authorized and is based on the three components: the final bound total AMS, plus permitted de minimis, plus the Blue Box. For the EU, this should come to Euro 95.76 billion and after applying the first cut, the subsidies that can be retained will be Euro 76.63 billion.
If all the components as specified in the WTO framework were to be added, the EU subsidies at present will total around Euro 55.8 billion, which is far less than what it is supposed to reduce.
In other words, EU gets enough leverage to increase its subsidies. No wonder, the so-called phase-out of agricultural subsidies, as committed by them at Geneva, has not caused any political crisis in any of the European countries.
Then, the EU has Blue Box subsidies to the tune of Euro 14.31 billion. This is a huge amount. The framework states: "In cases where a Member has placed an exceptionally large percentage of its trade-distorting support in the Blue Box, some flexibility will be provided on a basis to be agreed to ensure that such a Member is not called upon to make a wholly disproportionate cut." The EU, therefore, has nothing to worry about any cut in the Blue Box subsidies.
The United States, on the other hand, wants to shift the counter-cyclic payments of $180 billion that it has provided to farmers under the notorious Farm Bill 2002 - 70 per cent of this amount is to be spent in the first three years and before George Bush goes to elections - to the Blue Box. Since the WTO will now specify the historical period from which the Blue Box implementation will begin, it means that the US can now protect its illegal farm support.
In the case of cotton subsidies where the US provides a daily support of $10.7 million to its 25,000 cotton growers, and where the ruling of the WTO dispute panel has gone against the US cotton subsidies, it is interesting to note that the WTO will not take any action.
All that the WTO General Council has done is to "instruct the Director General to consult with the relevant international organizations, including the Bretton Woods Institutions, the Food and Agriculture Organization and the International Trade Centre to direct effectively existing programmes and any additional resources towards development of the economies where cotton has vital importance." The wording so used in the text is really disturbing.
Special and Differential Treatment was a measure that was originally carved out for the developing countries. But, in reality, these measures were used only by the developed countries.
Instead of dispensing with these measures, the framework agreement legitimizes its application for the rich countries. The only redeeming feature for the developing countries is that they have been promised that a special safeguard mechanism will be established.
Davinder Sharma observes, this is where the developing countries need to exert pressure, and see that they have the right to re-impose tariffs to block cheaper imports.
As if the massive subsidies are not enough, he says, the developed countries have used high tariffs to successfully block imports from developing countries. The special safeguards measures (SSG) have so far been used by 38 rich countries to restrict imports from developing countries.
The question of market access becomes important in the light of the special and differential treatment (SDT), special safeguard measures (SSM) and the domestic support (including Green Box subsidies) remaining intact in the developed countries.
Using a tiered formula, the developed countries have managed to seek an overall tariff reductions from bound rates and "substantial improvements in market access will be achieved for all products."
The only defence that the developing countries have been allowed is to label some of their important agricultural products as 'sensitive' and bring some other under 'special product' category.
This 'benevolence' is no justification for the developing countries to rejoice as some of them are seen doing so. The fact is that the developed countries have also been allowed the same provisions, which means that they can term these as sensitive and thereby deny market access.
For instance the US, the EU, Japan and Canada maintain tariff peaks of 350 to 900 per cent on food products such as sugar, rice, dairy products, meat, fruits, vegetables and fish, which can be easily brought under the category of 'sensitive'.
Davinder Sharma says that a country like India cultivates some 250 different crops a year whereas Europe does not grow more than 25. For India, therefore to say that areca nut is not a sensitive product would mean destroying the livelihood of thousands of farmers cultivating it, from cheaper imports. But to expect WTO to accord 'special product' status to over 200 crops from India would be asking for the impossible.
The hard fact is that agricultural subsidies had been, and will remain, the bone of contention in the ongoing trade negotiations. It is because of the disagreement on the reduction of the subsidies, to the tune of US $320 billion, in the rich countries that the developed countries had refused to budge thereby even allowing the collapse of the WTO Cancun Ministerial in September 2003. The question therefore is what made them change their stand and that too in a year when the US is going for elections?
