S. P. Shukla*
23rd May 2008
Implications of the Latest (19.05.08) Revised Texts on Agriculture and NAMA (Non-Agricultural Market Access)
Intrinsically, the latest texts do not change "the big picture" as far as developing countries are concerned: If anything, they confirm the apprehensions sounded repeatedly by many observers for some time that the attempted "round up" of the Doha process was tilting the outcome decisively against the interest of developing countries. This happens in the following ways.I
In Agriculture, despite the considerable "cleaning up" of the text by the Chairman, the fundamental imbalance persists. The market access sought by developed countries into the developing countries is ensured by the maintenance of the three-tiered tariff reduction formula which has been there for some time. Which, broadly speaking, requires developing countries to reduce their tariffs on agricultural products by 36 percent as against the developed countries obligation to reduce them by 54 percent. It must be noted that an average cut of 36 percent on bound tariffs in agriculture is a stiff proposition. As against this, the issue of elimination/substantial reduction in subsidies by developed countries, particularly USA, still remains hanging, awaiting “political solution" presumably at the ministerial conference. The possible range to which USA may agree to "bring down" the narrowly defined domestic support has been indicated at $12 - $16 billion, whereas the current level (2007) of such subsidies is only $11 billion per annum. Even if the USA finally accepts a middling figure in this range, it will be no great achievement towards the goal of substantial reduction. More so, because the subject matter of the attempted reduction constitutes only about 20 percent of the total state support whereas the remaining 80 percent of such support for the US agriculture is in the form of "green box "subsidies which are outside the range of reduction aimed at and are not subject to any worthwhile multilateral discipline, despite some provisions sought to be incorporated in the text for better "surveillance".
23rd May 2008
Implications of the Latest (19.05.08) Revised Texts on Agriculture and NAMA (Non-Agricultural Market Access)
Intrinsically, the latest texts do not change "the big picture" as far as developing countries are concerned: If anything, they confirm the apprehensions sounded repeatedly by many observers for some time that the attempted "round up" of the Doha process was tilting the outcome decisively against the interest of developing countries. This happens in the following ways.I
In Agriculture, despite the considerable "cleaning up" of the text by the Chairman, the fundamental imbalance persists. The market access sought by developed countries into the developing countries is ensured by the maintenance of the three-tiered tariff reduction formula which has been there for some time. Which, broadly speaking, requires developing countries to reduce their tariffs on agricultural products by 36 percent as against the developed countries obligation to reduce them by 54 percent. It must be noted that an average cut of 36 percent on bound tariffs in agriculture is a stiff proposition. As against this, the issue of elimination/substantial reduction in subsidies by developed countries, particularly USA, still remains hanging, awaiting “political solution" presumably at the ministerial conference. The possible range to which USA may agree to "bring down" the narrowly defined domestic support has been indicated at $12 - $16 billion, whereas the current level (2007) of such subsidies is only $11 billion per annum. Even if the USA finally accepts a middling figure in this range, it will be no great achievement towards the goal of substantial reduction. More so, because the subject matter of the attempted reduction constitutes only about 20 percent of the total state support whereas the remaining 80 percent of such support for the US agriculture is in the form of "green box "subsidies which are outside the range of reduction aimed at and are not subject to any worthwhile multilateral discipline, despite some provisions sought to be incorporated in the text for better "surveillance".
India (like a large number of developing countries forming G-33 led by
Indonesia) has basically protective or defensive interest in these
negotiations. We missed the bus by not insisting on ensuring the right
to impose quantitative restrictions on imports to safeguard the
livelihood of millions of small and marginal peasants. We placed our
trust in the mechanisms of Special Products and Special Safeguard
Mechanism. G-33 proposed that developing countries should have a right
to self-designate 20 percent of tariff lines as Special Products which
would not be subject to any tariff cut. As against that the text speaks
of only 8 percent of tariff lines being eligible to be treated as
Special Products and of these, only 40 percent, i.e. only 3.2 percent
of the tariff lines, to be subject to no tariff cut and remaining 60
percent i.e. 4.8 percent of tariff lines to be subject to an average of
15 percent cut. We have 715 tariff lines in agriculture. We wanted 140
tariff lines to be treated as Special products; now the text implies
that we would get only 57 lines, of which only 23 lines would be
subject to no tariff cut and 34 subject to a tariff cut of 15 percent.
Considering multiplicity of our agricultural product range and the
crucial importance of these products for livelihood, the range of
protection available is too narrow and too weak.
As regards Special Safeguard Mechanism, the criteria in the text for the price-based measures are too restrictive and ineffectual. Thus, the provision to impose additional duty to protect indigenous peasantry from sharp decline in international prices and consequent surge or threat of surge of imports can be invoked only if the import price declines to or below the designated "trigger price" which the text suggests to be 70 percent of the average import price of the preceding three years. And the additional duty to be levied can not exceed 50 percent of the difference between the actual import price and the trigger price. By definition, the import price will continue to remain much below the "trigger price" even after the levy of additional duty. Moreover, this measure will be applicable only on a shipment-by-shipment basis. The protection so offered is therefore ineffectual.
The other safeguard measure is volume-based. The text gives two alternative sets of criteria, one visualising relatively lower level of increase in imports (ranging from 105 percent and above of the average imports of the preceding three years) and the other visualising higher level of increase in imports (ranging from 130 percent of the similar average) as the trigger level. The former permits relatively higher level of additional duty while the latter prescribes relatively lower such level. While the former is clearly more desirable, the choice of alternatives would be the subject of negotiations and what would emerge may be somewhere between the two levels. That would not be adequate to protect our interests. Moreover, the text makes it clear that such measure can not be invoked for more than a year or a season, as applicable, and it can not be invoked again for the same product before a lapse of two years. The volume-based and price-based measures can not be invoked simultaneously for the same product.
It is well known that adverse impact of decline in international prices in a domestic market integrated with the world market is felt even before or without large scale actual imports. What is needed to insulate the peasantry from such adverse impact is a strong signal like immediate imposition of quantitative restrictions. Finely calibrated, halting and inadequate measures taken after the damage is done are of little use. All in all the protection regime visualised in the text is too limited and ineffectual to protect the livelihood of millions of small and marginal farmers against the surge or threat of surge of cheap imports of products which would continue to be heavily subsidised.
It is necessary to stress that the current situation of high international prices of some agricultural products should not lull us into a false sense of security and lead us to accept this weak and ineffectual regime of protection. The cyclical and speculative reasons are as much a part of the story as some long term factors. The story of sugar prices is a case in point. Despite all talk of diversion of food crops to bio-fuel production and increasing demand from emerging economies, the sugar prices are in doldrums, ranging around 10 cents a pound, a level below the cost of production of the most efficient producers. The subsidy, taxation and import regimes in USA and EU account for this phenomenon. One should not be taken in by self-serving arguments put forward by EU and USA in this context.
There are a couple of other points to be noted in this regard. The right of developing countries to "self-designate" Special Products is recognised in the text but only apparently. Otherwise there need not have been a detailed commentary or guidelines as provided in the "Illustrative List of Indicators for Designation of Special Products”. This restricts the right to self-designate. And that too when the restriction is already there in terms of numbers of such products and very limited level of protection visualised. The text of "Illustrative List...” uses the terms "significant proportion" or "significantly" too often. A multilateral legal text providing such criteria with quantitative innuendoes will lead eventually to avoidable questioning by interested parties and a demand for production of internationally verifiable data to support the fulfillment of the criteria by those who seek to invoke the protection for Special Products. Even at this stage, we must insist on deletion of such guidelines from the text. It is enough to have only the basic criteria of food security, livelihood security and rural development as earlier agreed upon. It is interesting to recall that when "Sensitive Product" category was invented by the developed countries in the negotiations leading to Agreement on Agriculture in 1990s, incorporation of similar guidelines was not considered necessary for their identification.
There are certain modifications necessary to be introduced in the text of Annex B (Amendments to Annex 2 of the Agreement on Agriculture) for reasons that are obvious:
(h) add the following policies or programmes to the list already included in the text to spell out non-objectionable subsidies or assistance: "debt-relief to peasantry; promotion of and assistance to farmers’ co-operatives; comprehensive land and water use policies and programmes."
Modification of footnotes 5 and 6: add "fibers" to "foodstuff" and add "single commodity dependent producers" to "low income/resource poor producers" in the text. This is necessary to take care of the schemes like monopoly or state procurement of cotton or jute and to protect the interest of cotton/jute farmers.
II
As regards the NAMA text, the tilt against the developing countries is even more blatant. The universal binding of tariffs, the line-by-line tariff cutting instead of average reduction target, application of the "Swiss Formula" and more than proportionate reduction in the tariffs of developing countries through low coefficients and few exceptions, which constituted the hallmark of the earlier text continue to govern the approach in the latest text. What is worse, the "Para 8 flexibilities" which were insisted upon by developing countries to mitigate the harshness of the approach have been effectively diluted, if not nullified, by the latest text.
The choice of low coefficients leaves developing countries with little margin or maneuverability. The simulation exercise done by the Third World Network had shown that the developing countries which have had historically high tariffs would need very high coefficients to avoid or smoothen the adverse impact on their industries. But the ranges prescribed now are effectively the same as before i.e. 7-9 for developed countries and 19-26 for developing countries. The latter has been sub-grouped in three categories, each associated with different regimes of flexibilities, the underlying principle being that higher the coefficient chosen, the lesser will be the flexibility in terms of deviation from application of the formula cut, it being zero in case of the highest range of coefficients viz. 23-26 . Prima facie, it appears that the middle range viz. 21-23 is the one that many developing countries would have to adopt. This will give them the flexibility of having 5 percent of lines left unbound provided they do not cover more than 5 percent of imports, a new conditionality introduced by the latest text to further whittle down the scope of flexibilities.
Our current level of applied tariff is, on average, 10 percent, and the bound level average is 34 percent. The cut which the formula would likely entail will require drastic reduction of bound level of tariff. With few exceptions available under the dispensation of the text, the door to deindustrialisation will be wide open.
III
There is therefore little to "take" and quite a lot to "give" in the dispensation visualised in the two texts. But the story does not end there. USA and Australia have already called for a "A Signaling Conference" of the Ministers on the Services issue to give a push to the negotiations in that area and obtain new commitments. Which would mean building up of pressures on emerging economies in particular to integrate their services markets, particularly the financial services markets with the global market. This has a sinister implication at the present times. The "toxic waste” of the financial services market in USA which virtually brought the recession in US economy needs to be dumped somewhere. And what could be a better place, in the US eyes, for the purpose than the burgeoning financial services sector in a country like ours. We have already a powerful "in-house" lobby advocating, as in the Economic Survey, liberalisation and further opening of banking, insurance and other financial services sectors. US would, therefore, knowingly enhance their pressure in this regard. And there goes another substantial "give" with un-be-known consequences for our financial sector and the economy as a whole.
IV
Last, but certainly not the least, consideration why the denouement being carefully planned and forced on us should be rejected totally is the stark fact that the present US Administration has no fast-track authority to conclude the negotiations in a credible manner. The fast-track authority which gives the credibility to the offers made by USTR in the course of negotiations lapsed in July 2007. There is no hope in the heaven that the US Congress will give it to the present Administration on its last legs. What happened to the US-Colombia FTA deal submitted by the US President to the Congress in April 2008 is an eye-opener for the negotiators in Geneva. The US Congress simply changed the timeline rule and refused to consider the FTA, despite the fact that the FTA deal in question was well covered by the fast-track authority. If any doubt was still lingering, the more recent passing of the outrageous Farm Bill with a veto-proof majority by the two houses of the US legislature should make it crystal-clear that the Congress is in no mood to oblige the present administration with a feather in its cap by allowing it to successfully wind up the Doha Round. Whatever "co-operation" we may extend by agreeing to the unequal bargain at this stage in the mistaken belief that it is good for the global economy, will only bind us to it , leaving free the new administration in USA and the Democrats-dominated legislature there to ask for "more" when time comes to approve the deal.
The conclusion is clear: We must not yield the ground either in Agriculture or in NAMA, although the position taken by us, along with the G-33 in Agriculture and with G-11 in NAMA, itself was not adequate to protect our interests. We should expose the lack of authority and, therefore, credibility of USTR in the negotiations at this stage. And refuse to proceed further until the USTR is reinvested with such authority.
S.P. Shukla is the former Indian Ambassador to GATT and is presently the convenor of the Indian Peoples Campaign Against WTO. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
As regards Special Safeguard Mechanism, the criteria in the text for the price-based measures are too restrictive and ineffectual. Thus, the provision to impose additional duty to protect indigenous peasantry from sharp decline in international prices and consequent surge or threat of surge of imports can be invoked only if the import price declines to or below the designated "trigger price" which the text suggests to be 70 percent of the average import price of the preceding three years. And the additional duty to be levied can not exceed 50 percent of the difference between the actual import price and the trigger price. By definition, the import price will continue to remain much below the "trigger price" even after the levy of additional duty. Moreover, this measure will be applicable only on a shipment-by-shipment basis. The protection so offered is therefore ineffectual.
The other safeguard measure is volume-based. The text gives two alternative sets of criteria, one visualising relatively lower level of increase in imports (ranging from 105 percent and above of the average imports of the preceding three years) and the other visualising higher level of increase in imports (ranging from 130 percent of the similar average) as the trigger level. The former permits relatively higher level of additional duty while the latter prescribes relatively lower such level. While the former is clearly more desirable, the choice of alternatives would be the subject of negotiations and what would emerge may be somewhere between the two levels. That would not be adequate to protect our interests. Moreover, the text makes it clear that such measure can not be invoked for more than a year or a season, as applicable, and it can not be invoked again for the same product before a lapse of two years. The volume-based and price-based measures can not be invoked simultaneously for the same product.
It is well known that adverse impact of decline in international prices in a domestic market integrated with the world market is felt even before or without large scale actual imports. What is needed to insulate the peasantry from such adverse impact is a strong signal like immediate imposition of quantitative restrictions. Finely calibrated, halting and inadequate measures taken after the damage is done are of little use. All in all the protection regime visualised in the text is too limited and ineffectual to protect the livelihood of millions of small and marginal farmers against the surge or threat of surge of cheap imports of products which would continue to be heavily subsidised.
It is necessary to stress that the current situation of high international prices of some agricultural products should not lull us into a false sense of security and lead us to accept this weak and ineffectual regime of protection. The cyclical and speculative reasons are as much a part of the story as some long term factors. The story of sugar prices is a case in point. Despite all talk of diversion of food crops to bio-fuel production and increasing demand from emerging economies, the sugar prices are in doldrums, ranging around 10 cents a pound, a level below the cost of production of the most efficient producers. The subsidy, taxation and import regimes in USA and EU account for this phenomenon. One should not be taken in by self-serving arguments put forward by EU and USA in this context.
There are a couple of other points to be noted in this regard. The right of developing countries to "self-designate" Special Products is recognised in the text but only apparently. Otherwise there need not have been a detailed commentary or guidelines as provided in the "Illustrative List of Indicators for Designation of Special Products”. This restricts the right to self-designate. And that too when the restriction is already there in terms of numbers of such products and very limited level of protection visualised. The text of "Illustrative List...” uses the terms "significant proportion" or "significantly" too often. A multilateral legal text providing such criteria with quantitative innuendoes will lead eventually to avoidable questioning by interested parties and a demand for production of internationally verifiable data to support the fulfillment of the criteria by those who seek to invoke the protection for Special Products. Even at this stage, we must insist on deletion of such guidelines from the text. It is enough to have only the basic criteria of food security, livelihood security and rural development as earlier agreed upon. It is interesting to recall that when "Sensitive Product" category was invented by the developed countries in the negotiations leading to Agreement on Agriculture in 1990s, incorporation of similar guidelines was not considered necessary for their identification.
There are certain modifications necessary to be introduced in the text of Annex B (Amendments to Annex 2 of the Agreement on Agriculture) for reasons that are obvious:
(h) add the following policies or programmes to the list already included in the text to spell out non-objectionable subsidies or assistance: "debt-relief to peasantry; promotion of and assistance to farmers’ co-operatives; comprehensive land and water use policies and programmes."
Modification of footnotes 5 and 6: add "fibers" to "foodstuff" and add "single commodity dependent producers" to "low income/resource poor producers" in the text. This is necessary to take care of the schemes like monopoly or state procurement of cotton or jute and to protect the interest of cotton/jute farmers.
II
As regards the NAMA text, the tilt against the developing countries is even more blatant. The universal binding of tariffs, the line-by-line tariff cutting instead of average reduction target, application of the "Swiss Formula" and more than proportionate reduction in the tariffs of developing countries through low coefficients and few exceptions, which constituted the hallmark of the earlier text continue to govern the approach in the latest text. What is worse, the "Para 8 flexibilities" which were insisted upon by developing countries to mitigate the harshness of the approach have been effectively diluted, if not nullified, by the latest text.
The choice of low coefficients leaves developing countries with little margin or maneuverability. The simulation exercise done by the Third World Network had shown that the developing countries which have had historically high tariffs would need very high coefficients to avoid or smoothen the adverse impact on their industries. But the ranges prescribed now are effectively the same as before i.e. 7-9 for developed countries and 19-26 for developing countries. The latter has been sub-grouped in three categories, each associated with different regimes of flexibilities, the underlying principle being that higher the coefficient chosen, the lesser will be the flexibility in terms of deviation from application of the formula cut, it being zero in case of the highest range of coefficients viz. 23-26 . Prima facie, it appears that the middle range viz. 21-23 is the one that many developing countries would have to adopt. This will give them the flexibility of having 5 percent of lines left unbound provided they do not cover more than 5 percent of imports, a new conditionality introduced by the latest text to further whittle down the scope of flexibilities.
Our current level of applied tariff is, on average, 10 percent, and the bound level average is 34 percent. The cut which the formula would likely entail will require drastic reduction of bound level of tariff. With few exceptions available under the dispensation of the text, the door to deindustrialisation will be wide open.
III
There is therefore little to "take" and quite a lot to "give" in the dispensation visualised in the two texts. But the story does not end there. USA and Australia have already called for a "A Signaling Conference" of the Ministers on the Services issue to give a push to the negotiations in that area and obtain new commitments. Which would mean building up of pressures on emerging economies in particular to integrate their services markets, particularly the financial services markets with the global market. This has a sinister implication at the present times. The "toxic waste” of the financial services market in USA which virtually brought the recession in US economy needs to be dumped somewhere. And what could be a better place, in the US eyes, for the purpose than the burgeoning financial services sector in a country like ours. We have already a powerful "in-house" lobby advocating, as in the Economic Survey, liberalisation and further opening of banking, insurance and other financial services sectors. US would, therefore, knowingly enhance their pressure in this regard. And there goes another substantial "give" with un-be-known consequences for our financial sector and the economy as a whole.
IV
Last, but certainly not the least, consideration why the denouement being carefully planned and forced on us should be rejected totally is the stark fact that the present US Administration has no fast-track authority to conclude the negotiations in a credible manner. The fast-track authority which gives the credibility to the offers made by USTR in the course of negotiations lapsed in July 2007. There is no hope in the heaven that the US Congress will give it to the present Administration on its last legs. What happened to the US-Colombia FTA deal submitted by the US President to the Congress in April 2008 is an eye-opener for the negotiators in Geneva. The US Congress simply changed the timeline rule and refused to consider the FTA, despite the fact that the FTA deal in question was well covered by the fast-track authority. If any doubt was still lingering, the more recent passing of the outrageous Farm Bill with a veto-proof majority by the two houses of the US legislature should make it crystal-clear that the Congress is in no mood to oblige the present administration with a feather in its cap by allowing it to successfully wind up the Doha Round. Whatever "co-operation" we may extend by agreeing to the unequal bargain at this stage in the mistaken belief that it is good for the global economy, will only bind us to it , leaving free the new administration in USA and the Democrats-dominated legislature there to ask for "more" when time comes to approve the deal.
The conclusion is clear: We must not yield the ground either in Agriculture or in NAMA, although the position taken by us, along with the G-33 in Agriculture and with G-11 in NAMA, itself was not adequate to protect our interests. We should expose the lack of authority and, therefore, credibility of USTR in the negotiations at this stage. And refuse to proceed further until the USTR is reinvested with such authority.
S.P. Shukla is the former Indian Ambassador to GATT and is presently the convenor of the Indian Peoples Campaign Against WTO. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
