7 PM | Agriculture : We need better trade deal for our farmers. | 10th October, 2019

Context: Agriculturalists in India are keen on improving exports and need all the help they can get to fight unfair world trade arrangements.

More in news:

  • The WTO hosted the first-ever World Cotton Day on October 7 in Geneva to highlight the challenges of cotton economies.
  • This event stems from the application by the Cotton-4 countries (Benin, Burkina Faso, Chad and Mali) to the United Nations General Assembly for its official recognition of a World Cotton Day, reflecting the importance of cotton as a global commodity.

World Cotton Day:

  • The WTO organized the World Cotton Day event in collaboration with the secretariats of the United Nations Conference on Trade and Development (UNCTAD), United Nations Food and Agriculture Organization (FAO), International Cotton Advisory Committee (ICAC) and the International Trade Centre (ITC).
  • Objectives:
    • Give exposure and recognition to cotton and all its stakeholders in production, transformation and trade.
    • Engage donors and beneficiaries and strengthen development assistance for cotton.
    • Seek new collaborations with the private sector and investors for the cotton-related industries and production in developing countries.
    • Promote technological advances, as well as further research and development on cotton.
  • Significance:
    • World Cotton Day provides a common platform to the international community and the private sector to share knowledge and showcase cotton related activities and products.
    • World Cotton Day will be celebrated across the world every year. The day will host events that give exposure to the cotton farmers, processors, researchers and businesses.

Type of trade negotiators:

  • The strong economies that have the means and muscle to extort the best deals for their people. Bringing up the rearare countries that have neither, and cannot drive a hard bargain.
  • The second category accounts for most countries, caught between colonial pasts, new trade rules and blocs and national ambitions, all pulling in different directions. India is in the second slot.

The distorted multilateral trade agreements:

Multi-Fibre Agreement (MFA):

  • The Multi-Fibre Agreement was set up in 1974 as a set of formal quota agreements and restrictions, governing textiles and the clothing trade between developing countries and the developed world. The MFA replaced the 1964 Agreement in International Trade in Cotton Textiles.
  • The agreement was first established under the auspices of the then-existing General Agreement on Tariffs and Trade (GATT). The origins acknowledged both
  • the threat to developed markets from cheap clothing and textile imports in terms of market disruption and the impact on their own producers,
  • the importance of these exports to developing countries in terms of their own economic development and as a means to diversify export earnings.
  • The agreement attempted to mitigate the potential conflict to ensure continued cooperation in international trade.
  • In this context, the quotas were described as an orderly means in which to manage the global clothing and textiles trade in the shorter term to prevent market disruptions.
  • The ultimate aim remained one of reduction of barriers and liberalization of trade, with developing countries expected to take an increasing role over time in this trade.

However, MFA remains one of the longest trade distortions in multilateral trade history.

Agreement on Agriculture (AOA):

The WTO Agreement on Agriculture, which came into force in 1995, represents a significant step towards reforming agricultural trade and making it fairer and more competitive. The Agriculture Committee oversees implementation of the Agreement.

The WTO Agreement on Agriculture contains provisions in 3 broad areas of agriculture and trade policy: market access, domestic support and export subsidies.

  • Market Access: This includes tariffication, tariff reduction and access opportunities.
    • Tariffication means that all non-tariff barriers such as quotas, variable levies, minimum import prices, discretionary licensing, state trading measures, voluntary restraint agreements etc. need to be abolished and converted into an equivalent tariff.
    • Ordinary tariffs including those resulting from their tariffication are to be reduced by an average of 36% with minimum rate of reduction of 15% for each tariff item over a 6 year period.
    • Developing countries are required to reduce tariffs by 24% in 10 years.
    • Developing countries as were maintaining Quantitative Restrictions due to balance of payment problems, were allowed to offer ceiling bindings instead of tariffication.
  • Domestic Support: Under this agreement, the countries have to comply with reduction commitments such as to limit their Total Aggregate Measure of Support (AMS) within specified limits.
    • The developed countries have to limit their domestic support (covered under amber box subsidies) within 5% and developing countries to limit within 10% of total agriculture production. One trade negotiator said this amounts to a “double whammy” for India, which finds itself in a “heads we win, tails you lose” trap when it comes to trade in cotton and textiles.
    • The de minimis level or domestic support subsidies of total agriculture production to be calculated from base year 1986 –1988.
    • The domestic support subsidies are categorized into three boxes that are as follows:       
    • Amber Box: It contains all domestic support measures that are mean to distort trade practices in agriculture. All these types of supports are subject to limits which are termed as ‘de minimis’ levels.  
    • Blue Box: It includes subsidies that are linked to one product, but that do not increase according to production levels. At present there are no limits on spending on blue box subsidies. 
    • Green Box: These are subsidies which causes no or little trade distortion in agriculture sector. They tend to be programs that are not targeted at particular products and not include direct income supports for farmers. They may include environmental protection, regional development, R&D or farmer training programs etc. “Green box” subsidies are therefore allowed without limits.
  • Export Subsidies:
    • Developed Countries: These countries have to reduce their export subsidies expenditure by 36% and volume by 21% in next 6 years from 1986 – 1990 levels.
    • Developing Countries: These countries have to reduce their export subsidies expenditure by 24% and volume by 14% in next 10 years from 1986 – 1990 levels.

Conclusion: India’s textiles sector holds a significant role in Indian economy as it is one among the earliest established industries and the growth and development of this sector has a direct bearing on the economic development of India. It is one of the prominent sectors of Indian economy in terms of its contribution to output, employment and foreign exchange earnings. It is the second largest employment provider, after agricultural sector.

Cotton and textile exports from India are considered the poor cousins of patents and information technology in the fight for free trade. Countries around the world value their national products and treat them as national treasures. Khadi is associated with India’s freedom struggle. However, India is still struggling under the world’s current rules on trade.

In order to improve the export performance, India needs to continue pushing its exports to non-traditional emerging markets of Africa, Asia and Latin America. Indian textile industries inherent strength such as availability of raw materials, especially cotton, integrated operations and design skills would favour the shift of world export of textile industry to India.

Source: https://www.livemint.com/opinion/online-views/opinion-it-s-high-time-we-got-a-better-trade-deal-for-our-farmers-11570641934314.html

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