US aiming to make flawed and skewed UR agri-disciplines permanent
Published in SUNS #8680 dated 15 May 2018

Geneva, 14 May (D. Ravi Kanth) - India has categorically dismissed a counter-notification from the United States at the World Trade Organization that India breached the permissible limits for trade-distorting domestic support for wheat and rice as per the Uruguay Round Agreement on Agriculture.

After blocking the permanent solution for public stockholding programs for food security at the World Trade Organization's eleventh ministerial meeting in Buenos Aires last December, the United States is now targeting India's agriculture support programs for wheat and rice, which remain the staple for more than 1.3 billion people in India.

On 9 May, the US circulated a 12-page counter-notification alleging that India spent vastly in excess of its scheduled commitments for wheat and rice as per its de minimis limit of 10%.

The US counter-notification, the first of its kind since the establishment of the WTO in 1995, said "India's apparent MPS [market price support] for wheat appears to have been over 60% of the value of production in each of the four years (between 2010 and 2013) for which India has notified data."

India's "apparent MPS for rice appears to have been over 70% of the value of production in each of the years," according to the notification.

Without mentioning India's latest notification of domestic subsidies for more than 20 agricultural items, the US picked India's two most sensitive items. "India appears to be providing significant market price support, both in terms of absolute value and as a percentage of the value of production, for wheat and rice," the US said.

The US alleged that "India's notifications for the years (2010-2013) appear to dramatically under-report the value of India's MPS [Market Price Support] for wheat and rice."

The US said: "For example, India's notification for MY 2013/14 showed a value of support converted from US dollars of Rs. 120,015.67 million for rice and negative Rs. 49,477.51 million for wheat.

[India notified MY 2013/14 values of -$817.81 million for wheat and $1,983.73 million for rice. The United States converts India's notified MPS values for MY 2013/14 in million USD to million Rs. using India's notified exchange rate for 2013-14 of 60.50 Rs. to 1 USD.]

"By comparison, the United States estimates that MPS was Rs. 1,780,185 million for MY 2013/14 for rice and Rs. 964,973 million for MY 2013/14 for wheat. The differences between India's reported figures and the apparent actual figures for other years are of similar magnitude."

The US also alleged that "India has not notified total value of production (VoP) for any commodity in its domestic support notifications for the years that the United States has examined" in its counter-notification.

It maintained the value of production (VoP) data based on India's national accounts statistics. The US said it is basing its calculations/conclusions in accordance with the Korea beef trade dispute case. The US said "the Appellate Body in Korea - Beef considered the meaning of the phrase "quantity of production eligible to receive the applied administered price" and reached a similar understanding."

The Appellate Body stated that "production eligible to receive the applied administered price" has a different meaning in ordinary usage from "production actually purchased".

The Appellate Body further defined "eligible" as that which is "fit or entitled to be chosen". It noted that "[p]roduction actually purchased may often be less than eligible production." Thus, "eligible production" within the meaning of Annex 3, paragraph 8 of the AoA is production, which is fit or entitled to receive the applied administered price, whether or not the production was actually purchased.

The US specifically targeted the minimum support prices provided by India which enable states and the federal government in New Delhi to undergird its public distribution programs.

The US took aim against India's emergence as "a significant exporter for rice and wheat" in the international market.

Effectively, the US sharply differed with India on both methodology and the data. For example, India has provided its notifications in dollars while the US said the data must be in Indian rupees which would reflect the inflation between 1986-88 and 2013.

The US used value of production for calculating the overall quantity of support. The Indian notifications are based on what is procured for the public distribution support (PDS).

"The United States expects our trading partners to comply with the reporting requirements they agreed to when joining the WTO," said the US Trade Representative Ambassador Robert Lighthizer on 9 May.

"India represents a massive market, and we want greater access for US products, but India must [be] transparent about their practices," said the US Agriculture Secretary Sonny Perdue.

In sharp response to the US counter-notification,  India's trade envoy Ambassador J S Deepak said that "India has already rejected it because of the flawed assumptions and erroneous methodologies used by the US for its calculations."

"During my meeting with US chief agriculture negotiator Ambassador Gregg Doud in Geneva on 4 May, I told him categorically the US counter notification is baseless."

The Indian trade envoy informed the US that its analysis and data are based on what US commodity groups had provided. Prior to the meeting with the US chief agriculture negotiator, a commodity trade lobbyist had already provided the data and conclusions to India (see:

Besides, "I asked the US to submit its notification before finding fault with other countries' notifications," Ambassador Deepak said.

"The US counter-notification vindicates why the US had blocked India's core demand for the permanent solution for public stockholding programs at Buenos Aires last December," said an agriculture trade analyst from Paris, who asked not to be quoted.

"The US agriculture secretary's statement makes it clear that Washington wants to capture the Indian market for wheat and rice," the analyst argued.

For the past six years, Indonesia, on behalf of the G33 developing countries in which India and China are key members, demanded that the calculation for the market price support based on the external reference price of 1986-88 must be changed to reflect the price inflation and the rising population of poor people in developing countries.

The G33 also demanded that the market price support programs for cereals must be included in the green box payments which are exempt from reduction commitments.

"The WTO's "Green Box" which is meant to hold non-trade-distorting subsidies, is now home to about $120 billion of the $130 billion in [US] nutrition programs and farm supports," said Timothy A. Wise, an academic at Tufts University. "This dwarfs India's commitments," he argued in his 2013 article - "Why WTO needs a Hypocrisy Clause."

On 25 October 2017, the Indian trade envoy had said the Agreement on Agriculture "is skewed in favour of a few developed members and provides considerable space and flexibility for them to provide (farm) subsidies and further, to concentrate (farm) subsidies on a few products."

In short, the US, which has systematically killed the permanent solution at the Buenos Aires meeting and later embarked on a mission to finish off the Appellate Body by blocking the selection process for filling three vacancies, is now pursuing an agenda to force developing countries to proceed according to the Uruguay Round commitments that are found to be flawed and tilted in favour of the developed countries.

The developing countries thus now face another battle with the US that is targeting the public support programs based on market price support arrangements. After killing the Doha Round, the US seems determined to make permanent the skewed UR disciplines.