Major North countries targeting South over agriculture
Published in SUNS #8865 dated 13 march 2019

Geneva, 12 Mar (D. Ravi Kanth) – After spiking the Doha Development Agenda (DDA) trade negotiations that aimed at bringing a development dimension in global farm trade, major developed countries led by the United States and Australia have begun targeting China, India, and other developing countries at the World Trade Organization based on the iniquitous Uruguay Round commitments, trade envoys told SUNS.

The US has filed several counter-notifications against India on cotton, rice, and wheat, while Australia, along with other countries such as Canada and the European Union, has charged India on alleged excess domestic support on pulses and sugar.

In a trade dispute initiated against India on 1 March, Australia has claimed that the federal and state-level domestic subsidies provided to Indian sugarcane and sugar producers have violated global trade rules.

[A similar dispute against India has been initiated by Brazil, a fellow-member of the Cairns Group led by Australia. In 2003, on the eve of the Cancun ministerial, with an emerging US-EU common front against developing countries over agriculture, Brazil had formed an alliance with India on agriculture at the WTO. It has since gone back on this. SUNS]

Canberra complained that India has provided export subsidies to its sugarcane and sugar producers in violation of global trade rules.

Significantly, Australia has never raised any trade dispute against the US which maintains protective barriers, including domestic subsidies, in the sugar sector.

Issues concerning market access and domestic subsidies for sugar in the US market were given a short shrift in the failed Trans-Pacific Partnership (TPP) negotiated outcomes.

During the US Trade Policy Review meeting last December, several members said that the US applies “high tariffs and restrictive quotas – for instance, in sugar, dairy and cotton. The US is also a heavy user of trade distorting support.”

Nevertheless, there is near unanimity among major developed countries to target China, India and other developing countries on agriculture at the WTO based on the Uruguay Round commitments. These developing countries are vulnerable under Uruguay Round commitments framed more than 25 years ago, said a trade envoy, who asked not to be quoted.

The 17-page complaint filed by Australia against India covers federal as well as state-level domestic subsidies.

The specific charges against the Indian sugar subsidies include that India has breached its global farm trade commitments by providing domestic subsidies far in excess of what New Delhi is allowed in the de minimis support.

Australia claims that “India did not schedule a domestic support reduction commitment level in Section I of Part IV of its Schedule XII” in the Uruguay Round commitments.

Consequently, India’s product-specific support is limited to a de minimis level at or below 10 per cent of the value of production.

It says that Indian domestic support, both at the federal and state-level for sugar, “are inconsistent with India’s obligations under Articles 3.2, 6.3 and 7.2( b) of the Agreement on Agriculture because they provide domestic support for sugarcane in excess of India’s de minimis entitlement.”

According to Australia, India “provides export subsidies for sugar or sugar cane through measures that include, but are not limited to, the legal instruments, policies and other measures.”

Since India did not schedule export subsidy reduction commitments for sugar, New Delhi is not entitled to provide export subsidies to its sugar exporters, Australia has argued.

Consequently, the export subsidies provided by India to its sugar exporters violated Articles 3.3, 8, 9.1 and 10.1 of the WTO’s Agreement on Agriculture, Australia has alleged.

“Furthermore, Australia considers these subsidies are inconsistent with India’s obligations under Article 3 of the Agreement on Subsidies and Countervailing Measures.”

India, according to Australia’s legal challenge, has provided domestic subsidies to its sugarcane growers through Minimum Sales Price (MSP) and other subsidies well above 10% of the value of sugar production.

Under Article 6.4 of the AoA (Agreement on Agriculture), India is allowed to provide up to 10% to its sugar producers, Australia has maintained.

Australia has also challenged subsidies provided by the Indian state governments such as Andhra Pradesh, Bihar, Haryana, Karnataka, Maharashtra, Tamil Nadu, Uttarakhand and Uttar Pradesh among others to their sugarcane growers through “state advised price” that sugar mills located in these states are required to pay.

According to Australia, India has also provided export subsidies to enable Indian sugar producers to sell sugar below its cost price in the international market.

India is not allowed to provide export subsidies for sugar as New Delhi has not scheduled export subsidy reduction commitment, Australia has argued.

India also failed to notify its domestic support for sugarcane and sugar since 1995-96.

Australia says that India’s measures are inconsistent with India’s obligations under the covered agreements, in particular:

(a) Articles 3.2, 3.3, 6.3, 7.2(b), 8, 9.1, 10, 18.2 and 18.3 of the Agreement on Agriculture;

(b) Articles 3 and 25 of the Agreement on Subsidies and Countervailing Measures; and

(c) Article XVI of the General Agreement on Tariffs and Trade 1994.

As a first step for resolving the trade dispute on sugar, India is required to enter into consultations and answer all the specific issues raised by Canberra within the next 30 days.

If Australia and India fail to settle the dispute during the consultations, then, Australia can call for establishing a dispute settlement panel to adjudicate the dispute.

New Delhi has already dismissed the sugar subsidies complaint when they were raised at the meetings of the WTO’s Committee on Agriculture, saying that India’s sugar exports are insignificant to cause any ripple in the international sugar market.

Significantly, at a time when the future of the WTO’s highest adjudicating body, the Appellate Body (AB), hangs in the balance because of the US opposition to filling the vacancies in the AB and the Doha Development Round negotiations have been stalemated by the US and its allies (including on their own commitments for agriculture trade reforms), India is specifically targeted for its farm subsidy programs under rules that were crafted more than 25 years ago under the Uruguay Round of trade negotiations, said a trade analyst, who asked not to be quoted.