TWN Info Service on WTO and Trade Issues (Nov18/17)
26 November 2018
Third World Network

North waging new form of trade warfare, undermining sovereign rights
Published in SUNS # 8803 dated 26 November 2018

Geneva, 23 Nov (D. Ravi Kanth) - The developed countries led by the United States and Australia have resorted to a new form of trade-related warfare at the World Trade Organization - issuing counter-notifications against the developing countries, undermining the "sovereign" rights of these countries, trade envoys told SUNS.

By challenging the notifications filed by developing countries such as India, the US and Australia have set in motion what would be tantamount to an assault on "sovereign" notifications by developing and poor countries, said a trade envoy, who asked not to be quoted.

Close on the heels of the US counter-notifications against India on rice an d wheat, followed by cotton, Australia has now joined its closest security ally, i.e, the US, by filing a counter-notification against India's market-price support programs for sugar at the WTO.

In its 11-page counter-notification (G/AG/W/189) under Article 18.7 of the Agreement on Agriculture on 16 November, and citing figures provided by the US Department of Agriculture, Australia said that "historically, as the world's second largest sugar producer and fourth largest exporter, dynamics in India's sugar market have significant implications for both prices and trade in the
global market."

Australia claimed that "each sugar season, the Government of India sets the Fair and Remunerative Price (FRP) for sugarcane as defined in the Sugarcane (Control) Order (1966)."

According to Australia, the "FRP [fair and remunerative price] is an administered price that effectively acts as a floor price for sugar mills to pay farmers for sugarcane."

Australia alleged that "Indian farmers are paid premiums for increased production efficiency, and are eligible for additional payments by sugar mills under specific State-level support."

According to Australia, "India has not included sugarcane, or its derived products, in any of its domestic support notifications since 1995-96."

Consequently, "there is no evidence provided to the WTO from the Government of India to compare with the findings of this paper."

It maintained that it compiled data on India's Market Price Support (MPS) for sugarcane over the period 2011-12 to 2016-17.

The "MPS has been calculated in accordance with the domestic support provisions of Annex 3 of the AoA [Agreement on Agriculture]," Australia claimed, arguing that "under Article 6, paragraph 4 of the AoA, India is limited to providing a product-specific AMS for sugarcane no greater than 10% of the total value of production of sugarcane."

India is one of the developing countries that have not scheduled subsidy payments for sugar or any other commodity under AMS (aggregate measurement of support) reduction commitments.

"India has no Total AMS (or reduction commitments) in Part IV of its Schedule (XII)," Australia has admitted.

In fact, India and China had called for the elimination of AMS by developed countries early this year for starting a discussion on the reduction commitments for all farm subsidies.

But the US, the EU, Japan, Norway, and Switzerland among others have fiercely opposed the joint proposal from China and India for the elimination of AMS.

In its communication, Australia said that "India has provided sugarcane AMS [Aggregate Measurement of Support or most trade-distorting farm subsidies] vastly in excess of the limits," during the years between 2011 and 2017.

Instead of adhering to the 10% limit that India is allowed towards total market price support, New Delhi has provided 77.7% of value of production in 2011/12, 77.1% in 2012/13, 94.1% in 2013/14, 94.4% in 2014/15, 99.8% in 2015/16, and 94.4% in 2016/17.

Citing the US Department of Agriculture figures on India in which India is rated as the second largest producer of sugar and fourth largest exporter, Australia said that India's market price support programs for sugar have "significant implications for both prices and trade in the global market."

Under the WTO's Agreement on Agriculture, Australia says that a developing country like India is exempted product-specific support up to 10% of the product's total value of production under the de minimis exemption.

"If India provides product-specific AMS (Aggregate Measurement of Support which is called the most trade-distorting subsidy) support for sugarcane in excess of 10% of the annual total value of production for sugarcane, Article 6, paragraph 4 of the AoA (Agreement on Agriculture) does not allow the exemption of that sugarcane AMS from the Current Total AMS," Australia has maintained.

The calculation of market price support involves "using the gap between a fixed external reference price (prevailing in 1986-88) and the applied administered price multiplied by the quantity of production eligible to receive the administer ed price."

Based on this calculation in rupee terms, "India's total MPS (market price support) for sugarcane reached an estimated Rs 656,163 million (US$9.9 billion) in 2016-17, which is 94.4% of the total value of India's sugarcane production and exceeds India's de minimis limit of Rs 69,526 million (US$1.1 billion)."

Australia has maintained that India has not notified the subsidy payments for sugarcane since 1995-96, suggesting that India's total MPS for sugarcane was US$184 million in the last notification.

Australia has acknowledged that while India's notifications are denominated in US dollars, it has calculated India's MPS based on Indian rupees.

According to several farm trade analysts, the calculation of AMS based on the external reference price of 1986-88 does not provide a proper gauge because of massive rise in inflation since then and other factors such as population growth between 1986 and 2017.

Clearly, Australia and the US prefer to use the external reference price that was decided more than 30 years ago because it suits their calculations for naming and shaming countries, said a Geneva-based farm trade analyst who asked not to be identified.

Earlier, India had dismissed the counter-notification on rice and wheat issued by the US on grounds that it is based on flawed assumptions and methodologies. India, for example, calculates the AMS in dollar terms as well as on the basis of procured production but not total production, the analyst said.

Further, the US and other farm exporting countries had refused to accept any change in the external reference prices.

Australia has also targeted India on pulses, saying India's subsidies for pulses has caused distortions in global trade. It remains to be seen whether Australia will issue a counter-notification on pulses on the lines of what it has done now on sugarcane, the analyst said.

"Clearly, India will come under intense pressure from Australia, the US, the European Union, and Brazil among others, as witnessed in the recent meetings of the WTO's Committee on Agriculture where India was pointedly challenged on its farm subsidy programs," the analyst argued.

Without raising a formal trade dispute against India's sugar subsidies at the World Trade Organization, Australia has adopted the controversial American practice of issuing a counter-notification alleging that New Delhi has provided trade-distorting subsidies for sugar vastly in excess of the eligible limit that could impact the global sugar markets.

This is a new trend at the global trade body where a "sovereign" notification is being questioned and ridiculed, said an African trade envoy who asked not to be quoted.

Coincidentally, Australia's counter-notification is in line with the so-called aggressive proposals by the US, the EU, Japan, and three other countries for forcing new rules on transparency and counter-notifications, trade envoys said.

In sum, the developing countries are facing an escalating assault on their rights at the WTO. Unless the developing and least-developed countries adopt a common united front against the intrusive proposals on transparency and counter-notifications, they will soon find themselves eclipsed on all fronts at the WTO, trade envoys said.