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Info Service on WTO and Trade Issues (May24/04) In its 15-page communication (G/AG/W/245), titled “India’s measures to provide market price support to sugarcane”, seen by the SUNS, both Australia and the US sought clarification from New Delhi on several elements concerning India’s measures. The joint communication is expected to be discussed at the WTO’s Committee on Agriculture on 23 May. The two countries argued that they have “a significant interest in ensuring a transparent and predictable global trading system, underpinned by a shared understanding of Members’ obligations under WTO rules.” Citing Article 18.7 of the WTO’s Agreement on Agriculture (AoA), which states that “any Member may bring to the attention of the Committee on Agriculture any measure which it considers ought to have been notified by another Member,” the two countries sought “further clarification from India on its domestic sugarcane and sugar policies.” They maintained that “historically, as the world’s second-largest sugar producer and third-largest exporter, dynamics in India’s sugar market have significant implications for both prices and trade in the global market.” Delving into India’s sugar price policy framework, Australia and the US said that “each sugar season, the Government of India sets the Fair and Remunerative Price (FRP) for sugarcane,” an administered price that “effectively acts as a floor price for sugar mills to pay farmers for sugarcane.” Further, they said the Indian farmers “are paid premiums for increased production efficiency, and farmers in some states are eligible for additional payments by sugar mills under specific State-level support, known as State-Advised Prices (SAPs).” According to Australia and the US, their joint paper aims to implement “the approach to calculating India’s market price support and Aggregate Measurement of Support (AMS) for sugarcane as discussed by the WTO Panel in its Report on the India – Sugar and Sugarcane dispute.” They argued that the WTO Panel in the India – Sugar and Sugarcane dispute (DS580) found on 14 December 2021 that “India’s sugar support regime was inconsistent with its WTO obligations and confirmed India’s subsidies were vastly in excess of levels permitted under WTO rules.” The two countries said that “the Panel’s report also provided a refined method for calculating India’s level of support for sugar by accounting for state-level subsidy schemes as well as the varying levels of efficiency (of extracting sugar from sugarcane) across India’s sugarcane-growing states.” Australia and the US acknowledged that “India appealed the findings of the Panel on 24 December 2021, which has prevented the Panel Report from being adopted by the WTO Dispute Settlement Body.” Surprisingly, they did not mention that India had appealed the findings of the Panel before the Appellate Body. Yet, the two countries said that “while the status of the Panel Report is not final, the methods outlined in the report provide the most up-to-date guidance from a WTO panel on calculating market price support for sugar.” However, it remains moot if the Panel’s calculation of market price support for sugar in India is struck down by the Appellate Body, said an agriculture negotiator, who asked not to be quoted. In fact, without the Appellate Body having given its ruling on India’s market price support for sugar, it is difficult to discuss the issue one way or the other, the negotiator said. “SYSTEMIC” CRISIS With the “enforcement” function of the WTO being impaired following Washington’s continued opposition to filling the vacancies on the Appellate Body since December 2019, there is an enveloping “systemic” crisis at the WTO, as major adjudicatory decisions continue to remain in limbo, said a trade envoy who asked not to be quoted. As long as the Appellate Body is unable to deliver impartial and independent rulings, a situation that has been made worse by the US opposition to the Appellate Body’s revival, there is little purpose in raising counter- notifications, said several people who asked not to be quoted. More so, if the dispute panel’s findings were to be upheld by the Appellate Body, then India could have been forced to implement the Appellate Body’s recommendations, said people who asked not to be identified. Notwithstanding this “systemic” crisis, in their paper, Australia and the US said that “India has not included sugarcane, or its derived products, in any of its domestic support notifications since 1995-96.” “Therefore, there is no information provided to the WTO from the Government of India to compare with the findings of this paper,” the two countries maintained. Claiming that they are “using the latest publicly available information,” they said their paper “compiles data on India’s market price support for sugarcane over the period 2018-19 to 2021-22.” They said when read alongside the Panel Report’s finding for India’s market price support for sugarcane over the period 2014-15 to 2018-19, “we are able to generate a picture covering eight years.” As India did not undertake any AMS (aggregate measurement of support or Amber Box support) commitments in the Uruguay Round, India’s support for sugarcane is limited to providing only de minimis support of less than 10 percent of its total value of production of sugarcane. According to the joint paper, “it appears that over the four-year period from 2018-19 to 2021-22, India has provided sugarcane AMS vastly in excess of the limits set out in Article 6, paragraph 4 of the AoA (10% of the total value of production of sugarcane).” According to the figures provided by Australia and the US, India’s market price support for sugar is estimated to be around USD 15.9 billion in 2018-19, USD 14.6 billion in 2019-20, USD 16.5 billion in 2020-21, and USD 17.6 billion in 2021-2022. Australia and the US maintained that “these estimates indicated that over the three-year period covered by this notification, India has provided sugarcane AMS vastly in excess of the limits set out in Article 6, paragraph 4 of the AoA (10% of the total value of production of sugarcane).” Meanwhile, commenting on the public stockholding (PSH) issue, the former US chief agriculture negotiator, Joseph Glauber, who currently works at the Washington-based International Food Policy Research Institute (IFPRI), has suggested that the time has come to take a look again at the AMS calculation based on the external reference price (ERP) of 1986-88. He offered several important insights into the calculation of the ERP and PSH programs. His conclusions are as follows: 1. During the Uruguay Round, negotiators were concerned about the potential price-enhancing aspects of PSH programs through the use of administrative prices; 2. Annex 2 of the WTO’s AoA provisions disciplined PSH programs by tying use of administrative support prices to market price support; 3. Market prices are generally in line with the 1986-88 base period until the mid-2000s when prices began to rise. Raising administrative prices risked pushing market price support above de minimis thresholds; 4. By 2012, PSH had emerged as one of the key agricultural issues for some developing countries. Proposals include adjusting fixed external reference price to be more in line with current prices. Against this backdrop, Australia and the US may have to change their “flawed” calculation of sugar subsidies all over again, said a farm trade negotiator from an industrialized country. In their paper, Australia and the US said that “India has not provided any domestic support notifications for sugarcane since 1995-96.” “We continue to be ready to engage in discussions with India and other Members regarding the significance of India’s market price support and resulting AMS for sugarcane, as well as the other trade-distorting measures to facilitate sugar exports as detailed in the Panel Report, and their impact on global sugar markets,” Australia and the US argued. However, if India chooses not to respond to the issues raised by Australia and the US at the WTO’s Committee on Agriculture on grounds that the matter remains sub judice, then there is little that the two farm giants can do, said people who asked not to be quoted. +
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