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Info Service on WTO and Trade Issues (May24/17) Geneva, 27 May (D. Ravi Kanth) — India has inveighed against Australia and the United States over their joint counter-notification filed against New Delhi’s alleged support for sugarcane and sugar policies at the World Trade Organization last week, unequivocally rejecting it on grounds of “unjustifiable assumptions and incorrect interpretation,” said people familiar with the development. At a two-day meeting of the WTO’s Committee on Agriculture on 23-24 May, Australia and the US presented their joint counter-notification (G/AG/W/245) claiming that India has provided market price support on sugarcane more than its de minimis limit of 10% during 2018-22. As reported in the SUNS, Australia and the US, in their communication titled “India’s measures to provide market price support to sugarcane”, sought clarification from New Delhi on several elements concerning India’s measures. 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,” Australia and the US 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 second-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 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.” INDIA’S RESPONSE In a sharp response at the meeting, India severely criticized the joint counter-notification on several aspects. India said while it has placed considerable emphasis on a transparent and predictable global trading system, it expects the same level of transparency from other members, said people familiar with the discussions at the meeting. New Delhi argued that its domestic support notifications are up to date at the WTO, charging Australia and the US for not doing the same within the mandated period of 4 months. “For example, it has been 1,000 days since the deadline for filing the 2020-21 [notification] expired, and Australia is yet to fulfil its obligation,” India said, according to people present at the meeting. India criticized Australia and the US for investing considerable resources in filing counter-notifications, noting that “they have not been able to file their own domestic support notifications which have been overdue,” said people who asked not to be quoted. Responding to the substantive issues raised in the counter-notification, India said that the calculations of the alleged Market Price Support for sugar are mainly based on the panel findings in the sugar dispute. India said its appeal against the panel ruling rests with the Appellate Body, suggesting that the issue is sub judice to discuss. Therefore, India said, it is inappropriate to base the counter-notification on the allegedly flawed methodology adopted by the panel, said people, who asked not to be identified. India challenged the two countries on the issue of calculating the domestic support in Indian rupees, as the calculations “disregard the impact of inflation on INR.” When the external fixed reference prices were based on 1986-88 prices in the Uruguay Round negotiations, the dollar-rupee rate was 1:13, while it is 1:83 now, which indicates massive inflation during this period, said an analyst who asked not to be quoted. At the meeting, India dismissed the claim that it continues to provide market price support for sugar, stating that “Fair and Remunerative Prices or State Advised Prices do not constitute market price support since the Central or State governments neither pay for nor procure sugarcane from farmers. Such payments are made by private sugar mills.” In conclusion, India asked Australia and the US to “respect and comply with their WTO commitments and prioritize the timely submission of their own domestic support notifications overfilling counter-notifications.” Several farm-exporting countries – Canada, Brazil, Australia, the European Union, Japan, and the United Kingdom – questioned India’s allegedly rising input subsidies estimated at US$48 billion for 2022-23. The US apparently said that the amount of India’s input subsidies is twice the value of its trade-distorting domestic support for 2021-22, expressing concern over rising input subsidies in India. In response, India stated that high inflation in power, irrigation, and fertilizers contributed to the increase in input subsidies. Under Article 6.2 of the WTO’s Agreement on Agriculture, input subsidies are exempted from any commitments. However, the US and the Cairns Group of farm-exporting countries seem determined to subject Article 6.2 of the AoA to limits in the stalled agriculture negotiations, said people familiar with the negotiations. EU’S DEFORESTATION MEASURES Also at the meeting, several developing countries along with New Zealand, Australia, and the US appealed to the EU to defer the implementation of its new Regulation on Deforestation-Free Products (EUDR). The EU’s controversial regulation, which is expected to come into effect on 30 December 2024, has been severely criticized on grounds that it will require several agricultural products sold in the EU market to be “deforestation-free”, implying that they must not result from recent (post-31 December 2020) deforestation, forest degradation, or breaches of local environmental and social laws. The products to be covered under this unilateral EU initiative include cattle, cocoa, coffee, oil palm, rubber, soya, and wood among others, as well as a wide range of derived products, such as meat products, chocolate, pulp, and paper, just to mention a few. “At a time when the multilateral trading system, including the WTO, is mired in poly-crises, the EU’s deforestation initiative is likely to further exacerbate the tensions,” said a negotiator, who asked not to be quoted. +
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