Threat challange for Indian Agriculture?

Note-Please read this article(Courtsey- ICTSD) because if this happens as per study and its findings a chaotic situation will emmerge for Indian Agriculture. V Acharya

A global trade deal at the WTO would lead to significant cuts in China’s already-low agricultural tariffs, new ICTSD research shows.

As governments renew efforts to clinch a deal in the ongoing Doha Round of trade talks, the study shows that the draft accord would cut China’s maximum permitted ‘bound’ farm tariffs by around one sixth - despite current rates already being one quarter of the average world tariff level. Because China’s actual applied tariff levels are close to these bound levels, most cuts would translate directly into new market access for exporters.

”China is one of the least protected markets for agricultural products in the developing world,” notes the author of the study, Professor Tian Zhihong of the China Agricultural University.

The study shows that tariff rates would be brought down to 13 percent from an initial average of 15 percent, after accounting for gentler tariff cuts for products deemed to be ’sensitive’ and for those considered important for food security and livelihoods. With 900 million people working in agriculture, and a growing income gap between cities and the countryside, China has emphasised the need to shield key products from cuts.

”China has set the pace in promoting the liberalisation of trade among WTO Members,” argues Tian. “There is therefore relatively little room left for further substantive concessions on special products that are important for food security, farmers’ livelihoods and rural development.”

China will also benefit from clauses permitting countries that have recently joined the WTO to cut tariffs by less - a key Chinese demand after gruelling accession negotiations slashed tariffs on 95 percent of the country’s products to below 30 percent.

As urban incomes in China are over three times higher on average than those in rural areas, the government has recently shifted from taxing agriculture to supporting it. The new draft text could constrain planned spending on cotton, and, if prices are high, on wheat. However, many other payments are likely to be exempt from cuts on the basis that they cause no more than minimal trade distortion.

”WTO regulations will be important factors affecting China’s agricultural policy-making,” the author notes.

The draft text could also reduce barriers to China’s exports - primarily to developed countries, where average tariffs facing Chinese exports would be cut by about one third, from 16 percent to 11 percent. Continued EU and Japanese protection for rice - one of China’s main exports - would probably mean little market access expansion for this product, although tariffs on other key exports such as vegetables could be cut by around one third.

The US has insisted that large developing countries such as China offer more market access for their exports before a draft WTO accord can be signed. Developing countries have argued that this would affect their food security and the livelihoods of small farmers, especially while developed countries maintain extensive trade-distorting subsidies for their domestic producers.

DEAL STILL POSSIBLE THIS YEAR?

WTO Agriculture talk to resume

The month following the failure of world trade talks, trade ministers and world leaders have sought to ensure that the significant progress that was made before negotiations fell apart will not be lost in the aftermath of the collapse. Whether - or to what extent - that aim can be realised is far from certain.

For the immediate future, at least, a schedule has been set: senior-level talks (that is, below the ministerial level) on agriculture will resume at WTO headquarters in Geneva the week starting of 14 September. Key to those discussions will no doubt be the Special Safeguard Mechanism (SSM), which was at least the proximate trigger of the failure of the talks.

In the weeks following the collapse, WTO Director-General Pascal Lamy paid visits to both the Indian and US trade ministers - the primary players, along with the head Chinese trade official, in the SSM deadlock. In a speech to industry representatives in India, Lamy reportedly said that he was urging the two sides to "try to understand each other a bit more, at the political level, because this is a political discussion that has to translate into a technical discussion, not the other way around."

The SSM is a tool that would allow developing countries to raise tariffs temporarily when import volumes increase or prices fall suddenly. One of the main sticking points in the July talks was the question of whether, and by how much, developing countries would be allowed to raise tariffs beyond current 'bound' levels in order to protect domestic producers. India and China fought for more flexible terms for the use of the SSM, while the US was firm in its demands for predictable market access for its farm products.

Many involved in the talks expressed surprise that the SSM, a seemingly minor and technical matter, ended up playing such a critical role in the collapse. "It became a huge issue because of the politics on both sides," Lamy said in an interview with Reuters. "I wouldn't say if we solve the SSM, the rest will fall in place. But what I'm certain is if we don't solve this, the rest will not fall into place," he said.

Some trade observers now speculate that the US refused to yield on the SSM in order to avoid a discussion of its cotton subsidies, which the WTO has repeatedly ruled to be in violation of the US' word trade commitments. After the SSM, cotton was the next item on the negotiators' agenda.

"I know there are a lot of conspiracy theories running on this...To be frank, I don't suspect the US broke on the SSM not to have cotton on the table. They know cotton has to be there," Lamy said in an interview with Reuters.

Looking ahead

Whether progress can be made on the SSM and other outstanding issues remains to be seen. On his recent trip to India, Lamy met with trade minister Kamal Nath, who reportedly expressed his support for the resumption of high-level talks in Geneva. But speaking to reporters on the sidelines of a meeting in Singapore a week later, Nath made it clear that he thought that other players should take on more responsibility: the "key to the lock of the [WTO] deadlock is not in our hands. The key is with the developed countries," he said. Nath is expected to meet with EU Trade Commissioner Peter Mandelson on 12 September.

Less than two weeks after his visit to New Dehli, Lamy paid a call on US Trade Representative Susan Schwab, who also expressed her support for continued talks, telling reporters that a world trade deal was "still conceivable" this year. She cautioned, however, that whether an agreement can be reached "depends largely on the seriousness of purpose, commitment, flexibility of the key players, and grandstanding isn't going to do it."

Schwab called for senior officials to re-engage and work to establish a framework for further action at the ministerial level. "Our sense is we need to have a representative group of countries that are ready, willing and able to engage in good faith to try to find an ambitious outcome to this round," she said.

The US position has been somewhat complicated by opposition from its domestic manufacturing lobby, which disagrees with some language in a report on the status of the industrial goods talks put out by committee chair Don Stephenson in mid-August. The National Association of Manufacturers (NAM), the largest industrial trade group in the US, has argued that the report does not go into enough detail on the offers Members put forward on sectoral liberalisation initiatives, provisions that would rapidly cut tariffs to a low level, even zero, on specific sectors, such as bicycle parts or forest products.

In a statement released while Lamy was in Washington, NAM president John Engler made his organisation's demands clear: "balance for American manufacturers is only possible if the big emerging manufacturers of Brazil, China, and India are part of sector-specific agreements that would be aimed at eliminating tariffs in significant industrial sectors. These countries must open their markets."

While the US and Indian ministers did not go so far as to call for ministers to re-engage in negotiations immediately, Brazil and Australia were explicit in their calls for ministers to return to Geneva as soon as possible to try to hammer out the final terms of a deal. "I'm still hopeful that we can still make an effort, but it has to be very fast," Brazilian foreign minister Celso Amorim told reporters on a visit to Australia at the end of August. "Based on past experience, there are two possibilities. We either do it now, in September, or we will have to wait for a long time," he said.

Many people involved in the talks consider the US presidential election in early November to be a final deadline for the agreement of a world trade deal in the near future.

In a speech to the Australian parliament on 26 August, Trade Minister Simon Crean expressed similar optimism on the prospects of deal. "The amount of distance that we covered in July and the relatively short distance left to travel does offer hope that WTO members can get back to the negotiating table soon," Crean said. "With further and sufficient political will brought to the task, we have a real chance to move forward."

Meanwhile, trade officials from the G-33 group of developing countries, which lobbied hard on the SSM during the July talks, sought to construct a potential compromise on the sidelines of a recent meeting of the Association of Southeast Asian Nations (ASEAN) in Singapore.

"We're working hard to come up with a compromise which we think is doable," Indonesian Trade Minister Mari Pangestu told reporters at the meeting. She said she hoped that ministers would return to Geneva to continue discussions in September, stressing the importance of acting quickly. "When you have an economic slowdown as is being predicted in the US as well as Europe and Japan, then this is often the time when you have unilateral protectionism. We certainly would be very concerned about that," she said. (ICTSD)

World Trade Report 2008

The WTO launches World Trade Report 2008: Trade in a Globalizing World

Trade has allowed nations to benefit from specialization and economies of scale to produce more efficiently। It has raised productivity, supported the spread of knowledge and new technologies, and enriched the range of choices available to consumers। But deeper integration into the world economy has not always proved popular, nor have the benefits of trade and globalization necessarily reached all sections of society। As a consequence, trade scepticism is on the rise in certain quarters.This year’s World Trade Report, entitled “Trade in a Globalizing World”, is devoted to an examination of the gains from international trade and the challenges arising from higher levels of integration. Over many years, governments in most countries have increasingly opened their economies to international trade, whether through multilateral trade negotiations, increased regional cooperation or as part of domestic reform programmes. “Few would contest the benefits that globalization and trade have brought in terms of greater prosperity for hundreds of millions, as well as greater stability among nations. But many individuals in different societies across the world have shared little or not all in the benefits. The challenges facing governments in managing globalization are formidable, and success in spreading prosperity more widely requires a strong common purpose” says WTO Director-General Pascal Lamy in an introduction to the Report.The Report explores a range of interlinking questions, starting with a consideration of what constitutes globalization, what drives it, the benefits it brings, the challenges it poses and what role trade plays in this world of ever-growing interdependency. We ask why some countries have managed to take advantage of falling trade costs and greater policy-driven trading opportunities while others have remained largely outside international commercial relations. We also consider who the winners and losers are from trade in society and what complementary action policy-makers need to take in order to secure the benefits of trade for society at large. In examining these complex and multi-faceted questions, the Report reviews both the theoretical trade literature and empirical evidence that can help to give answers to these questions.

The causes and consequences of globalization
The Report notes that the key economic characteristic of globalization is deeper integration of product, capital and labour markets. Globalization is driven by technological innovation, political change, and economic policy choices, and this process of integration has caused significant structural changes in parts of the world economy. The increased fusion of product, capital and labour markets internationally has resulted in a more efficient allocation of economic resources. Economic integration has resulted in higher levels of current output and prospects of higher future output. Capital can flow to countries which need it the most for economic growth and development. Allowing workers to move across national borders can alleviate skill shortages in receiving countries or respond to the needs in rapidly ageing societies while alleviating unemployment or under-employment in countries providing these workers. Today’s industrialized economies were the early beneficiaries of globalization in the immediate post-war period, and more recently newly industrializing economies have been among the major winners from increasing economic integration. Trade has consistently grown faster than output in the world economy, and manufactures have accounted for an expanding share of total trade. Traded services have also grown significantly, although their importance is still poorly understood as a consequence of limited data. A major evolving feature of production is the fragmentation of production processes across multiple jurisdictions. International capital flows have played a vital role in the internationalization of production, and more generally in fostering globalization.