The on-going farmers' protests in Punjab have brought to light a significant demand: the exit of India from WTO. This demand arose from what WTO members considered an anti-developing nation policy and an injurious policy to the small farmers of countries like India.
WTO and the Effect on Indian Agriculture
The WTO as an international organization founded in 1995 in order to supervise the trends of foreign trade and promote non-discrimination within the member states. But in WTO, this has been realized in the Agreement on Agriculture (AoA) commonly referred to as Agriculture Agreement which has acted as an opportunity for protest by Indian farmers. The AoA aims at lowering trade barriers and changing agricultural subsidies, and it considered to be pro-developed countries.
Minimum Support Price (MSP) and Subsidies
Another issue of protestation by farming communities is that WTO caps on trade policies limit provisions such as MSP domestically. The MSP is a government-fixed rate which everybody understands well and which gives farmers a floor price for their crops. However, WTO rules never permit member countries to offer domestic subsidies to the extent that will help farmers in India and other similar countries.
Public distribution system (PDS) and food security
India’s Public Distribution System (PDS) mean that millions of people can get food for a reasonable price. However, the policies that are provided at WTO always put pressure on the PDS in its international forums and results into overproduction and dumping of agricultural products in the markets. This practice reduces the farmer’s income in India and makes India more vulnerable with to food imports.
Special Safeguard Measures (SSM) and Import Tariff
India lacks Special Safeguard Measures (SSM) and hence the India is unable to slap on additional duties during import surges which are prevalent in developed nations. This has made the farmers in India weak in competition against cheap imports that flood the Indian markets from other countries.
The Role of Developed Nations
Opposing farmers also disagree that the WTO rules provide developed nations an opportunity to subsidize their farmers while counting on the developing countries to reduce crucial supports like the MSP. This has a negative impact on small farmers that are conducting their business in India as it provides a skewed marketplace which they are unable to compete in.
The Call for Withdrawal
During February 2024, the farmers of Punjab celebrated WTO Exit Day protesting against withdrawal from WTO and No Free Trade Agreement under AoA. They believe that WTO policies are dangerous for India’s small farmer and their food securities especially in Punjab.
Agreement on Agriculture (AoA)
Of key importance in WTO’s regime for agriculture liberalization and redirection of international agriculture trade towards market direction is the ‘‘Agreement on Agriculture’. AoA was created during the Uruguay round of trade negotiation from 1986 to 1994 to deal with matters concerning trade in agricultural products as well as market access, domestic support and export competition.
Objectives of the AoA
- Market Access: In an effort to lower barriers to trade and alleviate tariffs, which make it difficult for countries to gain entrance to the world market on their agricultural products.
- Domestic Support: To control the sort and degree of subsidies in domestic farmers to prevent the distortion of global trade.
- Export Competition: For more or to re-establish a better balance to the worldwide trading, to curb or remove export subsidies that provide the nationally produced good a competitive advantage in the export market.
Key Provisions
- Market Access: This is another area of interest for this pillar, which is the lowering of tariffs and non-tariff barriers. It makes countries transform non-tariff barriers into tariff and to engage themselves in the process of coming down. Thirdly, developing nations benefit from the facility given to them to exercise flexibility in implementing these changes.
- Domestic Support: In the case of domestic subsidies, the AoA divides them into what has been termed the Amber Box, Blue Box and Green Box, based on their potential to trade-distortive.
- Amber Box: Contained subsidies that are restricted for trade and are also referred to as the depicted subsidies. Some examples are price floors and the specific input subsidies.
- Blue Box: Includes subsidy that are related to production restricting programme and therefore out of scope of reduction commitments.
- Green Box: Encompasses subsidies that have minimal impact on trade, such as environmental protection and research programs. These are not subject to reduction commitments.
- Export Competition: This pillar seeks to Eradicate or reduce export subsidies which are regarded as trade distortions. The developed countries have agreed to cut these subsidies whereas the developing countries have allowed doing so in comparatively longer period.
Specific and Preferential Treatment
The AoA addresses the situation of developing and the least developed countries since they face various difficulties. The use of special and differential treatment provisions enable these countries to apply commitments more slowly and with much more leeway. The primary goal of this strategy is to facilitate their development requirements and effectively execute market competition.
Challenges and Criticisms
- Disparities in Implementation: Some of the developing countries pointed out that the AoA is biased towards developed countries, which can afford to give higher subsidies to production farmers without violating the package. This in turn results to competition distortion and the hindering of competitiveness of farmers in developing nations.
- Impact on Food Security: For DOM support and import constraints, critics argue that this will harm the small farmers in developing nations and food security, thus, making them poorer to global market.
- Limited Progress: Critics point out the fact that AoA has not been very successful in bringing down trade distorting subsidies and tariffs, or that, many nations continue to protect agriculture.
WTO
The WTO is an international organization that oversees the conduct of trade between nations of the world. It was official established in January 1, 1995 replacing the General Agreement on Tariffs and Trade (GATT), which was in existence since 1948. The WTO mission therefore is to seek an orderly trading world by increasing fairness and by opening up markets as much as possible.
Objectives and Functions
The primary objectives:
- Promoting Free Trade: Reducing trade barriers is one of the functions of WTO, it encourages the member countries to exercise tariff, quotas, subsidies etc.
- Ensuring Fair Competition: Through setting up of trade rules and regulation the WTO seeks to ensure the member countries have a level playing ground free from dumping and subsidies.
- Dispute Resolution: The WTO is an organization that allows member countries to resolve trade disputes through on consultations, negotiation, and where necessary, through an appellate system. This drives down the probability of conflict developments into trade wars.
- Trade Negotiations: Since establishment, WTO organizes the multilateral trade negotiations to liberalize the trade further and to regulate new topics that should describe the trade system according to the current economic environment.
- Technical Assistance and Capacity Building: As for the developing members, the WTO assists in strengthening capability in global trade and to assist in the integration of those states into the common trading system.
Structure and Membership
The WTO is an organisation that was formed by 164 member countries that accounts for more than 98 percent of the international trade. The supreme decision-making organ of the organization is the Ministerial Conference which convenes at least once in two years. The General Council deals with the administration of the organization and cope with various problems every day, and it comprises delegates from all the member countries. The WTO activities are assisted by Secretariat that is headed by the Director-General, offering technical and administrative aid to members. The overall organization is in Geneva, the Switzerland.
Key Agreements and Principles
The WTO works according to some trade agreements where the principle of international trade is regulated completely. Some are:
- The Agreement on Agriculture (AoA): Works for the liberalization of the current policies on world agricultural trade and making the policies more market friendly.
- The General Agreement on Trade in Services (GATS): Attempts to establish a more trustworthy system of general rules governing international trade in services.
- The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS): Recognizes the basic standards of the status of intellectual property rights.
The fundamental principles:
- Non-Discrimination: This in a way makes sure that there are no unfair trade barriers under which one country has to meet certain conditions before trading with another country.
- Reciprocity: They foster compromise in trade negotiations.
- Transparency: Ensures transparency and stability of trade policies and regulations as well as practices.
Minimum Support Price (MSP)
The Minimum Support Price (MSP) is one of the Aid that the Indian government provides in protecting the farmer from volatility of market prices and provide fair price to the farmer. The MSP therefore is a fixed price determined by the government at which it directly purchases certain crops from the growers in tandem with the market price. This is a security measure that protects the farmer and especially those that own relatively small pieces of land that they cultivate as well as the food security of the country.
Purpose and Objectives
- Provide a Safety Net: The MSP helps guarantee the farmer a certain amount for his produce hence barring him from the volatile open market prices. It is beneficial for farmers who can otherwise be at the mercy of market and product prices and crashes.
- Encourage Agricultural Production: For instance, the MSP locks price at a bottom level and encourage farmers to cultivate certain vital food grains to meet the consumer’s demand.
- Prevent Distress Sales: By source targeting and informing farmers the MSP assists in avoiding the sale of produce at deplorable low prices during glut. It helps make sure they get reasonable price for the job done.
- Promote Food Security: Being one of the major instruments applied in the food sector, the MSP acts as key tool for stabilizing farmers’ income and supporting the production of priority food crops thus ensuring food security throughout the country.
Calculation and Implementation
The MSP is notified by the government from time to time as recommended by the CACP. The CACP takes into account what it costs to produce these crops, the input prices and or the market prices, and the supply and demand factors in the agricultural sector. Once the MSP is declared, government agencies including Food Corporation of India (FCI) then Purchase the crops at the MSP, making sure that farmers have buyers.
Impact and Benefits
- Income Stability: The MSP give steady revenue for farmers, which help farmers to fix their revenues and try to invest on seeds, fertilizers and other inputs.
- Rural Development: Through providing reasonable income from the product produced by farmers, the MSP is also an important investment to the development of the rural area and thus the country at large it reduces poverty by improving the standard of living.
- Market Intervention: The MSP works as market intervention by keeping the prices above a given level so that farmers get appropriate price for their crop production.
- Encouragement of Crop Diversity: In addition to staple food crops such as rice and wheat, the MSP is extended to other crops, the aim of which is to cut on dependence on a single product by farmers.
PDS (Public Distribution System)
Public distribution system that is known as PDS is part of social welfare structure of the India planned to ensure food security to the needy groups of the population. Owned by the government, the PDS guarantees food security among millions of the poor who can’t afford to buy rice, wheat, and kerosene at cheap rates. This system has a very important role to perform in fighting hunger and malnutrition and indeed in making certain that people gets their basic nutritional requirements.
Objectives of the PDS
- Food Security: To provide adequate food grains in an affordable price and serving the belonging section of the society.
- Price Stabilization: Maintaining price levels of raw materials and other items required in production; particularly during rising inflation or product shortage.
- Poverty Alleviation: Safeguarding the poor by subsidizing various food items that are considered basic in each one’s household.
- Nutritional Support: Evaluating input to increase the quality of diet among the poor families thus improving their health nutrition status.
Structure and Functioning
The PDS works through a level of Fair Price Shops which are located throughout the country. These shops provide food grains at subsidized price through ration cards and the stocks are rationed monthly. The Food Corporation of India (FCI) is responsible for supplying, storing, and distributing the food grains. The union government fixes the subsidy rates and distribution of funds while the state governments are to identify the flow of subsidies to the intended beneficiaries.
Key Features
- Targeted Public Distribution System (TPDS): The TPDS was incepted in 1997 to concentrate in the needy groups by bi-furcating the households in BPL as well as APL. BPL families hence are given higher subsidies and more food grains than APL families.
- Antyodaya Anna Yojana (AAY): AAY was started in the year 2000 targeting the flagship program of the government of India for supplying, highly subsidized food grains to the BPL population. This program helps to ensure that sections of the population most at risk suffer from malnutrition receive the necessary nutrition.
- National Food Security Act (NFSA), 2013: NFSA legally earmarks 75% population of rural areas and 50% population of the urban areas, to be provided with the subsidized food grains under PDS. The act lies in the framework of food security featured as a legal right; it requires state governments to identify qualifying households.