Why Protesting Farmers in Punjab Want India to Withdraw from WTO

Why Protesting Farmers in Punjab Want India to Withdraw from WTO

Sub: Eco

Sec: External sector

Why in News?

• Farmers protesting at Punjab and Haryana borders demand India’s withdrawal from the WTO and suspension of agreements under the Agreement on Agriculture (AoA).
• They argue that WTO policies are biased against developing countries, threatening small farmers, food security, and livelihoods in India.

Context:

• Farmers in Punjab and other parts of India view the WTO’s agricultural rules as unfair, particularly its restrictions on Minimum Support Price (MSP), subsidies, and the Public Distribution System (PDS).
• Their concerns highlight the adverse effects of global trade liberalization on small and marginal farmers.

Key Takeaways

Farmers’ Demands and Concerns

• MSP Legalization: Farmers demand MSP as a legal right, which contradicts WTO rules limiting domestic support to prevent trade distortion.
• Withdrawal from WTO: To ensure the government can provide unrestricted MSP and subsidies.
• Cancellation of FTAs: Farmers oppose trade agreements that lower tariffs and increase competition from cheap imports.

Issues with WTO Rules:

• WTO mandates domestic support limits, restricting government subsidies for agriculture.
• Excessive subsidies are considered to distort international trade, leading to pressure on India to comply.
• India has committed not to fix MSP in violation of WTO rules, further intensifying farmers’ concerns.

Risks Highlighted by Farmers:

• Loss of Livelihoods: Cheap imports due to FTAs and WTO rules undercut Indian farmers’ incomes.
• Food Security Threat: Farmers fear increased dependence on global markets and reduced domestic production due to lack of support.
• Developed Countries’ Advantage: Developed nations provide large subsidies under different classifications while pressuring developing countries like India to cut subsidies.
• India lacks Special Safeguard Measures (SSG) to counter import surges, further disadvantaging its farmers.

India’s Agrarian Economy at Risk

• Punjab’s agriculture is heavily reliant on wheat and paddy, with around 90% of Rabi and Kharif crops procured under MSP.
• Public procurement system feeds into the central pool, forming the backbone of the state’s economy. WTO restrictions on subsidies and public procurement pose a significant threat to farmers’ livelihoods.
• 86% of India’s agricultural population comprises small and marginal farmers.
• Challenges include:
  • Lack of access to modern technology, markets, and finance.
  • Exposure to cheap imports due to liberalized global trade under WTO rules, destabilizing rural economies.

Agreement on Agriculture (AoA) under the WTO

The Agreement on Agriculture (AoA) under the WTO is a comprehensive treaty focused on reforming agricultural trade by reducing subsidies, enhancing market access, and disciplining export subsidies. Here is an organized overview:

Overview of AoA

• Establishment: Negotiated during the Uruguay Round (1986) and ratified in 1994 at Marrakesh. Came into effect in 1995.
• Objective: Promote fair competition, reduce trade-distorting practices, and ensure better access to markets for agricultural products.
• Significance for India: AoA provisions impact India’s food security programs, minimum support prices (MSP), and public procurement systems, directly affecting millions of farmers.

Pillars of AoA

• Market Access:
  • Aim: Eliminate non-tariff barriers by converting them into tariffs (tariffication).
  • Reduction commitments:
    • Developed countries: 36% (value) over 6 years.
    • Developing countries: 24% (value) over 10 years.
    • Least Developed Countries (LDCs): Exempt.
  • Special Provisions:
    • Developing nations with balance-of-payment issues could offer tariff ceilings instead of tariffication.
• Domestic Support:
  • Subsidy Classification:
    • Amber Box: Trade-distorting subsidies subject to reduction commitments (e.g., MSP, input subsidies).
    • Blue Box: Subsidies aimed at production limitation, exempt from reduction.
    • Green Box: Minimal trade-distorting subsidies, like environmental protection and research, exempt from caps.
• India’s Concerns:
  • The outdated reference price (based on 1986-88 levels) inflates subsidy levels due to inflation, causing potential WTO compliance issues.
  • India’s extensive MSP program risks breaching the 10% de minimis cap for developing countries.
• Export Subsidies:
  • Reduction commitments:
    • Developed countries: 36% (value) and 21% (volume) over 6 years.
    • Developing countries: 24% (value) and 14% (volume) over 10 years.
  • India’s Limitation: India, not having used export subsidies historically, is restricted from introducing them, unlike advanced economies.

Peace Clause (2013, Bali Ministerial Conference)

• Provides protection to developing countries like India from legal challenges if subsidy limits for public stockholding programs are breached.
• However, this is a temporary solution, and negotiations for a permanent resolution are ongoing.

Special Safeguard Mechanism (SSM):

• Developing nations, including India, have sought an SSM to impose import restrictions during price crashes or surges in imports.
• India argues that lack of such measures leads to destabilization of local markets and threatens small-scale agricultural livelihoods.