Trade dispute with India over sugar subsidies

  • May 10, 2024
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Trade dispute with India over sugar subsidies

Subject: Economy

Sec: External sector

  1. Issue Raised by U.S. and Australia:
  • Allegation: India’s sugarcane subsidy breaches WTO norms.
  • Concern: Distortion of global trade due to excessive subsidy.
  1. Contentions Presented:
  • Submission: Paper to WTO’s Committee on Agriculture.
  • Data Analysis: Four-year period (2018-19 to 2021-22).
  • Claim: India’s sugar subsidies consistently exceeded 90% of production value.
  1. Call for Discussion:
  • Openness: U.S. and Australia express readiness to engage in talks.
  • Objective: Evaluate India’s market price support and its impact on global sugar markets.
  1. Methodology Used:
  • Calculation Basis: Previous WTO panel’s recommendations.
  • Focus Period: 2014-15 to 2018-19.
  • Critique: India disputed the classification of FRP and SAP as market price support.
  1. India’s Appeal and its Impact:
  • Response: Appeal lodged against the WTO panel’s findings.
  • Consequence: Prevented adoption of the panel report by WTO Dispute Settlement Body.
  1. Data Insights Provided:
  • Financial Figures: Market Price Support for 2018-19 to 2021-22.
  • Magnitude: Exceeded $15.9 billion in 2018-19 and increased annually thereafter.
  • Comparison: Well above the permissible 10% of production value.
  1. Future Course of Action:
  • Potential Dialogue: India and other WTO members.
  • Focus Areas: Examination of subsidy impact and adherence to WTO guidelines.

What is WTO:

  • Role: Only international organization regulating trade rules among countries.
  • Establishment: Created in 1995, replacing the General Agreement on Tariffs and Trade (GATT).
  • Membership: Consists of 164 members, representing 98% of world trade.
  • Decision Making: All decisions made through consensus; any member can exercise a veto.

Dispute Settlement in WTO:

  • Bilateral Consultation: Initial step; if unsuccessful, either party can approach Dispute Settlement Panel.
  • Panel Report: Can be challenged before the Appellate Body.
  • Final Decision: Appellate Body’s decision is final, but currently unable to review cases due to vacancies.

Issues Raised in respect of subsidy given:

  • Minimum prices for sugarcane and sugar.
  • Fair and remunerative prices (FRP).
  • State-specific higher minimum prices.
  • Minimum Indicative Export Quota (MIEQ).
  • Argument: India’s support exceeds the de Minimis level of 10%.

Way Forward and Impacts:

  • Consultation: Bilateral talks key to dispute resolution.
  • Impact Mitigation: No effect on existing sugar sector policies.
  • Reforms: Continuation of reforms to enhance competitiveness.

Sugar Production in India:

  • Importance: Second-largest producer and consumer globally.
  • Economic Significance: Annual output worth approximately Rs. 80,000 crores.
  • Employment: Supports around 50 million sugarcane farmers and 5 lakh workers directly.

WTO Agriculture Agreement:

  • Purpose: Reducing agricultural support and subsidies.
  • Provisions: Developed and developing countries to meet reduction commitments.
  • Focus Areas: Market access, domestic support, export competition.
  • Goal: Establish fairer trading system, improve livelihoods of farmers worldwide.
economy Trade dispute with India over sugar subsidies