The Pandora’s Box of Agri Reform, Subsidies and Tariffs
January 23, 2021
India cannot have protectionism for corporations backed by tariffs and a free market only for Indian farmers. — Indra Shekhar Singh
Who is it that wishes to deny our farmers their proper due, as they brave 4.1°C temperatures at the borders of Delhi?
Is it the ‘middle men’ or the ‘robber barons of India’? Or is it perhaps someone more sinister – a plan that will allow heavily subsidised agriculture commodities to be dumped into India, destroying the livelihoods of small farmers?
Let us take the example of maize and try to understand the dynamics and stakes at play here.
While the farmers were marching towards Delhi against the farm laws, the government decided to import 5 lakh tonnes of maize at a concessional import duty of 15% (down from 50%). The government bought imported maize for about Rs 3,200 a quintal. Meanwhile, it was giving Rs 1,850 a quintal to Indian corn farmers. Telangana farmers were so alarmed at the discrepancy that the Telangana high court intervened and asked the Centre to “spell out its maize import policy”.
Currently, Bihari maize farmers cannot get Rs 5 a kg. India has 3.53 crore tonnes of maize in stock against the annual consumption of 2.42 crore tonnes.
In the same period, the government also reduced masoor dal import duty by 20%. Some industry experts feel that move “benefitted foreign farmers and traders as global prices of lentil rose after India reduced the import duty.”
The doublespeak on edible oil was also exposed recently when industry body Solvent Extractors’ Association (SEA) of India, in a pre-budget memorandum, inveighed on the reduction of import duty on crude palm oil from 37.5% to 27.5%, citing welfare of mustard farmers. This seems unfair to farmers as the government – to protect Indian solar to telecom industry – has been imposing high import duties.
Meanwhile, US senators wrote to the Modi government to reduce import tariffs further on US farm products. “Over the last 10 years, exports alone have pumped an additional $1.25 billion in economic activity into rural America. Reducing trade barriers into India is an opportunity to strengthen the economy of rural America,” wrote Senators Kelly Loeffle, David Perdue, Doug Jones, John Boozman and Tom Cotton. They were only regurgitating goals of the trade talks between Modi and Trump, which demanded India buy “at least another $5-6 billion worth of American farm goods.”
Historically India has been ‘most favoured agri-dump’ for the ‘US Big Ag.’
From ‘P.L.-480’ in the 1960s to 1998 – soya was dumped on India at $200 per tonne, killing off oilseed farmers and small processors. In 2005, 74 metric tonne of wheat was dumped as part of the US-India agreement on agriculture, at $400 per MT from Cargill. For 2005, the FAO report pegged prices of wheat at $152 per MT. Vandana Shiva’s Why is every 4th Indian Hungry, records this debacle.
But how are US imports cheaper than Indian products?
American direct payment subsidies overpower negative subsides given to Indian farmers. As per the Agreement on Agriculture (AoA) which was introduced in the Uruguay Round of General Agreement on Tariffs and Trade (agriculture was never part of GATT), developed countries had to end export and other subsidies to their farmers. The Global South was told to remove import and export restrictions, give market access, stop price support for farmers and dismantle public distribution systems. But EU and US, created new clauses such as “green box” subsidies that allowed them to bypass the World Trade Organisation and continue direct payments to their farmers or the ‘Big Ag’.
The result was that in the US under Clinton administration, $15.3 billion was given through direct payments. For example, US government paid US soy bean farmers or Big Ag. $193 a tonne when the market price of soy was only $155 a tonne. By giving direct payments, the commodity prices were unaffected, yet the farmers got money. This artificially cheap soy was then exported to countries like India. Under pressure from the US, India also removed quantitative restrictions (QRs) on import in 2001 with the US for 719 items.
US farm and EU farm subsidies were a major reason for the failure of the Doha round of talks. Yet in 2020, Trump administration gave $46 billion in farm subsidies. This sum amounted to 40% of farm income as the farm debt stood at a staggering $434 billion. But have these payments gone to real farmers or Big Ag or banks in 2020?
Like always the farmers got crumbs at best, as the top 1% got 26% of the payment. So roughly, $1.7 million per company. Between 1995 and 2019, the top 10% of recipients got 78% of the $223.5 billion. This included 50 people on the ‘Forbes 400’ list of the wealthiest Americans, while 62% of US farms did not receive any subsidies. Out of the 10 top beneficiaries of farm subsidies 2020 eight are banks or credit unions.
The way out
The Modi government’s agri-export mania will not go down well at WTO as other nations will demand free trade agreements or import duty relaxations from India too. There is no export without import. And putting the fate of 60% of the country on export centric policy only feeds into the agenda of external liberalisation created by Big Ag corporations like Cargill.
India needs to reorient its agriculture policy towards local consumption and planning should be done so that India can be self reliant in key crops like oilseeds, pulses, etc. Next step should be to increase agri-import duties to the highest level possible and when possible, to ban imports of crops that can be grown in India. EU has already, at various times, banned produce from countries including the US, and the WTO has not prevented them from doing so.
India, instead of encouraging agri-dumping, should enact new laws that prevent this. Not joining the RCEP was good initiative, but the government needs to build on this and also swerve off the bullying by Big Ag. We should impose a stricter QR list and have blanket policy, where all surplus items in India cannot be imported. The government may consider also having stricter anti-trust and anti-monopoly laws within the grain trading and food sector to prevent another Dal scam.
As US, EU and developed countries’ agri-products are highly subsidised; a report by Organisation for Economic Co-operation and Development says governments support 40 to 45% of farm incomes in US, EU and Japan. Many of these subsidies are received by big corporations, and hence they should be taxed at entry and upon sale, so Indian farmers have a fair playing field.
In the end, India cannot have protectionism for corporations backed by tariffs and a free market only for Indian farmers. Our government has a moral imperative to stand with farmers, protect their interest with import duties and ensure higher prices for them. Farmers are our annadattas, it’s about time we save them from agri-dumping and make policy conducive for them, and not Big Ag. qq
Indra Shekhar Singh is director (policy and outreach) at National Seed Association of India. Views expressed in this article are personal.