Model Answer
0 min readIntroduction
The World Trade Organization (WTO), established in 1995, is a multilateral trading system designed to promote free and fair trade among its member nations. Agriculture forms a significant component of the WTO’s agenda, governed primarily by the Agreement on Agriculture (AoA). India, with its agrarian economy and a large population dependent on agriculture, has been a key player in WTO negotiations related to this sector. While the WTO aims to create a level playing field, its impact on India’s agricultural exports has been complex and often contentious, marked by both opportunities and challenges. This answer will critically examine the role of the WTO on agricultural exports in India, analyzing its benefits, drawbacks, and the ongoing issues.
The WTO and Agricultural Trade: A Framework
The AoA, a cornerstone of the WTO’s agricultural policy, aimed to reform trade in agriculture by addressing issues like market access, domestic support, and export subsidies. It categorized agricultural support into three ‘boxes’ – Green, Amber, and Blue – based on their trade-distorting effects. The Green Box includes support decoupled from production, the Amber Box includes trade-distorting subsidies, and the Blue Box includes payments linked to production but with some restrictions. India, as a developing country, has sought special and differential treatment (S&DT) within the WTO framework to address its unique vulnerabilities.
Positive Impacts of WTO on India’s Agricultural Exports
- Increased Market Access: The WTO has, to some extent, facilitated access to global markets for certain Indian agricultural products. Reduced tariffs and non-tariff barriers in some importing countries have opened up opportunities for exports of items like basmati rice, spices, and fruits & vegetables.
- Discipline on Export Subsidies: The AoA’s limitations on export subsidies provided by developed countries have theoretically created a more level playing field for Indian exporters, who generally do not benefit from such subsidies.
- Improved Sanitary and Phytosanitary (SPS) Standards: WTO agreements on SPS measures have encouraged India to improve its quality control and food safety standards, enhancing the competitiveness of its agricultural exports.
- Negotiating Platform: The WTO provides a platform for India to negotiate bilaterally and multilaterally to secure better trade terms for its agricultural products.
Negative Impacts and Challenges
- Continued Subsidies by Developed Countries: Despite the AoA, developed countries, particularly the US and the EU, continue to provide substantial domestic support and export subsidies to their agricultural sectors, distorting global markets and disadvantaging Indian farmers. According to WTO data (as of 2023, knowledge cutoff), the US provided approximately $28 billion in agricultural subsidies, while the EU provided around $60 billion.
- Tariff Escalation: Developed countries often employ tariff escalation, where tariffs increase with the degree of processing. This hinders India’s ability to export value-added agricultural products.
- Non-Tariff Barriers (NTBs): Stringent SPS measures and technical barriers to trade (TBT) imposed by importing countries often act as significant NTBs, restricting Indian agricultural exports. For example, EU regulations on pesticide residues have frequently led to rejection of Indian agricultural consignments.
- Peace Clause Limitations: The ‘Peace Clause’ secured by India at the Bali Ministerial Conference (2013) provides temporary protection against trade disputes related to its food subsidy programs. However, this clause has limitations and requires periodic renewal, creating uncertainty.
- Impact on Small and Marginal Farmers: The increased competition resulting from trade liberalization can disproportionately affect small and marginal farmers in India, who lack the resources to compete with subsidized producers from developed countries.
Specific Examples & Case Studies
- Cotton Subsidies in the US: US cotton subsidies have been a long-standing point of contention, leading to depressed global cotton prices and harming Indian cotton farmers.
- Basmati Rice Exports: While India is a major exporter of basmati rice, it faces challenges related to geographical indication (GI) protection and competition from artificially flavored basmati rice produced elsewhere.
- Dairy Sector: The dairy sector in India faces challenges related to market access due to stringent SPS measures and sanitary regulations in developed countries.
Recent Developments & Ongoing Issues
The WTO’s agricultural negotiations have been stalled for years, primarily due to disagreements over domestic support and market access. The Public Stockholding (PSH) program for food security remains a critical issue for India, seeking a permanent solution to ensure that its food subsidies are not challenged at the WTO. The ongoing geopolitical tensions and disruptions to global supply chains have further complicated the situation, highlighting the need for a more resilient and equitable agricultural trading system.
Conclusion
The WTO’s role in India’s agricultural exports is a mixed bag. While it has provided some opportunities for increased market access and discipline on export subsidies, the continued prevalence of trade-distorting subsidies by developed countries, coupled with NTBs and tariff escalation, pose significant challenges. Securing a permanent solution for PSH, addressing the issue of domestic support, and promoting a more equitable trading system are crucial for ensuring that India’s agricultural sector can benefit fully from global trade. A proactive and strategic approach to WTO negotiations, coupled with investments in improving quality control and infrastructure, is essential for enhancing the competitiveness of Indian agricultural exports.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.