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Indian is no exception to these general trends, with a few special features. During last two decades India‘s agricultural exports as a part of total merchandise exports have continued to decline from the preponderant position they occupied in the pre-independence. But with the achievement of selfsufficiency in food grains and some other major agricultural commodities, which used to account for large portion of import bill, overall imports of agricultural commodities have sharply declined. The outlay on agricultural imports as a proportion of earnings from agricultural exports has progressively declined, and all the balance has become progressively more favorable. Discussion on these issues has, naturally, to take into account the new trade regime as the stated objective of firstly to study the performance of India‘s agricultural exports under WTO regime. secondly, to analyze the competitiveness of top agri-exports of India under WTO regime. Finally, to suggest policy measures in the identified India‘s agricultural. In the first part of discuss briefly introduce, the developments in agricultural trade specially the agricultural exports at the world level in the recent years and discuss the performance of Indian agriculture in this respect finally shaped the shifts in this policy. Final part, I will try to spell out the ingredients of a strategy to augment agricultural exports in the changing, and more demanding, global economy. Recent empirical studies have estimated the trade flow effect of membership in the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT). One important, although largely untested, conclusion from this literature is that the GATT/WTO has worked well if we ignore trade in agriculture one of the institution‘s seemingly apparent failures. This article investigates this conclusion using a large panel of agricultural and non agricultural trade flows, the latter of which serves as our benchmark. The results are impressive: the multilateral institution has delivered significant positive effects on members‘ agricultural trade relative to trade between non members. Further, despite their special and differential treatment, membership has provided important trade flow benefits for developing and least developed country agricultural exports. These findings are robust across a large number of specifications and slices of the data. Although there are few sectors as politically sensitive, participation in the GATT/WTO appears to be a significant determinant of agricultural trade flows.
Indian is no exception to these general trends, with a few special features. During last two decades India‘s agricultural exports as a part of total merchandise exports have continued to decline from the preponderant position they occupied in the pre-independence. Their share in the merchandise exports of the country in recent years (1991-97) ranges between 15 to 18 per cent. But with the achievement of self-sufficiency in food grains and some other major agricultural commodities, which used to account for large portion of import bill, overall imports of agricultural commodities have sharply declined. The outlay on agricultural imports as a proportion of earnings from agricultural exports has progressively declined, and all the balance has become progressively more favorable. A stylized version of the changes in agricultural trade pattern during the course of economic development will suggest that with the growth of an economy development will suggest that with the growth of an economy not only the share of agriculture in GDP declines, share of agricultural exports to the total merchandise exports also decline. As the economy gets diversified the non-agricultural commodities acquire greater importance in the product mix, and also in exports.
Part of the explanation for the relative also lies in the rising share of processed agricultural products. On the imports side, with larger share of purchased inputs such as fertilizers, pesticides, farm machinery etc. rises, However, as the import intensify of agricultural production is low imports. Most of the developing countries maintain a favourable trade balance in agriculture. Contribution of agricultural exports to foreign exchange earnings is critical for a country such as India which faces a chronic balance of payment problem. With the growth in economy, especially with the growth of more import intensive sectors such as industry the need opportunities mean bigger markets and higher value for their output. However, while thinking about exports of agricultural commodities in a poor country like India the implication of export growth on domestic cannot be overlooked. Discussion on these issues has, naturally, to take into account the new trade regime as the stated objective of to study the performance of India‘s agricultural exports under WTO regime. In the first part of my presentation I will briefly introduce I will look into the developments in agricultural trade specially the agricultural exports at the world level in the recent years and discuss the performance of Indian agriculture in this respect. In the next part I will review years and account for the important factors which have shaped the shifts in this policy. Final part, I will try to spell out the ingredients of a strategy to augment agricultural exports in the changing, and more demanding, global economy.
OBJECTIVES 1. To analyze the competitiveness of top agri-exports of India under WTO regime. 3 . 2. To suggest policy measures in the identified India‘s agricultural. To study the performance of India‘s agricultural exports under WTO regime. 3.
term comparison.e. To examine the agriculture export performance. WTO. and information across the international borders. trade barriers (tariff and non tariff) as well as reduce and eventually remove domestic support and system of export subsidies that distort international trade between nations. ratio. As a matter of fact the relative importance of agriculture in the economic and social life of these countries is much more than that in the developed countries. The technical ability to ease flow of goods. 4 . those living on one dollar or less per day).WTO period. UNCTAD. has reached immense proportions in the last few decades. ANALYSIS OF DATA Globalization – manifesting in progressive integration of economies and societies has assumed increasing significance in the lives of common people all over the world. Ministry of Agriculture GOI.METHODOLOGY The present study is based on secondary data. Agriculture is of special significance for developing countries particularly the extreme poor (i.periods are also made for short. Compound Annual Growth Rate. percentage. These problems of trade distortion are most conspicuous in agriculture sector. This is achieved by developing a set of rules of multilateral trading system which aims to remove. Ministry of Finance GOI and Tea Board of India. Data are obtained from FAO. The objective is to compare export performance under WTO regime with pre. In the field of the trade the World Trade Organization (WTO) is the principal international institution responsible for laying down rules for the smooth conduct of trade in goods and services among nations in this globalized world. Co-efficient Variance. longer period time series data are used. etc. most of them as small farmers‖ . Average Growth Rate. It has been estimated that ―three quarters of them about 900 million people – live and work in rural areas. services. The annual time series data are used for the entire period from 1991 to 2006. Table 1 shows that where as agriculture contributes 3% to the GDP and employs only 4% of the population in developed countries the corresponding figures for developing countries are 26% and 70% respectively. tools like. inter alia. RBI. IMF. Sub. Wherever it is necessary.
This trade round stretched from 1986-1994 and concluded in establishment of WTO and inclusion among others of agriculture in the discipline of WTO. marking and labeling requirements. S. WTO policies impact agriculture principally through the following agreements: Agreement on Agriculture (AOA) Agreement on Application of Sanitary and Phytosanitary Standards (SPS): (Dealing with Health and disease related issues) Agreement on Technical Barriers to Trade (TBT): (Dealing with Regulations. testing and certification procedures. Action Aid ―Food Rights‖ The WTO Agreement on Agriculture. (2001) Proposal for ―development Box‖ in the WTO Agreement on Agriculture. 2003. Government of Pakistan. Islamabad. plant breeders‘ rights etc). The agriculture was included in the multilateral trading system after the eighth (Uruguay) round of talks under GATT on demand of developing countries who had a comparative advantage in this sector and its benefits were being denied to them. (2002) Presentation at Agriculture and WTO Seminar. R. etc) Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs): (Dealing with Patents and copyrights. D and Priyadarshi.3% 4% Developing Countries (including least developed) Subsistence 26% 27% 27% Nature of Agriculture System Share of GDP Contribution to foreign exchange Population engaged in agriculture Source: Green. standards. This was achieved by developing countries only after paying a heavy price in the form concessions on many fronts especially intellectual property rights and services. Kaukab. CAFOD and South Centre. 2002. 5 . Ministry of Commerce. August.Table 1: Key differences between agriculture systems in developed and developing countries Parameters Developed Countries Commercial/Export Oriented 3% 8. packaging.
Blue and Amber. extension and advisory services. decoupled income support etc. Developed countries can give subsidies up to the value of 5% and developing countries up to 10% of the value of its agricultural production for non product specific purposes. 6 . tariff on rice is up to 1000%2 making it very difficult for agricultural products from developing countries to enter and compete in developed country markets. Green Box subsidies are deemed to cause no or minimal trade distortion and hence not subject to reduction under WTO commitments. The three pillars of Agreement on Agriculture are domestic support. training services. for instance. At worst. Amber box subsidies are considered to be trade distorting such as market price support and are expressed in terms of Total Aggregate Measure of Support (AMS) which is given as one figure. Domestic support can be provided under deminimus provision as well. At best. Market access provisions under WTO are based on the principles of ―tariffs only‖. Non tariff restrictions like quotas have been replaced by tariffs but the bound levels of tariffs for agricultural products originating in developing countries are excessively high in developed countries. it has been perceived as legalization of trade distorting practices. Only Amber Box subsidies are subject to WTO reduction commitments according to an agreed formula. environment programme. These include government spending for research. being carried out by developed countries by virtue of which market access to foreign agricultural products is denied and domestic support to local agricultural products is continued to be provided.The preamble of the Agreement on Agriculture (AOA) recalls that the long term objective of the agreement is to establish ―a fair and market oriented agricultural trading system‖1. Domestic support falls mainly under three domestic subsidy boxes named after traffic lights as Green. relief from natural disasters. market access and export competition. In Japan. Blue box subsidies are linked to acreage or animal numbers but under schemes that also limit production by imposing production quotas or requiring farmers to set aside part of their land. Moreover developed countries have been discouraging value addition at each step in the processing ladder by tariff escalation. marketing and promotion services. Agreement on Agriculture (AOA) has turned to be a modest attempt to lay down some institutional framework and general principles that can be further developed to move towards a fair and market oriented trading system in agriculture. infrastructure provisions. pest and disease control. The way Agreement on Agriculture (AOA has been implemented so far evoked understandably harsh criticisms from developing countries and civil society organizations in the developed world.
March 2001.WTO. FAO and UNDP have shown that the total value of domestic support provided by OECD countries in the last decade has in fact been increasing instead of falling which is exactly opposite of the desired goal. have maneuvered domestic subsidy boxes and shifted most of the support to green and blue boxes leaving very little for amber box subject to reduction commitments. Table 3: Level of Support in agriculture amongst OECD Countries ($Billions) Countries OECD US EU 1986-1988(annual average) 302 69 110 1998 339 91 125 1999-2001(annual average) 330 95 113 7 .The World Trade Organization‖. on the other hand.Table: 2 Reduction Commitments under Agreement on Agriculture (AOA) Developed Countries Implementation Period Tariffs 6 years i.g. Under agreements with IMF and World Bank. The developed countries. The problems with developing countries is that they don‘t have fiscal space to even take advantage of the permissible provisions for domestic support available in the form of green box and deminimus measures. Studies by South Centre and Action Aid quoting statistics from OECD.e.e. P 17 Export subsidies were only allowed to the countries which were granting these at the time of coming in force of Agreement on Agriculture. for food security reasons) they usually have decreased their tariffs much below the bound levels. domestic support and export subsidies. Table 3 provides a comparison of their level of domestic support before and after Uruguay Round. Table 2 provides details of reduction commitments under various heads of market access. 1995-2000 -36% Developing Countries 10 years i. 1995-2004 -24% -13% Domestic Support (total AMS -20% support for base year 198688) Export Subsidies(based period -36% 1986-90) Source: -24% ―Trading into future. or under domestic political pressure (e.
For cereals. Needless to emphasize that these practices accentuate poverty through loss of jobs and diminution of GDP. like many other developing countries has been transferring resources from agriculture to bolster its industry since fifties. Pakistan had reported that it did not provide export subsidies in 1995 as it did not have exportable surplus at that time. Pakistan. Resultantly developing countries exports suffer from low profits due to fall in international prices and in worst scenarios their domestic markets have been lost due to inflow of artificially cheap imports from developed countries.50 Source: ―Schedule of WTO commitments‖ by Pakistan and Sarfraz K. Pakistan committed to bind more than 90% of its agricultural tariff lines with most of these bound at 100%. Prices of food items have been kept artificially low to cater to the needs of low paid urban labour and middle class. 2001 and 2002 Agricultural Policies in OECD Countries: Monitoring and Evaluation. Table: 4 WTO tariff bindings and applied rates for selected major products (percentage ad valorem) Product Bound Rate Cereals 100-150 Oil seeds 100 Vegetable oils 100 Live animals 100 Meat 100 Dairy Products 100 Sugar 100 Coffee and tea 100-150 Simple average 100. 8 . Food Rights. Paris and Action Aid. AOA conditionalities now prohibit provision of any new export subsidies. Qureshi Applied Rates 1995 1997 0-6 0-25 10-70 0-65 25-70 25-65 15-65 15-65 35-70 15-65 25-70 25-65 35-70 45-65 15-70 0-65 1999 0-15 0-35 10-35 10-35 10-35 10-35 25-35 25-35 Total AMS (Aggregate Measure of Support) in case of Pakistan has been negative and hence without any consequence for reduction commitments. WTO and Agreement on Agriculture. 2003 Import barriers (market access restrictions) and domestic subsidies have increased the prices of agricultural products in internal markets of developed countries leading to over production of agricultural products. Applied tariff rates for agricultural items have been much lower than the bound rates. Dumping of dairy products and sugar by European Union in African markets is often sited as an example in this regard. coffee and tea the bound rate varies from 100-150%. By providing export subsidies and export credits developed countries have been able to effectively dump their excess production in international markets causing a fall in prices of agricultural products.Source: OECD. OECD.
human. introducing some change in the gene 9 . middle men and government departments. There is a need to balance the provisions of TRIPS with that of Convention of Biological Diversity wherein the sovereign rights of nations over their genetic resources is recognized. animal and plant health and safety standards. using and selling farm saved seed. however. Animal health standards by International Office of Epizootics and Plant health standards by the FAO‘s Secretariat of the International Plant Protection Convention. exporters. they will resort to more and more use of quality standards as non tariff barriers. In any event developing countries should make serious efforts to comply with these standards. Overall research and development environment in agriculture sector needs to be enhanced to cater to this challenge. fear that when pressure on developed countries will force them to decrease their market access tariff barriers. Disease and pest control should be on modern lines to produce quality products. These quality standards and disease/pest control measures are based on internationally recognized scientific measures and standards. Developing countries should therefore develop their own sui generis system balancing the rights of plant breeders and local farming communities. The international Union for the Protection of New Varieties of Plants (UPOV) was developed as a sui generis system in Europe and is widely viewed as tilted in favor of plant breeders. The use of fertilizers. This requires creation of awareness amongst the farmers. These companies are able to gain patents on their valuable resources by extracting the basic contents. while recognizing the desirability of maintaining quality standards clearly mentions that these should not be used as trade barriers. Multinational seed companies have now started claiming patent rights over the seed produced through their research by introducing some new gene sequence. Chains of Laboratories which are internationally accredited and well equipped to deal with the requirements of local exportable produce are required to be established. Developing countries. among others to the inventors of new seeds and plant varieties. Another problem for developing countries‘s agriculture arises out of TRIPS agreement that has made it mandatory for all member countries to accord protective intellectual property rights. WTO Agreement on Sanitary and Phytosanitary Measures (SPS). For centuries farmers had been saving.Developing countries have to face tough resistance to gain access to the markets of developed countries on the basis of food safety. Multinational companies are criticized for utilizing the biological resources of the developing countries without informed consent of their governments and communities. Developing countries fear that this will threaten their centuries old farm practices and make their agriculture dependent on these companies. These include Food quality standards as prepared by FAO/WHO Codex Alimentarius Commission. exchanging. TRIPS states that all countries should protect their plant varieties by patents or through a sui generis system. pesticides and other chemicals at various stages of crops is highly unscientific in Pakistan and leads to increase of chemical levels beyond internationally permissive levels. These are aimed at better quality living for the living beings. which are internationally acceptable.
According to Doha declaration a road map was provided for agriculture negotiations. Our agricultural products are already working in nearly free and market oriented system unlike more protective developing countries like India and Brazil due to low values of applied tariff. competition policies. Now is the time that we should struggle to reap benefits of our comparative advantage by removal of distortions in international agricultural trade instead of indulging in just anti rich rhetoric. Japan and USA. SPS and special and differential treatment for developing countries. oranges etc. work in close coordination with the members of Cairns group of countries. trade facilitation and government procurement. The developing countries led by India. packaging. We should. Pakistan needs to provide patent protection to its valuable export brands like Basmati Rice. labeling. testing. domestic support and export competition as well as to make more meaningful and enforceable the ―special and differential treatment‖ provisions. 10 . varieties of mangoes. Plant breeders rights legislation requires to be introduced which should be based on our own sui generis system. Under Article 20 of Agreement on Agriculture the review process to ascertain the progress made towards establishing a ―fair and market oriented trading system in agriculture‖ started in the year 2000. Under pressure of an increasingly assertive civil society. developed countries agreed to make more meaningful concessions to developing countries at Doha in 2001. 2003 which has passed without any agreement. will be in the interest of Pakistan to voice the concerns of developing countries especially on TRIPS. processing and marketing facilities on scientific lines to pursue an export led growth strategy with adequate safeguards to ensure that the benefits reach teeming millions of our poor who are dependent on agriculture for their livelihood. however. and try to improve market access to the markets of EU. WTO Ministerial Conference held at Cancun from September 10-14.structure and getting patent rights. Brazil and Malaysia had made it clear before the Ministerial Conference that negotiations on ―The New Issues‖ should not proceed unless there is substantial progress on the ongoing ―Doha Development Agenda‖ especially vis-à-vis removal of trade distortions in agriculture sector by developed countries. We need to improve our production. WTO has been criticized for paying lip service to the concerns of developing countries in the field of agriculture while pursuing an agenda of developed countries. Singapore issues also called ―The New Issues‖ consist of cross border investment. antiglobalization movement that emerged at the time of Seattle Ministerial Conference. which consists of powerful agricultural exporters like Australia and New Zealand. In pursuance of this ―built in agenda‖ many proposals have been submitted on the three pillars of market access. storage. Traditional herbal and pharmaceutical knowledge needs to be documented and their link with community practices and ways of life established. The deadline for agreeing on modalities was March. The issue of contention had been the insistence of developed countries on further negotiations on Singapore issues. 2003 has reportedly ended in failure. The original communities who have been using such products may not get any information or share in the profits that subsequently accrue to the companies.
development is the signing of various agreements as a result of the of the Uruguay round of trade negotiations. The significance of the Uruguay round agreements could be well appreciated one it is recognized that for the first time agriculture is brought under the General Agreement on Trade and Tariff (GATT) discipline.Brief review of literature Nayyar and Sen (1994). I will briefly touch upon the developments at the international plane and their implications for the agricultural trade. They emphasize that the emerging scenario in respect of food balance opens up the prospects for. because various trade blocks would. p. Also. and probably more important. it is argued.2001a). the contracting patties to GATT had reconciled to a waiver on agricultural trade obtained by USA which. A number of scholars and practitioners have commented on the move towards the policies on liberalization and globalization and their implications for agriculture in our country.4). The extent environment The economic environment for agricultural trade is changing in a remarkable way due to changes in the domestic policies as well as in International Trade arrangements. in fact. It is obvious that Rao and Gulati have taken this position in order to strengthen their case for export of food-grains. Second. I shall comment on the latter now more or less universal coverage in terms of the countries agreeing to its covenants. starting from EEC and ASEAN to more recent attempts at forming NAFTA (North American Free Trade Agreement) and SAFTA (South Asian Association of Regional Cooperation). and indeed necessitates the export of foodgrains. all crops and all agricultural products output as also marketed surplus it is positive (Desai and Nambodiri. hopefully. The international developments relevant to one. 1994. specially in view of the comparative advantage that the country enjoys in respect of the production of rice and wheat (Rao and Gulati. several groupings of the countries are emerging with the objective to forming unified trade blocks. Out estimate of the multivariate model that uses Nerloian partial adjustment frame work shows that for 1967-68 to 1990-91/1994-95 this aggregate ‗net‘ impact is negative for the output as well as marketed surplus of food-grains which occupy two-thirds of the cropped area. Until the present round of trade negotiations. The alignment of internal domestic prices with border prices is likely to help in obtaining a more rational and sustainable cropping pattern and would result in the expansion in acreage under those crops which have a comparative advantage and contraction of acreage under crops like oilseeds and to some extent sugarcane which are high cost. while for non. would be a more rational allocation of production resources.foodgrains. pleaded for 11 . converge on a global trading system initiated by the Uruguay round.
The very fact that agriculture has been brought under international discipline is of great significance. agreements have been reached on several important areas. partly. A firm beginning could be made by domestic economic reforms. In recent years the ratio of agricultural exports to agriculture GDP has seldom exceeded 3 per cent. After lengthy and tortuous negotiations under the Uruguay round. Adjustment of agriculture to a more liberal and global economy should be attempted carefully. Limits on public stock holdings of grains for food security. deregulation and debureaucratization within the country. Adjustment in the food sector should be gradual and non-doctrinaire. because of great complexities of provisions and instrumentalities in the agreements which could subject it to a variety of interpretations. Nor. to take long-term advantage of a liberal international trade regime in agricultural commodities should. Sparing use of sanitary and phyto sanitary import barriers. 5. These include: 1. International prices could be used referral for this purpose. Agricultural trade policy India like several other long countries is not an export-oriented economy. This is itself is not a disqualification. exact outcome of various provisions of the agreements on the developing countries is difficult to forsee. include the following: Macro economic reforms which discourage high tariffs and overvalued exchange rates are beneficial to agricultural trades and need to be continued. However. This is particularly true of agriculture. and Introduction of intellectual property rights. Nothing should be done to impair food security and poverty alleviation efforts in the process of economic reforms. The steps which are necessary not only for the short-term relief but also for equipping the developing countries. Implicit taxation of agriculture through price discrimination should be avoided. in my view.complete removal of all interventions in agriculture. Reduction in the farm subsidies. if the example of the African countries 12 . including ours. 2. 4. 3. The Uruguay Round Agreements are a milestone in the development of the international trade in agricultural commodities. Enhanced market access. although no sanctity need to be attached to the border prices. The proposal to bring agriculture tinder GATT discipline evoked a responsive chord in several countries which were concerned with the rising burden of subsidies in their budgets. especially by encouraging liberalization.
Firstly. The agricultural commodities can be broadly divided into two categories. However. The distinction between two is not firm but under stable. All these ingredients of overall trade policy applied to agricultural trade. There are. In regard to the regulation and control. starting from the mid-sixties this policy was pursued more rigorously. an import substitution policy leads to high unit cost of production. and existing distortions in agricultural trade will be removed.sufficiency and promotion of exports of the so called ―commercial crops‘. a quest for import substituting industrialization and concern for dwindling foreign exchange resources. The instrumentality of element of the developmental thinking. heightened tariffs. along with higher yields the unit cost of production of superior cereals came down and benefits of growth in productivity could be shared by the producers (in terms of higher income) and consumers (in terms of stable prices) in an equitable manner (Vyas. Any fluctuations in food grains prices will result in undue hardship for this section of population. mainly because of the availability of a high yielding technology in cereals. a fact which is generally not appreciated. There is an established policy of encouraging exports in commercial crops. Secondly. The public sector agencies were given equally important role in the imports of inputs. 1990).493 for the very poor and . The role of State Trading Corporation (STC) and the cooperative Federations was emphasized as canalizing agencies for agricultural exports. surcharge on imports.e. the country fill-in the gap between the demand and supply of food grains without raising the real cost of production. it is now generally accepted that food security means entitlement of food and. Till then the agricultural trade was also subjected to a regime of quantitative controls and other state interventions to conserve foreign exchange. Corresponding figures for urban areas for urban areas of the now well 13 . import comparatively cheaper food grains and distribute it equitably. In the second phase. however. Continuation of the strategy of food self-sufficiency is challenged mainly on three grounds. agricultural trade was no exception. i.e. i. several reasons why the policy of food self.. not only the task of food self-sufficiency was accomplished.sufficiency which largely for over 40 per cent of expenditure of the bottom ones-third of India‘s population. The importance of exports as an economic activity has to be judged by the objectives it serves. especially till 196667.409 for the poor in rural areas. therefore. and it has to continue. rebate on exports and phases in which these provisions were relaxed yet. However. the developed countries will also have to withdraw subsidies for agricultural products and. In fact. Thirdly. the country as a whole as well as the poor will benefit more. the second year of serious draughts of the mid-sixties. particularly fertilizers and chemicals. The major instruments used to implement these policy goals comprised of quantitative restrictions. it is suggested that unlike in the 1950‘s and the 1960‘s when the food grains surplus was mainly concentrated in USA and few other developed countries there is much more widespread distribution of tradable quantities of food grains. Normally. an implicit distrust of private sector and an implicit faith in bureaucracy to achieve the stated goals of development. and Food self sufficiency became the corner stone of the development strategies in agriculture. if the country can earn foreign exchange.is an indication. while in industry the policy of import substitution was designed to pursue twin objectives of food self. the food crops and the non-food crops. therefore..0. it is suggested that with the new economic regime brought in by the Uruguay round of agreements. Price elasticity with respect to prices of cereals was estimated at 0. There is hardly any country which is in a monopolistic position. India‘s foreign trade regime till the reforms initiated in 1991 was primarily dictated by two important considerations. The basic characteristics of an inward looking import substituting policy frame remained more or less intact. there will be a level playing field. a high export to GDP ratio is a blessing in itself.
the wheat requirement is estimated at 71 million tones and rice requirement is estimated at 88 million tones. When country has enough buffer stocks to ward off any significant price fluctuations imported from external source When there are numerous and assured sources of supply to cope with any sizeable short fall in domestic food grains production. especially the budget of the poor. Therefore. Their livelihood depends on the growth of agriculture. it has to be recognized that the food grain surpluses in food exporting surplus countries are not adequate to meet the demands of the measurable extent.established that the international prices are far more volatile than the domestic prices. We can view the policy when the following conditions are met. Australia and Germany. When food production does not remain the main source of livelihood for the small and marginal farmers. USA. food self-sufficiency is not a matter of faith. an opening up of the economy for food grains imports to any sizable extent will tantamount to importing price instability. India‘s food requirements by year 2000 are expected to be of the order of 210 (209. On the supply side. It is not only as the consumers.4) million metric tons. Bulks of the poor are in the rural areas. Exportable surplus of food grains. Canada. who accounted for nearly 73 per cent of total exports of wheat in triennium ending 1995. However. When non-food exports become sufficiently buoyant to generate enough foreign exchange surplus. particularly wheat is still concentrated in five developed countries. In this. When expenditure on food becomes a minor part of the consumers budget. Other major consideration is the availability of foreign exchange to meet food grains imports. also as producers the poor have a stake in maximizing food grains production. 14 . the main victims of that would be the poor in the rural and the urban areas. France.
69 3.06 1. Market Access Where tariff bindings are too high.33 Cotton 0. market access provisions do not apply when the commodity in questions is a traditional staple in the diet of a developing country. However.08 Source: Calculated from FAO.iii.67 -1.62 1.94 5.77 1. Developing countries are to reduce their bindings over a period of ten years (1995-2004).03 0. Indian Agriculture and WTO iv Domestic Support World Trade Organization was established on January 1.13 3. Growth Rates of Area. Trade Year Book Various Issues Crop 1980-81 to 1991-92 Production Yield 3.83 0. It replaced GATT.71 3.08 2.63 Oilseeds 0. Least developed countries are exempted from tariff reduction.1995.60 0.07 Coarse cereals -1.55 Wheat 2.42 1.24 1.22 1.76 2. Production and Yield 1967-68 to 1980-81 Area Production Yield Area Rice 0. Devloped countries were to reduce their tariff bindings over a period of six years (1995-2000).61 0. i. WTO is much wider in scope and coverage.34 15 . trading system in agriculture.62 2.64 2.39 -0.24 3.54 -0. current market access has to be maintained as the amount of exports to other countries at preferential tariff rates.89 4. Table 1.25 3.04 0.45 -0.68 Pulses 0.46 0. Agreement of Agriculture (AOA) AOA of WTO recognizes free and market-oriented following main features.59 3. Tariffication It means conversion of all non-tariff barriers on trade such as import quota into tariffs. It has the ii.79 1. Tariffs bindings are to be reduced under this agreement.
00 1.52 1986-94 5. 49.24 Wheat 0.66 17. The developed countries are heavily subsidized countries and are allowed to retain up to 80 per cent of their subsidies but developing countries can subsidize their farmers not more than 10 per cent of the total value of agricultural production.10 23.61 Tobacco leaves 2.85 Sugar 0.79 Source: Calculated from FAO.18 Sugar refined 1.78 Tea 22.53 Coffee.83 Sesame seed 7. white/long/black 14. distortions emerge from inequity in domestic subsidy discipline due to different base positions.64 6.10 17. there are many issues under the AOA which are considered against the interests of developing countries like India. Trade Year Book Various Issues WTO member countries are subject to following obligations on domestic support to their agriculture.65 Cashewnuts shelled 60. Trade Year Book Various Issues Table 4.47 79.Table 2.88 Tobacco leaves 13.06 13.89 2. India Percentage Share of Exports in Production (in Quantity) Commodities 1991-95 1996-05 Rice milled 1.18 Coffee.71 14.28 3. green 51.88 7.53 Tea 18. the minimum access for import of primary goods flouts the basic rule of promoting free trade under WTO agreement.35 20.88 4.80 12. Secondly.04 Oil of castor beans 69. Hence.82 3.25 1. green 2.31 32. India percentage share in world exports in value Commodities 1991-95 1996-05 Milled paddy rice 12.13 1.58 93.37 Source: Calculated from FAO. CAGR and CV of World and India’s Agricultural Exports Year CAGR CV World India World India 1976-85 4.29 54. However.67 Buffalo meat 99. the domestic support by developed countries needs to be reduced 16 .99 15.46 3.88 Onion dry 8.68 Source: Calculated from FAO.54 2.35 49.86 1995-04 2.93 4.91 Pepper.16 8.40 23.39 13.91 27.94 Cotton lint 1. Trade Year Book Various Issues Table 3.28 Onion dry 8.65 3.03 Sesame seed 14. Firstly.15 Cake of Soyabeans 7.56 Cotton lint 3.90 12.03 Pepper.85 4.85 14.08 15.49 Wheat 0.91 Coffee extracts 2.
In the case of cotton. milk. 1967-68 to 1980-81 which may be called the first green revolution decade and 1980-81 to 1991-92. It was mentioned above that this crop group was favoured by the market but an even more powerful influence on the performance of oilseeds since the mid. Also. the eighties. meat. market access and domestic support discipline should be such that their food requirements are met from domestic sources. EXPORT COMPETITION WTO member countries are obliged to reduction commitments of their direct export subsidies. horticulture and floriculture products and farm products with international quality standards could help to increase exports from this sector. cheese as well as tobacco products and cotton. Like oilseeds. Developing countries are to reduce the same by 14 per cent and 24 per cent respectively within ten years. e. It is exempted from reduction commitment under WTO. it is an exempted support. which received little policy attention. butter. i. market intelligence. production and yield for two periods. possibly in response to the market signals. In comparison with oilseeds. diversification of agricultural production into agro-foods. Developed countries are to reduce the volume of subsidized agricultural exports by 21 per cent and the value of subsidies by 36 precent of the average base period 1986-88 within six years. ii) Blue box support: It is product-limiting subsidy and pertains mainly to the developed countries. shallow wells etc. cotton also benefited from policy interventions to help its production as well as marketing though. Thirdly. A heartening feature of the growth in oilseeds production has been that it occurred in the agriculturally backward areas of states. considering the decline in its area 17 .. production and yield during the eighties as compared to the preceding period. its area decreased in the eighties but there was a marked rise in the growth rate of its yield and production between the ‗green revolution‘ decade and the eighties.substantially in absolute terms. i) Green Box Support: It is given on items which have minimal impact on trade. India has argues that for low income countries. has been quite modest though. The volatile international market can get transmitted to the domestic economy and can affect the prices of food grains and food entitlement of the poor. by and been well received and endorsed by most of the developing countries as well as some of the developed countries. cereals.e..eighties has been the Technology Mission and the market intervention operations by the pubic agencies.g. The table shows the growth area. However. the performance of pulses. there was a marked increase in the growth rates of area. it is important that steps are taken to reap benefits of a liberalized trade regime through increased efficiency arising from sanitary and phyto. iii) Special and differential treatment box support: It includes investment subsidy to agricultural sector for farm development work like land leveling.sanitary measured. sugar. Include the mayor agricultural staple foods. some improvement in pulses did take place in the eighties while their production and yield had actually decreased during the preceding period in the wake of the surge in the production of wheat. Efficiency would be greatly enhanced with increased investment and land reforms. pest and disease Control. In the case of oilseeds. The Indian proposals have.
there is a misconception that India is reducing import duties on agricultural products under WTO compulsions. pulses and ediable oils in the last Budget (2001-02). In the context of fears expressed in some quarters that liberalization of imports would lead to surge of agricultural imports affecting Indian farmers adversely. Agricultural exports of India took a downturn during 1997-2002 in absolute terms. the interaction between the policy support and the favourable market has apparently been much more effective in certain selected areas and not uniformly in all cotton growing regions. The government. In the subsequent section. ―India has considerable flexibility to counter flooding of the Indian market by cheap agriculture products which provide a fair level of protection. In a country‘s export share in world export. coffee. tea. we may infer that it is liberal trade policy helped the exports to increase in absolute terms during post.The tempo of growth in agricultural exports of India could not be sustained after 1996. This is clear from the table. average export unit value of that country will be lower compared to average export unit value of the world. From the above analysis. Countervailing duties can also be imposed to counter countries apart from having the opinion of acting under safeguard provisions to counter surge of imports. It shows. if quantity export share increases more than share in export value in world export. country exports are at lower price in international market. if quantity share is more than share in value. economic benefit of export in post. in fact.favorable terms trade for the exporting nation. From 2002 we find revival in India‘s agricultural exports. it will lead to un. 18 . To capture this on India‘s selected agricultural commodities exports during 1991 to 2005. the Economic Survey. With export expansion of a country. As a matter of fact.WTO period is mainly focused. Contrary to India‘s expectations from WTO AoA. the actual import duties on a variety of agricultural products are lower than the tariffs under WTO. we have done a simple exercise in Table have calculated ratio of export share in terms of value and quantity in world export and then multiplied by 100 (share in value/ share in quantity *100).during the eighties. 2001-02 observed. the situation reversed from 1997-2002. Now question arises about economic benefit of exports.WTO period and importantly increased their share in world exports both in terms of quantity and value. As regards tariffication. raised the import tariff for many agriculture products such as.
The results support the fact that GATT/WTO members have more liberal tariff policies (Figure 1).5% (12%) in AG (NONAG)). then this should be reflected by more liberal trade policies of its members. While this approach fails to control for a host of other factors that may influence tariffs (as in a political economy model) or trade flows (as in the gravity equation). GATT/WTO members apply lower tariff rates on average (16% (8%) versus 17. While most tariff profile studies often report differences in the levels of protection between agricultural and non agricultural sectors (Gibson et al. these differences in tariff policies are significant in two out of four cases in AG (share of duty free applied tariffs and maximum tariffs) and three out of four cases in NONAG (the exception being the maximum duty rate).EVIDENCE FROM TARIFFS AND TRADE FLOWS Before turning to the formal econometric results. The remaining panels in Figure 2 (II. Confidence intervals for each point estimate and the difference in means t test with the usual asterisks to denote significance are also included. virtually no attention has been paid to differences in tariff rates between members and non members within a sector. We then save the residuals. Compared to non members. Nonein). 1. and (IV) the maximum applied tariff. If the GATT/WTO has worked well then we might expect to see systematic differences in the residuals of members and outsiders. OECD 2004). That is. 2. 2001. If the GATT/WTO has worked well. The top left panel (I) plots the mean value of (log) bilateral trade between members (Bothin) and trade involving at least one non member (Onein. (III) the share of applied tariffs greater than 15 percent. Statistically. they have a higher share of duty free applied rates (22% (27%) versus 15% (15%) in AG (NONAG)). an initial look at the data can be quite instructive. and IV) plot the mean value of the gravity equation residuals conditional on GATT/WTO membership. III. following Rose (2004a) we regress the log of trade on all right hand side variables discussed in equation (3) (including year fixed effects) but purposefully omit the GATT/WTO treatment effects. and the average maximum tariff they apply is over 100 percentage points lower than non members (186% (84%) versus 269% (98%) in AG (NONAG). Evidence from Trade Flows and Gravity Equation Residuals Figure 2 plots four summary measures of trade flows along with the associated t tests for differences in means within each industry (AG and NONAG). they have a lower share of applied duties greater than 15 percent (32% (17%) versus 37% (26%) in AG (NONAG)). (II) the share of duty free applied tariffs. Tariff Rates Figure 1 plots four summary indicators of members‘ and non members‘ tariff policies in each of the AG and NONAG sectors: (I) the average applied tariff. 19 . These plots are based on Most Favored Nation (MFN) applied rates from the WTO‘s World Trade Profiles database for the years 2006 and 2007. we take a casual look at tariffs and trade flow differences between members and non members within each sector.
membership appears to make a big difference in terms of DING countries‘ access to DC markets for the export of their AG products (panel IV). respectively). The remaining panels (III and IV) examine subsets of the data. whereas the residuals are negative for DC imports of NONAG products from generic and DING country members (panels III and IV. the mean value of log trade is higher between members than it is between a member and a nonmember (Onein) or between outsiders (Nonein) (panel I of Figure 2). DC imports from members and non members are compared. In the next section we explore the robustness of these findings using a formal model of trade flows. particularly for agricultural goods. for AG trade. where differences in the residuals between members and non members is easily rejected in both sectors. Based on these plots.Results presented in Figure 2 suggest that the GATT/WTO has a significant impact on members‘ trade. the mean residuals for DC imports from a generic member (panel III) as well as for a DING country member (panel IV) are positive. Second. while panel IV is based on the subset of gravity equation residuals reflecting DC imports from DING country members and non members. In panel III. First. a slightly different story emerges when comparing AG and NONAG sectors. First. This result is also confirmed by the gravity equation residuals (panel II). 20 . This is an important result given the AG export interests of DING nations.
66*** 35% 30% t = 1.55 Share 20% 15% 10% 5% 0% AG NONAG Tariff Rate 25% 200% 150% 100% 50% 0% AG Maximum Applied Rate Member Non Member NONAG Share of Applied Duties Greater Than 15% Member Non Member Figure 1.19 III t = 3.08*** 20% 25% 15% Tariff Rate Share AG Average Applied Tariff Member Non Member NONAG 20% 15% 10% 10% 5% 5% 0% 0% AG NONAG Share of Duty Free Applied Tariffs Member 400% 350% 300% 250% Non Member 50% 45% 40% 35% 30% t = 1. Differences in GATT/WTO Members’ and Non Members’ Most Favored Nation Tariff Policies 21 .95 I t = 4.25% t = 0.92* II t = 3.23** IV t = 0.12*** t = 2.
5*** I t = 67.80 AG NONAG III.10 0.00 0.Figure 2.30 0.10 0.10 0. Differences in GATT/WTO Members’ and Non Members’ Trade Flows and Gravity Equation Residuals 8. Differences In Mean Gravity Equation Residual. Differences in Mean of Log Trade Bothin 0. With Year Fixed Effects Developed Country In.05 0.20 0.2*** IV t = 13.7*** II t = 12.1 0.00 5.20 0.2*** 0.15 0.00 3.00 0.40 0.00 6. With Year Fixed Effects Bothin 0.05 0.1*** 0.00 0.20 t = 14.00 AG I.00 0.00 1.00 7.30 Onein or Nonein NONAG Gravity Equation Residual AG NONAG II.20 0. Exporter Also In Exporter Not In IV.60 t = 23. Difference In Means of Gravity Equation Residual.40 0. Difference In Means of Gravity Equation Residual.00 Log Trade t = 46.60 Onein or Nonein t = 21. With Year Fixed Effects Developed Importer In.3*** 0.7*** 4.00 2.20 Gravity Equation Residual III t = 13.40 AG NONAG Gravity Equation Residual 0.15 0.10 0. Developing Exporter Also In Exporter Developing Country Not 22 .
needs a comprehensive revamp of agricultural policy with reorientation towards rapid diversification of this sector. A higher growth in agricualture. After come across out results Technology Mission and the market intervention operations by the public agencies. CONCLUSION The finally.HYPOTHESIS India‘s competitive strength in the global agricultural market over the years is declining. thus. 23 . This suggests that there exists some scope for raising agricultural output through improvements in technical efficiency. Indian agricultural products by seeking a reduction in the high tariffs and subsidies prevent in developed countries. A progressive correction is required in the incentive structure for agriculture so that the excessively high minimum supports prices do not continue to distort resource allocation in agriculture. A heartening feature of the growth in oilseeds production has been that it occurred in the agriculturally backward areas of states. This will ensure that farmers diversification towards high value added segments of agriculture in response to the new demand structure. without resort to new improved technologies.
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