Indian Agriculture and the WTO: A developing country perspective

Abstract
The Uruguay round promises on agriculture trade liberalization have unfortunately remained
illusory. It is ironical but true that export subsidies on agricultural products in developed
countries are higher now than before the Uruguay Round. Dirty tariffs have replaced Quantitative
Restrictions. s with industrial products! there are specific duties! high pea" tariffs and tariff
escalation. #ar"et access has suffered because of the special safeguards clause! and the $%$
agreement is notorious now for the abuse it suffers. The developing country perspective! in this
mess! is a tough one to arrive at.
Introduction
The &orld Trade 'rganization (&T') is an organization that intends to supervise and liberalize
international trade. The organization officially commenced on *anuary +! +,,- under
the #arra"ech greement! replacing the .eneral greement on Tariffs and Trade (.TT)! which
commenced in +,/0. The organization deals with regulation of trade between participating
countries1 it provides a framewor" for negotiating and formalizing trade agreements! and a
dispute resolution process aimed at enforcing participants2 adherence to &T' agreements which
are signed by representatives of member governments and ratified by their parliaments. #ost of
the issues that the &T' focuses on derive from previous trade negotiations! especially from
the Uruguay Round (+,034+,,/).
The organization is attempting to complete negotiations on the Doha Development Round! which
was launched in 566+ with an explicit focus on addressing the needs of developing countries. s
of *une 56+5! the future of the Doha Round remains uncertain7 The wor" programmed lists 5+
sub8ects in which the original deadline of + *anuary 566- was missed ($o was the next unofficial
target of the end of 5663.) The further imposition of free trade on
industrial goods and services and the protectionism on farm subsidies to domestic agricultural
sector re9uested from the developed countries! and the substantiation of the international
liberalization of fair trade on agricultural products from developing countries remain the ma8or
obstacles. These points of contention have hindered any progress to launch new &T'
negotiation(s) beyond the Doha Development Round. s a result of this impasse! there has been
an increasing amount of bilateral free trade agreements.
&T'2s current Director:.eneral is %ascal ;amy! who leads a staff of over 366 people in .eneva!
$witzer the Uruguay Round of multilateral trade negotiations under the auspices of .TT
(.eneral greement on Tariffs and Trade! based on a +,/< agreement) established the &orld
Trade 'rganization. Upon ratification of the Round2s =inal ct by members! the &T' replaced
.TT as the global multilateral trade organization! and a series of agreements associated with but
legally distinct from .TT were also placed under the &T' umbrella (such as the .T$! the
greement on griculture! on Textiles and >lothing! on Rules of 'rigin! etc.).
The +,/< .eneral greement on Tariffs and Trade (.TT) emerged from wartime and post:war
negotiations (see ?retton &oods) to establish a stable! multilateral economic order. The lengthy
negotiating process (+,//:<) reflected the controversial nature of the politics of international
trade at domestic and international levels of bargaining7 changing patterns of international trade
could have dramatic and fairly immediate effects on domestic employment and income levels
within and among national economies. &hile it has never proved possible to gain broad
agreement on the extent of liberalization in most domains of international trade! it was accepted
that the unilateralist and discriminatory practices of the inter:war period had had particularly
negative conse9uences for all concerned
.TT itself was an interim accord which sought to codify the rules of the emerging trade regime
and to proceed with important reductions in national barriers to trade. The U$ delegation was
determined to press other countries to reduce their discriminatory trade practices (particularly the
?ritish @Imperial %referenceA) and in exchange the United $tates was willing to reduce its
traditionally high tariffs. The U$$R and its allies remained outside .TT! only considering
membership at the end of the >old &ar in +,0,. =ollowing the signature of the Bavana >harter in
+,/0! the .TT was supposed to form the @rule boo"A of the newly established International
Trade 'rganization (IT'). The IT' charter prescribed a far more ambitious multilateral
institution than the eventual &T'! but this was in part its eventual downfall. &hen the U$ failed
to ratify the IT' charter! the institution was dead and only the @interimA .TT survived.
The .TT agreement enunciated the principles of reciprocity and non:discrimination!
encapsulated in the #ost =avored Cation (#=C) and Cational Treatment concepts. Cational
Treatment implies that governments cannot treat foreign exporting firms any less favorably than
domestic producers. Reciprocity meant that any negotiations among trading partners were to yield
roughly reciprocal concessions andDor benefits in the eyes of the parties. Con:discrimination
meant that any trade concession advanced by a country to one .TT trading partner had to be
extended to all others simultaneously. In this way! bilateral negotiations among trading parties
would be @multilateral zedA! leading to the establishment of a liberal trading order.
.TT negotiating @RoundsA were difficult due to the wea" state of most post:war economies! and
the extraordinary competitive edge of merican industry at the time. #ost economies would have
experienced severe balance:of:payments difficulties had they removed barriers to imports! and
domestic employment would have been adversely affected as well. s post:war recovery
rendered more liberal trading policies acceptable! the merican government sought to replace the
piecemeal approach with reciprocal across:the:board tariff cuts by all participating parties on a
wide range of traded products. This initiative developed into the @Eennedy RoundA agreements of
*une +,3< which stands as a watershed in post:war trade liberalization. Tariffs on manufactured
goods were reduced by F3 per cent on average! and this progress was continued in the later To"yo
Round (+,</:,).
The United $tates had originally ta"en unilateral measures to "eep agricultural trade out of the
.TT process in +,--! but had reversed this position in the Eennedy Round. This led to a long:
running conflict with the GU (with its >ommon gricultural %olicy! which represented a delicate
internal compromise difficult to disturb) and *apan! both with protected agricultural mar"ets.
griculture is still central to conflict over the trade regime! and held up the Uruguay Round of
negotiations (completed in December +,,F).
s tariffs were lowered! so:called non:tariff barriers (CT?s) became the remaining instruments
of trade policy. Gxamples were voluntary export restraint agreements and 'rderly #ar"eting
rrangements! running against the spirit of .TT non:discrimination. s these were @voluntaryA!
.TT rules theoretically did not apply. =urthermore! the principles of liberalization called into
9uestion many economic policy measures associated with successful national economic
development strategies in the post:war period! particularly in *apan! Gurope! and the developing
world. =inally! the ;ess Developed >ountries sought exemption from many of .TT2s rules!
pointing out that their wea" economies benefited little from free trade arrangements. ll
governments abused the escape clauses in .TT (e.g. through anti:dumping measures) and
attempts have been made to tighten up the rules over time. Cone of these disputes is li"ely to be
resolved in any permanent fashion1 it is the nature of the eventual compromise which will be
crucial to the continued success of the &T' as .TT2s successor. There none the less remains
broad agreement on the need to continue the momentum of the liberalization process through
further rounds of &T' negotiations.
The Uruguay Round negotiations successfully expanded the scope of .TT. It now includes
multilateral rules applied to the services sector (see .T$)! intellectual property! investment
measures! and some aspects of agricultural trade. The Round also ended the provisional status of
.TT by establishing the &orld Trade 'rganization with an enhanced institutional framewor"
and dispute settlement procedure. The &T'2s 8udgments on trade disputes now bind member
countries to change their trade practices! though the U$ >ongress formally refuses this
implication and asserts the superiority of U$ laws.
The new &T' is not without tensions among its members and their societies! as its history would
suggest is li"ely to be the case. Developing countries argue strongly that the &T' as constituted
does not ade9uately ta"e into account the difficulties and asymmetries of economic development
under conditions of liberalization. Developed countries and the international organizations they
control such as the I#= have put strong pressure on developing countries to liberalize their trade
laws despite uncertain conse9uences for long:run development prospects. Developed countries
are often less than generous in opening their mar"ets to developing country exports! especially in
the domain of agriculture and garment production.
%erhaps the biggest challenge to the &T' comes not from member states but
from civil society groups such as non:governmental organizations. #any social activists in
the anti:globalization movement draw attention to the difficulties of liberalization in both
developed and developing countries! especially for the wea"er members of society and less
mar"et:competitive forms of economic organization which may none the less be crucial to local
identities and cultures. 'rganized labour maintains an uneasy relationship with the liberalization
process! for fear of 8ob losses. =inally! the emergence of the Guropean Union (GU)! the C=T!
and other nascent regional arrangements such as #GR>'$UR or the sia %acific Gconomic >o:
operation =orum (%G>)! are also potential challenges to young &T'. $o far these regional
arrangements have not emerged as discriminatory trading blocs! and the &T' expressly permits
regional economic integration if compatible with its rules. Despite the ultimate success of the
long Uruguay Round! regional arrangements and indeed bilateralDunilateral solutions (especially
on the part of the United $tates) may become the order of the day if ongoing agreement cannot be
reached on outstanding issues. Bowever! global companies would be li"ely to put up stiff
resistance to any attempt to substantially restrict the liberal or global nature of the trade regime.
In short! conflict in the &T' continues to mirror socio:political tensions across its member
economies and is intimately related to the tensions of global economic integration largely driven
by liberalization policies.
History
The economists Barry &hite (left) and *ohn #aynard Eeynes at the ?reton &oods >onference.
?oth had been strong advocates of a liberal international trade environment and recommended the
establishment of three institutions7 the I#=(for fiscal and monetary issues)1 the &orld ?an" (for
financial and structural issues)1 and the IT' (for international economic cooperation).
The &T'2s predecessor! the .eneral greement on Tariffs and Trade (.TT)! was established
after &orld &ar II in the wa"e of other new multilateral institutions dedicated to international
economic cooperation H notably the?retton &oods institutions "nown as the &orld ?an" and
the International #onetary =und. comparable international institution for trade! named
the International Trade 'rganization was successfully negotiated. The IT' was to be a United
Cations specialized agency and would address not only trade barriers but other issues indirectly
related to trade! including employment! investment! restrictive business practices! and commodity
agreements. ?ut the IT' treaty was not approved by the U.$. and a few other signatories and
never went into effect.
In the absence of an international organization for trade! the .TT would over the years
Itransform itselfI into a de facto international organization.
India and the WTO
India has 3 percent of the worldAs human population! +- percent of the worldAs
livestoc"! 5 percent of the worldAs geographical area! + percent of rainwater! + percent of
forest! and 6.- percent of pastureland. >onse9uently! the stress on the population:
supporting capacity of natural ecosystems is immense. The country has over <-66 "m of
coastline and about 5.+ million s9 "m of exclusive economic zone in the oceans. round
36 percent of the geographical area suffers from soil erosion! water logging! and salinity.
Two:thirds of the total /-6 million heads of livestoc" struggle for survival in crowded
rain fed regions.
Cearly <6 percent of the population in India depends on agriculture. It was hoped that the
start of the &T' negotiations would pave the way for an arrangement reflecting the
aspirations of farming communities in India and other developing countries. The failure
of the $eattle #inisterial >onference in +,,, blunted that hope. Indian agriculture was
perceived as badly hit when! in compliance with its obligations under &T' on pril +!
5666! the .overnment of India eliminated all import restrictions from more than <66
items! a large portion of which were agricultural commodities. The remaining <66 or so
items were freed from import restrictions in 566+. The result of this liberalization
5
is that
many agricultural commodities and processed foods have entered the Indian mar"et from
different countries and are seen on supermar"et shelves. The political economy of
agriculture as a result is at a crossroads where liberalization! globalization and world
trade
F
have caused some concern in the Indian farming community.
1 &hile the Uruguay Round negotiations were going on! the perception was that India would gain in the mar"et
access
area and would lose in the new areas. The Uruguay Round agreements entered into force on *anuary +! +,,-.
&ithin the agriculture text proper there are border measures and domestic policy disciplines.
'n border measures! QRs must be converted to tariffs! and tariffs brought down to F3 percent
(over six years) by developed countries and by 5/ percent (over ten years) by developing
countries. Gxport subsidies must be reduced by stipulated percentages on both volume (5+
percent for developed and +3 percent for developing countries) and budgetary terms (F3 percent
for developed and 5/ percent for developing countries). In addition! there is a minimum mar"et
access commitment of - percent! increasing to - percent over a period of six years.
/
Gight years after the Uruguay Round agreements entered into force! there is reason for the
wide spread dissatisfaction with the implementation of the agricultural sector liberalization.
There are times when agreements have not been implemented! or agreements have been
circumvented and their spirits violated. The reasons are not far to see". =irst! the Uruguay Round
was the first attempt to impose multilateral disciplines on agriculture. $econd! the liberalization
proposed was an imperfect one! unli"e the Dun"el Draft that which would have liberalized
agriculture much more.
It is now fairly certain that the rise in international prices due to agricultural trade reforms!
as predicted by many studies! may not pass on fully to the farmers and to developing countries.
In fact! one does not see a consistent increase in the spot export prices of agricultural
commodities. Despite the implementation of the reforms! there have been wide fluctuations in
the spot export prices of agricultural products. This should not! however! come as a surprise as
the international mar"ets are very thin. Gxogenous supply shoc"s arising out of over:production
or shortages in countries li"e India can cause sharp fluctuations in export prices! as the mar"ets
are inherently thin. India may want to emphasize these points and bargain for concessions
somewhere else. If agricultural prices are not expected to rise! higher reduction commitments by
the developed countries in various forms of price and non:price support could be suggested.
IndiaAs priorities in the &orld Trade 'rganization (&T') negotiations on agriculture cannot
but include the protection of domestic agricultural production and the welfare of farmers! what
with the political interests that prevail in an economy facing uncertain electoral issues. The
government has no choice but to bring in measures that see" to ensure food security! livelihood!
and rural development. 'btaining mar"et access for products of export interest to India is also
high on the agenda.
3 There are four sets of &T' agreements that are relevant to agriculture. =irst! there is the agriculture text proper.
$econd! there is the sanitary and phytosanitary measures ($%$) agreement. Third! the agreement on intellectual property rights!
specifically on microorganisms and plant and seed varieties. =ourth! the agreements on industrial tariffs! especially after the
phase:out of the 9uantitative restrictions (QRs)! which have implications for fertilizers and the fertilizers policy.
4 'n domestic measures! there is the system of calculating the #$ (ggregate #easurement of $upport) with a
threshold #$ level of +6 percent for developing countries and - percent for developed countries. In excess of the
threshold! developed countries have to reduce the base level of #$ by 56 percent. Developing countries have to reduce the
base level of #$ by +F.F percent.
IndiaAs proposal! submitted to the &orld Trade 'rganization in Covember 5665!
states that the country is in favour of methodologies for minimal tariff reduction and for
provisions of special safeguards against import surges. >urrently! developed countries
have these provisions while developing and less developed countries do not. 'n domestic
support! IndiaAs proposal calls for steep reduction in all forms of trade distorting domestic
support by developed countries and flexibility to developing countries to improve their
agriculture! food! and livelihood security. It also calls for immunity from challenges of
rticle 3.5 measures. $teep reductions in export subsidies of developed countries and a
call for disciplining export credit! guarantees! and insurance provided by developed
countries such as the United $tates are demanded. India is also in favour of developing
countries retaining mar"eting and transport subsidies on exports. Developed countries
through dirty tariffication! as agreed under the Uruguay Round! have clearly and not so
cleverly undermined agricultural trade liberalization
-
.
fter promising mar"et access to agricultural goods in return for agreeing to widen
the scope of multilateral trade negotiations to cover trade:related intellectual property!
trade:related investment measures and trade:in:services during the Uruguay round!
developed countries have not reduced agricultural subsidies or lowered tariff and non:
tariff barriers. They are now see"ing further mar"et access in new areas such as
investment in return for mar"et access in agriculture. Developed countries should
demonstrate their commitment to the multilateral trading system by delivering what was
already promised rather than continue as"ing for further concessions from the poorer
countries.
The Current Situation
#any blame import liberalization in general and the &orld Trade 'rganization in
particular for overflowing godowns and falling agricultural product prices in the country
in recent times. The impending removal of the last of the 9uantitative restrictions (QRs)
on all agricultural products has added to the fears for the future of Indian agriculture.
&hile contractual obligations and import liberalization forced on the .overnment have
indeed considerably increased the exposure to the world mar"et! there has been a
tendency to shift the blame for domestic problems on to external factors.
The immediate challenge is what will follow the removal of QRs. There is no reason
to believe that there will be a flood of imports! only that protection can no longer be
provided by a ban on imports but by customs duties. &ith the plugging of loopholes that
existed in the form of zero tariffs on cereals and dairy products! agriculture will for now
continue to en8oy a measure of protection. &here the .overnment could fail : as it did in
the case of edible oil imports is by moving slowly on increasing tariffs whenever global
or domestic prices fall. Bowever! the fairly high levels of tariff protection that India can
now invo"e could be under threat when the next phase of multilateral negotiations on
agriculture begins at the &T'.
-
For instance, the European Union has set tariff bindings for the base period at about 60 percent above the actual
tariff equivalents on an average. The US has set them at 4 percent above the recent rates.
This is the second issue! on which the .overnment has approved a set of proposals
that will constitute IndiaAs initial negotiating stance. These tal"s will be completed only
years down the line. In its first set of proposals! the .overnment appears to have chosen
to place greater importance on protecting agriculture than on liberalizing farm exports.
This is apparent from the demand for constituting a J=ood $ecurity ?oxK that will
facilitate higher levels of protection and codify provisions that already exist in the &T'
agreements
3
.
The third issue is the functioning of the +,,/ &T' deal on agriculture! which far
from boosting trade! has been used by the rich countries to increase farm subsidies.
Gxperts in the country have demanded a review of this agreement! but such a review
underlies the preparatory wor" now going on at the &T' for future tal"s. ?esides! India
has officially already made proposals to address the Jimplementation problemsK in the
farm pact. .oing further may force India to offer more concessions on imports.
fourth issue is intellectual property protection. >ompelled as India was in +,,/ to
agree to provide sui generis protection to plant varieties it had the choice of drafting its
own legislation. This could have contained innovative provisions to protect traditional
rights. Let! six years of procrastination and inter:#inistry s9uabbling have meant that no
legislation has been enacted! opening the door to disputes at the &T' from other
countries.
&here imports have caused problems they have followed either leaden:footed
decision:ma"ing or the .overnment placing the interests of the consumers above that of
the farmers. ?oth were evident in the setting of tariffs for edible oils (mainly palmolein)!
which were raised only recently. The larger problems that Indian farmers face are the
result of high costs! low productivity! falling public investment! poor mar"et development
and ultimately limited purchasing power among one billion people. ll these are
domestic policies.
Features of the General Agreeent on Trade and Tariffs
!
To get to a complete understanding of agriculture trade issue! it is important to loo"
at the historical developments culminating in the greement on griculture. The .eneral
greement on Trade and Tariffs would be the first institution one must loo" at. The basic
elements of the +,/< .TT were7
6 n influential section in the policy:ma"ing establishment has been pushing for India to become an
aggressive agricultural exporter. ?ut the twin of 8oining the side of the agricultural exporters at the &T' is a
lowering of import protection. &hile India continues to demand ade9uate mar"et access for its exports! the
.overnment has wisely decided against too aggressive a position on liberalization of trade in agriculture.
7 .TT! which came into force in +,/0! contained tariff concessions that were agreed upon during
the first multilateral trade negotiations and a set of rules designed to prevent these concessions from being
frustrated by restrictive trade measures. The global trade relations were now to be based on multilateralism!
globalization! and liberalization of national and international economies. The multilateral trade negotiations
on .TT began in *anuary +,/0.
The "ost Favoured #ation $"F#% &rinciple: The #ost =avoured Cation (#=C)
principle! or the principle of non:discrimination meant that each contracting party
was re9uired to provide all other contracting parties with the same conditions of
trade as the most favorable terms it extends to any one.
'eciprocity: ?enefits of any bilateral agreements regarding tariff reductions or
mar"et access should be extended simultaneously to all other contracting parties!
and should be e9ually reciprocated.
Transparency: This meant that the use of 9uotas should be limited! except in
specific conditions (those widely used for agricultural trade).
Tariff reduction: $ince tariffs were the main form of trade protection in +,/<! most
negotiations focused on tariff reduction.
&hile these basic elements have remained! there have been some important
exceptions and waivers to this. Developing countries were given special status!
recognising that their industrialization process re9uired them to impose more and
different types of trade protection. ;ater! from the +,<6s! this was extended to a
.eneralized $ystem of %references (.$%)! which promised @differential and more
favourable treatmentA to developing countries. The possibility of preferential trade
agreements was retained! because countries that offer each other more favourable
treatment within a customs union were allowed to waive full adherence to the #=C
clause. gricultural trade was given special treatment! and was effectively excluded from
the .TT Rounds until the Uruguay Round.
'un (p to the )un*el )raft
+,// : The United Cations #onetary and =inancial >onference is held in ?retton
&oods to plan the future of the worldAs monetary system. >ame to be "nown as the
?retton &oods system.
The International #onetary =und (I#=) and the International ?an" for
Reconstruction and Development (I?RD) are set up. The conference also recommends
the setting up of an International Trade 'rganization (IT').
+,/3 : %reparatory >ommittee! with 5F members! is established by the United
Cations Gconomic and $ocial >ouncil to draft the charter of the proposed International
Trade 'rganization (IT').
+,/< : The .eneral greement on Tariffs and Trade (.TT) is set up with the
ob8ective of removing barriers to world trade.
+,/< 4 The first multilateral trade negotiation2s (#TC) rounds are held in .eneva.
0
+,/, : The second round is held in nnecy! =rance. &hile further tariff concessions
are negotiated! +6 more countries 8oin .TT in nnecy.
+,-6 : The third round is held in Tor9uay! Gngland! and four more countries became
members of .TT.
,
0
The .eneral greement on Tariffs and Trade is signed as an interim measure by the original 5F countries on F6
'ctober +,/<. nd .TT enters into force on + *anuary +,/0.
+,-3 : The fourth round comes bac" to .eneva.
+,36 : The fifth round was "nown as the Dillon round (+,36:3+).
+,35 : &ith the Eennedy Round in +,35:3<! the focus shifts to an elimination of
non:tariff barriers. ?y the time of the Eennedy Round! around -6 countries are members
of .TT
+,<F 4 The To"yo (+,<F:<,) rounds begin. Reduction of non:tariff barriers receives
even more serious attention. ,, countries participate in the negotiations. few of the
To"yo Round results are incorporated as codes or arrangements! referred to as the .TT:
plus system.
+0
+,0+ 4 The new Reagan administration in the U$ becomes more aggressive on
liberalizing agriculture.
+,05 4 The #inisterial declaration launches wor" programme on agriculture! the De
Meeuw >ommittee on Trade in griculture.
+,0- : ;eutwiler group (+,0F) report recommends clearer and fairer rules for
agricultural trade.
+,03: =ourteen agricultural exporters meet in ugust in >airns! ustralia! to wor" on
agricultural trade issues together. In $eptember! the %unta Del Gste #inisterial
Declaration ta"es place in $eptember.
+,0<: The U$ calls for complete phase out of all agricultural subsidies that distort
trade by +6 years.
+,00: &or"ing .roup on $anitary and %hytosanitary #easures set up! #id:term
Review! #ontreal! December +,00.
+,0, : Individual countries submit detailed liberalization proposals.
+,,+ 4 The Dun"el Draft Text! +,,+ announced.
The Urugua! "ound
The Uruguay Round (+,03:,/) is considered by both its defenders and its critics as a
ma8or landmar" in international trade negotiations. It has changed the terms of the world
trade regime in many significant ways. In this round! besides negotiation areas of tariff
and non:tariff measures! three new areas were touched7
1. Trade in services!
2. Trade related investment measures (TRI#$)!
3. Trade related intellectual property rights (TRI%$)
?ecause of differences among the ++- member countries! these negotiations could not
be finished within / years. The main areas of dispute were agriculture! textiles and
9 It is at Tor9uay that the United $tates indicates that it would not support the idea of the IT'.
10 The Uruguay Round also persists with this trend! such as in the government procurement code or the
information technology agreement. In the government procurement negotiations! India is an observer! but not a
signatory. In the final Uruguay Round pac"age! such .TT:plus! agreements are called %lurilateral trade agreements.
This is in contrast to multilateral trade agreements! which are .TTD&T' agreements proper and have universal
application.
TRI%$. To brea" this deadloc" in tal"s! rthur Dun"el! the then Director .eneral of
.TT! unilaterally presented a /FF:page document on December 56! +,,+.
++
The =inal
ct! which was signed in #arra"esh in +,,/ by +F- countries! consisted of an entirely
new set of +3 agreements that had superseded the earlier .TT agreement. It created a
formal international institution : the &orld Trade 'rganization or &T'
+5
, which came
into force on + *anuary +,,- : to oversee implementation of multilateral trading rules.
It introduced many new areas under the purview of .TT and the &T'7
agriculture! textiles and clothing! services! trade:related intellectual property rights! trade:
related investment measures! subsidies! anti:dumping rules! public procurement! and so
on. It allowed for trade disputes to be brought before a Dispute $ettlement ?ody of the
&T' and for retaliation across trading categories for transgression of rules. It enforced a
shift from 9uantitative restrictions on imports to tariffs! as well as greater predictability in
tariff reductions by forcing every member country to declare tariff bindings in all traded
goods! and by promising tariff reduction over time.
#ains from the Urugua! "ound
t the time of signing the #arra"esh agreement! the following "inds of gains were to
benefit the signatories7
1. J$tatic gainsK due to a reallocation of resources to areas of comparative
advantage (that is! those that are relatively better at producing particular
goods).
2. Gfficiency gains that would result from reduced slac" in economies that have
been highly protected.
3. Dynamic gains due to improved technical efficiency or lower input use per
unit of output and technological change.
The first was supposed to result from a shift in international production patterns. The
second and third were supposed to emerge from a stronger competition within and
between national economies.
+F
It was largely the promise of such gains that lured most
11 This document is popularly "nown as the Dun"el Draft. The draft comprised two parts7 one! results of
agreed negotiations! and two! compromise proposals in areas of disagreement. The .TT head9uarters at .eneva had
fixed December +-! +,,F as the deadline to resolve the deadloc". Bowever! the developing countries opposed the
proposals.
12 The #inisterial Declaration of $eptember +,03 that formally launched the Uruguay Round of negotiations said :
$%ontracting &arties agree that there is an urgent need to bring more discipline and predictabilit! to 'orld
agricultural trade b! correcting and preventing restrictions and distortions including those related to structural
surpluses so as to reduce the uncertaint!, imbalance and instabilit! in 'orld agricultural mar(ets. )egotiations shall
aim to achieve greater liberali*ation of trade in agriculture and bring all measures affecting import access and e+port
competition under strengthened and more operationall! effective #,TT rules and disciplines, ta(ing into account the
general principles governing the negotiations, b!- .i/ improving mar(et access through, inter alia, the reduction of
import barriers0 .ii/ improving the competitive environment b! increasing discipline on the use of all direct and
indirect subsidies and other measures affecting directl! or indirectl! agricultural trade, including the phased reduction
of their negative effects and dealing 'ith their causes0 .iii/ minimi*ing the adverse effects that sanitar! and
ph!tosanitar! regulations and barriers can have on trade in agriculture, ta(ing into account relevant international
agreements.1
13 The pro8ections of such gains in terms of increased value of world trade ranged from N+06 billion to N 5F6
billion over ten years! around two:thirds of which was supposed to accrue to developed countries and one:third to
developing countries.
developing countries into signing the entire =inal ct! even though many specific
agreements such as those relating to intellectual property and investment measures were
seen as detrimental to their interests! and some aspects of the other agreements were also
problematic for them. Gven the Indian government presented a case in favour of signing
the #arra"esh greement in terms of the benefits that would come from increased
exports of agricultural and textile products in particular as well as more inflows of
investment because of greater international trade in general.
Bowever! most of these expectations have not been realized so far. It turns out that
many of the pro8ections of increased trade flows were far too optimistic. In fact! world
trade growth has been slower in the second half of the +,,6s! after the signing of the
Uruguay Round greement! than in the first half of the +,,6s. nd many developing
countries feel that they have even greater problems of mar"et access and protectionist
barriers to their exports than they had before. This is why implementation issues have
become so important among developing countries in the &T'.
The &orld Trade 'rganization (&T') on *anuary +! +,,-! succeeded the .eneral
greement on Tariff and Trade (.TT). It was a watershed event in the history of global
trade. t present! the &T' has +/3 member countries including India. The &T' deals
with the tariffs and 9uotas between the member countries and wor"s to remove any
anomalies. griculture was also included in the &T' (greement on griculture)
+/
.
India! being one of the signatories of &T' and after losing its appeal in the &T'!
liberalized trade on agro:commodities as per &T' norms.
rticle 56 of the '
+-
ensured that these reforms are an ongoing process. Re:
negotiations in this regard ta"e stoc" of the experience of the past years and explore the
potential for further commitments to the reform process. The Uruguay Round
negotiations involved discussions on new areas such as agriculture! textiles! garments!
trade in services! trade:related intellectual property rights (TRI%$)! and trade:related
investment measures (TRI#$)! in three distinct thematic groups. The first was reducing
specific trade barriers and improving mar"et access for partner countries. reas under
this were tariffs! non:tariff measures! tropical products! natural resource:based products!
textiles and clothing! and agriculture. second theme was one of strengthening .TT
disciplines and improving the rules under which .TT operated. reas under this theme
were .TT articles! safeguards! #TC agreements and arrangements! subsidies and
countervailing measures! dispute settlement and functioning of the .TT system
(='.$). The third and final theme covered new areas including TRI%$! TRI#$! and
services.
Features of the 2T3
14 Under the auspices of the &T'! many trade:related agreements were signed by the member countries and
for the first time! an greement on griculture (') was reached to reform and dismantle trade barriers in the
agricultural sector.
15 The ob8ective of the greement of griculture is to reform trade in the sector and to ma"e policies more
mar"et oriented. This would improve predictability and security for importing and exporting countries. The &T'
wishes to liberalize trade barriers within member countries by reducing the tariff and non:tariff barriers! such as 9uota
restrictions
- The &T' agreement re9uires the conversion of all non:tariff barriers on agro:
commodities trade into e9uivalent tariffs. These tariff rates e9uivalent are to be
combined with the existing tariffs and the resulting composite tariffs are to be bound
at that rate.
- Gach country is given the flexibility in distributing the average tariff cut over
different commodities! as long as each individual tariff is reduced by at least +-O
(+6O for the developing countries) over the relevant period.
- &here the resulting tariff is prohibitive! a minimum level of imports! e9ual to FO of
domestic consumption is to be guaranteed. These Jminimum accessK 9uotas will rise
to -O of domestic consumption after six years.
- The minimum allocation 9uotas for developing countries constitute 5O of domestic
consumption moving up to /O after +6 years.
- The agreement also provides for a cut in the subsidies from the +,03:,6 levels by
F3O (5/O for the developing countries) over six years (ten years for the developing
countries) in e9ual annual installments.
- Developed countries are also re9uired to reduce the volume of exports of each
subsidized commodity by 5+O over six years with average export levels of +,03:,6.
corresponding reduction by +/O is re9uired for the developing countries.
4enefits for 5ndia
Reduction in export subsidies on farm products in developed countries will ma"e
Indian agricultural exports more competitive.
Gxports will increase to N +.- billion by 566-. =ruits! oil seeds! cotton! and mil"
products will be benefited due to subsidy reductions.
There will be higher price realizations! which will help in improving the standard
of living of farmers.
>ountries will be forced to produce only what they are best at. This will mean
increased efficiency and higher productivity throughout India.
+3

Gnvironmental programmes are exempt from cuts in subsidies so that the
environment protection programmes continue unabated.
India does not have to cut subsidies or lower tariffs as much as developed
countries and it has been given enough time to complete its obligations.
Distortions in the mar"et place would reduce! which would benefit the end
consumer.
The ,greement on ,griculture
+3
The increase in allocation to cotton 4 related agricultural research shows that India should concentrate on a few
commodities where it already has an advantage.
The greement on griculture signed at the end of the Uruguay Round of
negotiations deals mainly with the nature of entry of the imported goods in domestic
mar"ets and the nature of support provided to the domestic farmers and exporters of
agricultural goods by their governments. It also lists the different types of crops subsidies
that have to be reduced. re the farmers of the developing countries receiving e9ual
benefit as compared to the farmers in the developed countriesP Bow would these
measures improve the ability of Indian farmers to compete in world mar"etsP
The greement on griculture signed at the end of the Uruguay Round of
negotiations! which has as its ob8ective the establishment of a Jfair and mar"et:oriented
agricultural trading systemK! dealt with three groups of issues. These were (i) better
mar"et access! or easier entry of imported goods into different national mar"ets1 (ii)
reduced domestic support! or lower direct or indirect support provided to domestic
farmers by national governments1 and (iii) lower export subsidies or lower budgetary
support for exporters of agricultural products.
6ar(et ,ccess
#ar"et access was sought to be increased in a number of ways. =irst! the o made
tarrification mandatory. That is! countries had to dismantle! in a phased manner! any non:
tariff barriers such as a ban on imports of particular agricultural products or ceilings set
on the 9uantities of individual products that could be imported (otherwise termed
9uantitative restrictions or QRs)! and only use import tariffs or duties as means of
protection.
$econd! the agreement re9uired that the developed countries reduce their tariff levels
by F3 percent over a six:year period from the start of implementation! with a commitment
to reduce tariffs on each tariff line by a minimum of +6 percent. Developing countries
were re9uired to reduce tariffs by 5/ percent over a /:year period! and ensure a tariff
reduction of +6 percent in each tariff line
+<
. Third! all countries had to specify ceilings at
which their tariffs were bound! or the maximum level to which tariffs would be raised
under any circumstances. =inally! there was a minimum level of actual access of imported
commodities to domestic mar"ets that each country had to ensure. This was set at F
percent of average domestic consumption during the +,03:00 reference years! to be
ensured by +,,- and - percent of the same by 5666 in the case of the developed countries
and 566/ in the case of the developing countries. If countries did not reflect this
minimum access! they were expected to use the mechanism of Jtariff:rate 9uotasK! or
lower tariffs for imports of a magnitude re9uired to ensure the realization of minimum
access re9uirements.
Despite these detailed specifications! the o provided countries with an Jescape
clauseK in the event of a large and disruptive inflow of imports. Under the $pecial
$afeguards provisions! countries that had tarrified their QRs! if faced! in the case of
+<
It needs to be noted that given the level of such tariffs at the time of implementation of the tariff reduction
commitment! the actual increase in access may not be substantial. The least developed countries were provided a
concession! as they were not re9uired to reduce their tariff levels.
tarrified products! with an import surge or by a fall in import prices to levels that were
low relative to those that prevailed during the +,03:00 reference period! were allowed to
impose higher tariffs and other restrictions to restrain imports.
7omestic Support
The o defined the principles on the basis of which the ggregate #easure of
$upport (#$) provided by the government of a country to its agricultural sector was to
be computed. The aggregate measure of support was the sum total of the o product:
specific and non:product:specific support provided by national and sub:national or
federal governments in individual countries. The original Dun"el Draft of the Uruguay
Round greement provided for commitments to reduce domestic support on a product:
by:product basis. Bowever! the agreement between the .:5! the U$! and G> at meetings
that too" place at ?lair Bouse in &ashington in Covember +,,5 ("nown as the ?lair
Bouse ccord)! which paved the way for the successful conclusion of the negotiations on
the Uruguay Round! replaced these product:wise commitments to a commitment to
reduce overall support to agriculture
+0
.
Cot all of these measures of support were considered violative of free trade
principles and therefore eligible for inclusion in calculations of the #$. In fact! the
greement on griculture categorized the different possible measures of support into
three categories. The first! termed the Jamber boxK measures! were seen as Jthose
policies! which do have a substantial impact on the patterns and flow of tradeK. ll such
domestic support measures were to be ta"en into account while computing the #$
level! and countries had to commit themselves to reduce in the aftermath of the
agreement. The second termed the Jgreen: boxK measures were those that were seen as
having no ma8or effect on production and trade and were considered completely non:
violative of the o and not sub8ected to any reduction commitments. They included a
variety of Jdirect paymentsK to farmers! which were seen as augmenting their incomes
without influencing production decisions. $ome of them were7
%roducer retirement programmes!
Resource retirement programmes!
Gnvironmental protection programmes!
Regional assistance programmes!
%ublic stoc"holding for food security reasons!
gricultural input subsidies for low:income! resource:poor families!
Domestic food aid!
>ertain types of investment aid!
.eneral services that provide among other things7
+0
$upport in the form of subsidies comes by way of (i) price support! or measures such as government procurement!
bac"ed by export or import controls using tariffs and QRs and (ii) budgetary support! in the form of explicit budgetary
outlays on subsidies on farm inputs and credit! agricultural research and extension! deficiency payments! insurance and
disaster payments! diversion payments for temporary retirement of resources! and compensation in lieu of reductions in
mar"et price support or implicit budgetary outlay in the form of revenues foregone as a measure of support to
agriculture.
o Research! training! and extension! o
#ar"eting information!
o >ertain types of rural infrastructure
The third! termed the Jblue :boxK
+,
measures! were additional exemptions arrived
at through the ?lair Bouse accord and were introduced to allow the U$ and the G> to
continue to support agriculture! while meeting #$ provisions. They were exempt from
inclusion in the #$ sub8ect to reduction commitments! but were conditionally
actionable. These included notably compensatory payments and land programmes of the
GUAs >ommon gricultural %olicy! aimed at compensating producers for limiting
production! and the U$ governmentAs deficiency payments scheme! aimed at
compensating producers facing mar"et prices that are below a targeted level.
,6S "eduction %ommitments
The agreement re9uired countries to reduce their #$ levels by 56 percent in the
case of the developed countries and +F.F percent in the case of the developing countries
during the implementation period. Bowever! there was a minimum level of support that
all countries were allowed to provide! which was set at - percent of the value of
production in the case of the developed countries and +6 percent in the case of the
developing countries. >ountries were not re9uired to reduce their #$ below this level
in order to realize their domestic support reduction commitments. =urther! those countries
characterized by an #$ that was below the de minimus level! were free to increase the
extent of support they offered to agriculture
56
.
Under mar"et :access provisions of the '! countries were re9uired to convert
non:tariff barriers into tariffs! and commit to reduction of tariffs by an unweighted
average of F3 percent with a minimum rate of reduction of +- percent for each tariff line.
Bowever! the spirit of these measures was lost as developed countries engaged in @dirty
tariffication!A i.e. there was tendency to use data which allowed tariffs to be bound as high
as possible. Bathaway and Ingco (+,,-) show that some Guropean Union (GU) tariffs and
the U$ tariff on sugar contain considerable @dirtA. In contrast! though the bound tariff on
sugar is +-6 percent! India has never exercised this option completely.
#oreover! *apan! GU! and U$ have reduced low tariffs more than the high tariffs. s
a result! average rate of reduction was F3 percent! but the average tariff levels were
reduced by less that F3 percent. In contrast! India has agreed to tariff bindings of 6
percent on commodities such as mil" powder long ago! and has high tariff on li9uid mil"
that is hardly traded. If possible these rates need to be re:negotiated! and suggestions
19 ?lue box provisions are considered to be Jnon:trade distortingK. $uch payments were exempt if
they7 (+) are based on fixed area and yields! or (5) made on 0- percent or less of the base level of
production! or (F) made on a fixed number of head of livestoc".
20 The asymmetry involved in setting an acceptable floor to the #$ but defining no ceiling meant that
countries! especially the developed ones that had subsidized their agriculture heavily in the past and had to reduce the
volume of such support by 56 percent! could end up with levels of support far higher than even +6 percent of the value
of their agricultural output.
could be made to have the $wiss =ormula of steeper reductions of high rates by the
developed world.
s per the '! member countries are re9uired to calculate the total aggregate
measure of domestic support (#$) extended to the agricultural sector every year. The
current measure of #$ should not exceed the base #$ (+,03:00 period)! and it has to
be reduced by at least +F.F percent in ten years in the case of developing countries and by
56 percent during a period of six years for developed countries. Interestingly! most of the
developing countries including India have net:taxed their agricultural sector! and as a
result their #$ is negative. Therefore! there are no reduction commitments on this issue
for India. Bowever! the rules have been framed in such a way that for most of the
developed countries the current level of #$ is very low.
This situation has become possible due to various reasons. The base year #$ was
calculated for the period +,03 :00 when the world prices were very low. s a result! the
base #$ is 9uite high for the developed countries. #oreover! while green:box measures
are exempted from both the base #$ and current #$! there are what are called blue:
box measures exempted only from the current #$. s a result! for most of the
developed countries! base #$ is very high and current #$ is low. Therefore! the #$
reduction commitments are nearly met for most of the developed countries. This implies
that there will be insignificant reductions in the domestic support given by the developed
countries. This certainly does not s9uare with the spirit of &T' ob8ectives. In this regard
developing countries may ma"e suggestions either to eliminate the blue:box measures or
move the blue :box into the #$ calculation and sub8ect it to reduction commitments.
=urther! they may negotiate for receiving some credit for their negative #$. $tudies
show that the total #$ for India is negative! and! therefore! there are no reduction
commitments on this issue.
5+
The Indian #$ figure varies from year to year. Bowever! it is always below the
threshold of +6 percent. >onse9uently! domestic agricultural reforms do not have to
happen on account of &T'. There are certainly methodological issues in computing
#$ that need to be cleared up in subse9uent negotiations. The 9uestion is7 &ill India
gain from liberalizationP If it is accepted that India does gain from global agricultural
liberalization! as studies have indeed documented! India can afford to be more aggressive
in the negotiations. India can then argue that the blue and green box policies! exempted
from #$ calculations should be disciplined. There should be a cap on the #$ and the
minimum mar"et access commitment can be lin"ed to the actual level of #$. It can be
argued that the export: subsidy disciplines should be at much finer levels (eight digits!
5+
Cevertheless! the methodology involved in the calculation of #$ needs to be carefully loo"ed at. The ' text
implies calculation of nominal #$! which does not give any consideration to inflation. &ithin the product: specific
#$! the per unit price support is to be calculated as the difference between the administered price and c.i.f. price of
the importable commodity or f.o.b. price of the exportable commodity! the latter prices representing the fixed external
reference price for that commodity. Bowever! part of the difference between the administered price and the external
reference price will be the domestic freight! insurance! and other related expenses. These must be added to the c.i.f.
external reference price so that the external reference price is comparable to the administered price paid to the farmers
at the village mar"ets.
say) and that tariff:rate 9uotas (TQRs) should be prohibited. It is also possible to argue
that the $pecial $afeguard >lause should be scrapped.
E+port Subsidies
In its bid to ma"e agricultural trade freer! the o re9uired nations to reduce the
subsidies they offered to exporters of agricultural products! as these were considered an
unfair practice. $ignatories to the o committed themselves to reduce the expenditure
they incurred on such subsidies to levels that were F3 percent lower than their +,03 :,6
average values in the case of the developed countries and 5/ percent lower relative to the
same figure in the case of developing countries. =urther! countries agreed to reduce the
volume of agricultural exports that were subsidized! by reducing the share of subsidized
exports by 5/ percent relative to the +,03:00 base period in the case of the developed
countries and +/ percent in the case of developing countries. =urther! it was mandated
that commodities that were not subsidized at the time of the agreement! would not be
supported with subsidies in the future as well. The problem here is often that export
subsidy commitments are seen at aggregated levels
55
.
There are two angles to IndiaAs negotiations in terms of what India has to do and in
terms of what other countries have to do. 'n disciplines that apply to India! the issues are
fairly simple. There are too many problems on border measures! since bound rates for
agricultural commodities range between +66 and +-6 percent with F66 percent for some
items. ?arring a few items! as shown by agricultural economists such as sho" .ulati
and nil $harma! IndiaAs agricultural products are price competitive. $ince liberalization!
even if it is imperfect! IndiaAs agricultural products are li"ely to become even more
competitive. >onse9uently! fears of India being deluged with imports of agro:products
are unrealistic! even if import duties were to be zero. &ith import duties upwards of +66
percent! the argument is strengthened. This issue attains some additional significance
because India no longer has access to rticle QRIII? 8ustification of QRs on the balance:
of: payments ground and barring a small prohibited and banned list! everything was put
on '.; (open general license) from + pril 566+. There is no reason to create distortions
by imposing import duties of more than /6 percent on agricultural products! while the
maximum bound duty on industrial products is /6 percent. Therefore! a maximum duty of
/6 percent on agricultural products is reasonable.
These issues must be discussed among the member countries to see that the
methodology used is consistent across countries and is based on sound economic
principles. In comparison to mar"et access and domestic support! disciplines on export
competition were considered the most binding of all ' commitments. Cevertheless!
55
This allows the flexibility to maintain and even increase subsidies at finer levels of desegregation. It has been
observed that the allocation of TQRs is often arbitrary and non:transparent. s long as TQRs exist! they amount to a de
facto reintroduction of QRs. &hen QRs are replaced by tariffs! the actual tariffs set are considerably higher than what
the tariff e9uivalents of QRs should have been. %rotection surfaces through the $%$ agreement! which allows standards
that are higher than internationally accepted standards! provided these have ade9uate scientific basis. 'n occasion!
protectionism also surfaces through anti:dumping and anti:subsidy investigations. $tate trading! government
procurement! and government monopolies are not sufficiently regulated. .iven the imperfection of global mar"ets!
competition policy is also an issue.
5- percent of the members of &T' have maintained the right to subsidize exports. =or
example! only three exporters account for ,F percent of subsidized wheat exports and two
countries account for ,/ percent of subsidized butter exports (Eonandreas! $harma and
.reenfield! +,,,). #oreover! there is a concern about circumvention of rules through
carrying forward unused export subsidies from one year to the next. These issues too
could be addressed in the re:negotiations. $ince the ma8ority of countries do not give
export subsidies! they could press for further reductions in the export subsidies. >ountries
can be persuaded to bring in other forms of export assistance such as export credits and
export credit guarantees into the fold of general rules on export subsidies.
#ost of the issues discussed so far relate to price competitiveness of agricultural
commodities. Bowever! the &T' member countries have reached agreements on $%$
and T?T that essentially affect the 9uality competitiveness of Indian agricultural
commodities.
Sanitar! and &h!tosanitar! ,greement and ,llied 6easures
ny discussion on the effects of the &T' agreements on Indian agriculture will be
incomplete without a discussion on $%$ and T?T agreements. In fact! rticle +/ of the
' clearly states7 6embers agree to give effect to the ,greement on the ,pplication of
Sanitar! and &h!tosanitar! 6easures. The greement on $%$ allows members to adopt
and enforce measures necessary to protect human! animal or plant life or health! sub8ect
to the re9uirement that these measures are not applied in a manner which would
constitute a means of arbitrary or un8ustifiable discrimination between members where
the same conditions prevail or a disguised restriction on international trade. #oreover!
rticle F.5 states that sanitary and phytosanitary measures that confirm to international
standards and guidelines shall be deemed to be necessary to protect human! and animal or
plant life or health. =or food products! the agreement has accepted the guidelines on food
safety and food standards set by the >odex limentarius >ommission (>>). n
important component of the >> guidelines is the implementation of a food safety
system called Bazard nalysis and >ritical >ontrol %oints (B>>%).
doption of the 9uality system will not only ensure exports of value: added
agricultural products! but will improve our domestic food 9uality as well. rticle , of the
$%$ agreement provides for technical assistance to developing countries to build their
infrastructure for food processing. $imilarly! the agreement on Technical ?arriers to
Trade (T?T) sets standards for labeling and pac"aging of agricultural products as
recommended by >>. Unless India "eeps itself abreast of the emerging guidelines of
>>! it may face non :tariff:barriers in future. In this regard! &T' does encourage
developing countries to ta"e active part in the >> activities to decide on various $%$
and T?T:related standards. mong developing countries! India has been active in its
participation. This practice needs to be pursued on a continued basis to protect interests of
Indian agriculture! without 8eopardising the spirit of achieving uniform international
standards.
Agriculture and I&'s + The T'I&S Agreeent
4asic Elements of T"5&S
The TRI%$
5F
greement protects intellectual property rights in all &T' member
countries and constrains the production of imitation products. &hile its purpose is to
encourage invention and innovation by ensuring private agents a return for investment in
Research and Development! it is framed in such a way that it may discourage competition
and prevent the dissemination of "nowledge and technology. Recent experience suggests
that this has actually been the result.
rticle 5 of the agreement is of relevance to agriculture. JIn respect of %arts II! III
and IR of this greement! members shall comply with rticles + through +5! and rticle
+,! of the %aris >onvention (+,3<). Cothing in %arts I to IR of this greement shall
derogate from existing obligations that members may have to each other under the %aris
>onvention! the ?erne >onvention and the Treaty on Intellectual %roperty in Respect of
Integrated >ircuitsK (rticle 5)
5/
. Gstimates indicate that up to ,6O of technology and
product patents in the world and 06O of those in developing countries are owned by
#C>s! which have tended to use such product patents as a tool for stifling competitors.
Gven apart from this! there are several aspects of both the way in which TRI%$ are
framed and the manner of its operation so far! which are of concern to developing
countries. 'ne critical issue relates to the development of technology7 should it be
determined by the need of society in general or by the possibilities of private profitP
There are other 9uestions! such as! how to ensure that there is research and development
in areas of special interest to society and of special benefit to the public! which do not
have short:term profitability but provide long:term benefit and high social returns.
$imilarly! if public research is downsized and technology development becomes
increasingly private in scope! then what ensures peopleAs access to technologyP
This is more than an issue of technology transfer between developed and developing
countries! it refers to the access of people within developed countries to such technology
as well. This issue also impinges on mar"et structure! for it implies monopoly rights to
patent holders. nother problem is that of the right to traditional "nowledge of
communities! and possibilities of bio: piracy and other forms of "nowledge theft! which
is even more problematic because such theft removes existing "nowledge from the public
sphere and ma"es it a source of private gain. In this context! there are several aspects of
23 The greement on Trade:Related spects of Intellectual %roperty Rights is set out in nnex +> of the =inal
Uruguay Round text. There are <F articles in the text! split up into seven different parts. %art I is on general provisions
and basic principles. %art II is on standards for specific intellectual property rights and covers copyright and related
rights! trademar"s! geographical indications! industrial designs! patents! layout designs of integrated circuits! and
protection of undisclosed information. There is also a section on the control of anti:competitive practices in contractual
licenses. %art III is on the enforcement of intellectual property rights. %art IR tal"s about the ac9uisition and
maintenance of intellectual property rights! while %art R in on dispute prevention and settlement. %art RI is on
transitional arrangements and %art RII tal"s about institutional arrangements.
24 This is relevant because of rticle +.F of the %aris >onvention! which states7 JIndustrial property shall be
understood in the broadest sense and shall apply not only to industry and commerce proper! but such as wise to
agricultural and extractive industries and to all manufactured or natural products! for example! wines! grain! tobacco
leaf! fruit! cattle! minerals! mineral waters! beer! flowers! and flourK (rticle +.F).
the TRI%$ agreement that can create problems for developing countries in particular.
They should be sub8ect to renegotiation to incorporate some of these legitimate concerns.
Transfer of Technolog!
It has already been stressed by the representatives of several developing countries in
the &T' that the ob8ective of fostering the transfer and dissemination of technology!
which is already explicitly stated in rticle < of the TRI%$ greement! should be made
operational through special provisions. This is because! after a period in the early +,,6s
when technology access constraints were relaxed somewhat! there has been a tightening
up after TRI%$ was signed. In fact! the developing and least developed countries now
face growing constraints to get access to up:to :date technologies. The enhanced
competition between #C>s! which has also been reflected in the growing tendency
towards merger and concentration at the international level! has in turn been associated
with a reduced willingness to part with or share new technologies. lso! the stronger
protection to invention! which has been granted under TRI%$! ma"es it more difficult for
industries in developing countries to use the technology developed elsewhere! through
reverse engineering and other devices. This reduces one of the more obvious means of
Jcatching upK by late industrializes! and of the more important sources of technology
particularly for small and medium enterprises across the world
5-
.
"esearch and 7evelopment
The shift towards greater private funding for research has been associated with a
change in research patterns themselves! moving at the margin away from areas of greater
social importance to those of currently higher profitability. Thus! medicine and disease
research have been increasingly oriented towards the curative aspects of disease rather
than prevention! and it has dealt more with diseases that are more common or more
potentially dangerous in the rich societies. ?y contrast! the diseases that continue to
proliferate in developing countries! and which within such countries are more prevalent
among the poor! get less emphasis and certainly less research funds.
$imilarly! in the area of crop research! the focus has been on improving the 9uality of
certain products in a consistent way! or on genetically modifying certain crops so as to
ensure particular features that are found to improve mar"eting chances! rather than on
improving yields. This is despite the fact that yield improvement remains the primary
concern of most cultivators across the world and will remain the prime determinant of
global food security at least as long as world population continues to increase.
=or this to change in a way that would be more beneficial to people in general! the
increasingly common perception that scientific research is essentially something that is
carried out or funded by private corporations! must be fought. It is important to remember
5-
The enhancement of technology flows to developing countries re9uires revision in several articles of the TRI%$
greement! such as rticle 5<.+ (wor"ing obligations)! rticle F+ (b) (broader application of Jrefusal to dealK as an
autonomous ground for compulsory licenses)! rticle /6 (specification of illegal restrictive business practices in
voluntary licenses)! and rticle 33.5 (further specification of measures to be adopted to encourage the transfer of
technology to ;east Developed >ountries).
that even in the developed countries! until the +,06s most of such "ind of research was
actually funded by governmental and 9uasi:governmental agencies! other public bodies
and universities! rather than by corporations. &hile the profit motivation was not entirely
absent! certainly it was not the dominant motivating principle in much of the most
important research that has occurred even in this century. It is necessary to recreate this
pattern! in both developed and developing countries! simply because the research areas
with the greatest long:term benefit to societies remain those where social returns are
higher than private returns! and where! therefore! socially desirable levels of expenditure
will not otherwise be maintained.
%ontrol of 6onopolies
There is an inherent contradiction between the competition policy that see"s to
prevent the exercise of undue and unfair mar"et power! and the TRI%$ agreement! which
effectively grants monopoly rights to patent holders. $ince most RSD is now conducted
under the aegis of #C>s or funded indirectly by them! they also end up holding the vast
ma8ority of the patents.
53
There is sufficient evidence that such patents are used as a means of increasing
mar"et power and undermining the competition! and this in turn can easily lead to the
growth of monopolies with attendant forms of anti:competitive business practices. In
some cases! these monopolies and the fact that large #C>s control important patents can
be especially worrying when the products relate to crucial areas such as agricultural seeds
and life:saving drugs. ?y restricting competition! the TRI%$ rules will enable some
companies to 8ac" up prices of their products far beyond costs and thus earn rents in
terms of monopoly revenues and profits. This has already been clearly seen in the case of
computer software.
Thus! I%Rs allow companies a monopoly of seed ownership and other biotechnology
products. These companies can then also behave in a monopolistic way in global sales
and distribution. =or example! the chemical company #onsanto owns the second largest
cottonseed company in the world ($toneville %edigreed) and is a ma8or shareholder in the
worldAs largest cottonseed company (Delta S %ineland). Restrictive business practices
have been found to occur in cases where farmers who use #onsantoAs Roundup Ready
soybean seeds also end up using #onsantoAs pesticides and allow inspections of their
fields. The lin"ing of seeds and pesticides purchases has also been found in the case of
cotton cultivation in $outh sia! with problematic effects in terms of higher variability of
output in addition to higher monetary costs for farmers.
It is a point of debate whether the TRI%$ agreement by itself needs to be modified to
ta"e account of this problem! or whether a simultaneous application of a more stringent
competition policy would be sufficient to deal with it. It is true that the expansion and
53
The number of patents granted worldwide in +,,- was about <+6!666 and that at the end of +,,- about F.< million
patents were in force in the world. $ince then! there has been an increase in patenting activity! dominantly by large
companies based in the Corth. Thus! it has been estimated that industrial countries hold ,< percent of all patents! and
that ,6 percent of all technology and product patents are held by #C>s.
strengthening of I%Rs has ta"en place with a more effective application of competition
law! such as an increase in the number of compulsory licenses granted in the United
$tates to remedy anti:competitive practices. ?ut such conditions do not exist in most
countries! nor is the institutional framewor" strong enough vis:T: vis large multinational
companies! to ensure the effectiveness of anti: trust measures. In general! therefore! the
nature of patent law itself needs to be sensitive to the potential that may be implicit in it
for creating or strengthening monopoly behaviour! and it should contain provisions that
allow for revo"ing of patents or reduction of patent period if the holder is found guilty of
anti:competitive behaviour. This is especially necessary in the case of patents relating to
essential products.
4iodiversit! and 5ndigenous 8no'ledge
#uch technological progress in the recent past has been in the field of biotechnology
and genetic engineering! which in turn has been based on generic resources that are often
available only in the tropics (that is! mainly developing countries). Increasingly! while
research organized by private corporations into genetic resources has drawn on the
traditional "nowledge of indigenous communities! these communities and people
themselves do not benefit from the patents or even from the resulting inventions. The
issue of ac"nowledging and rewarding the contribution of indigenous and local
communities is currently being discussed internationally. The >onvention on ?iological
Diversity has attempted to deal with the 9uestion of peopleAs participation in
biotechnological research activities in areas where genetic resources are located! and
share the fruits of such research. $imilarly the =ood and griculture 'rganization of the
UC in an International Underta"ing has developed the concept of JfarmersA rightsK!
defined as the Jrights arising from the past present and future contribution of farmers in
conserving! improving and ma"ing available plant genetic resourcesK. These are
important because they recognize the inherent communal and participatory nature of
invention and technological progress! an aspect that the TRI%$ approach has hitherto
missed completely.
Reconciling the TRI%$ agreement with these conventions and peoplesA rights may
become one of the focal points of re:negotiation. This could include the amendment of
rticle 5<.+ (re9uirement of universal novelty as a condition for patentability)! and
rticle 5, (obligation to prove that prior informed consent has been obtained with regard
to claimed biological materials). new provision on Jtraditional "nowledgeK could also
be considered. n important point in this regard is that those developing countries that
are hastening to meet the re9uirements of the TRI%$ agreement may end up pushing
through legislation that does not ade9uately safeguard the traditional "nowledge rights
and therefore negatively affects all citizens
5<
. The new %atents ct in India is also being
criticized on grounds of inade9uate protection to bio:diversity and traditional "nowledge.
5<
Under the Industrial %roperty ?ill +,,,! EenyaAs attempt to domesticate an agreement on Trade:Related spects of
Intellectual %roperty Rights is unwittingly s"ewed in favour of foreign control over local genetic resources. In
particular! small:scale farmersA ability to grow food through seed saving could be severely curtailed due to failure to
protect indigenous and traditional "nowledge systems. Doctors and international medical relief agencies in Eenya have
launched a vigorous campaign against the proposed Industrial %roperty ?ill.
9ife Forms and &lant :arieties
rticle 5<.F (b) of TRI%$ says that members may also exclude from patentability!
plants and animals other than microorganisms! and essentially biological processes for
the production of plants and animals other than non:biological and microbiological
processes. Bowever! members shall provide for the protection of plant varieties either by
patents or an effective sui generis system or by any combination thereof. These
provisions were to be reviewed after four years! but no systematic review has been put
into place at the &T'.
There are two "ey issues involved with respect to the patenting of life forms and the
protection of plant varieties. The first relates to the process of Jbio:piracyK! that is the
theft of biological resources and traditional "nowledge from the developing countries.
Gxamples of bio:piracy abound : the case of the U$ patent on the use of turmeric for
healing wounds is a well:"nown one. The second aspect is the advent of biotechnology.
The ability to identify! isolates! and move genetic materials across species types has
aroused great commercial interest and investment in biotechnology. .enetically
engineered crops and foods are being produced with the global mar"et as their target1
thus the need to obtain I%R protection for such JnewK products.
In relation to the patenting of life forms! rticle 5<.F(b) provides that countries may
exclude from patenting plants! animals and essentially biological processes! but countries
must patent micro:organisms! micro:biological and non:biological processes. ?ut there is
no scientific or legal rationale for the distinction made between the different types of life
forms and of natural processes. In fact! such a distinction goes against the basic principle
of patent laws in many countries that JdiscoveriesK (as opposed to inventions) are not
patentable.
The second aspect of rticle 5<.F (b) is the protection of plant varieties. >ountries
must protect plant varieties through the patent system! or through the establishment of an
effective sui generis (i.e.! uni9ue or of its own "ind) system or any combination of the
two. 'nce again! there is no clear distinction that can be drawn between plants and plant
varieties from the scientific or legal perspectives. Bowever! there is a history of plant
variety protection! in order to protect the interests of commercial plant breeders! which
sought protection for their crop varieties but found it difficult to meet the re9uirements of
the patent system.
recent proposal of the frican .roup
50
of &T' members is significant! as it
9uestions the TRI%$ greementAs re9uirement for mandatory patenting of some life
50
The frican countries have thus proposed a review of TRI%$ which would enable the following7 (a) clarify that
developing countries can opt for a national sui generis law that protects innovations of indigenous and local farming
communities (consistent with the ?iodiversity >onvention and the ='As International Underta"ing)1 (b) allow the
continuation of traditional farming practices! including the right to save and exchange seeds and sell their harvests1 (c)
prevent anti :competitive rights or practices that threaten food sovereignty of people in the developing countries1 (d)
harmonize rticle 5<.F(b) with the provisions of the >?D and the ='As International Underta"ing! which ta"e into
account the conservation and sustainable use of biological diversity! the protection of the rights and "nowledge of
indigenous and local communities! and the promotion of farmers rights. These proposals have been supported by many
other developing countries.
forms and some natural processes. It calls for a clarification that plants! animals! and
microorganisms should not be patentable! and that natural processes that produce plants!
animals! and other living organisms should also not be patentable. The paper also puts
forward the view that by stipulating compulsory patenting of micro:organisms (which are
natural living things) and micro:biological processes (which are natural processes)!
rticle 5<.F(b) contravenes the basic tenets of patent laws that substances and processes
that exist in nature are a discovery and not an invention and! thus! are not patentable. The
frica .roup paper also gives a clear direction to the review of another part of rticle
5<.F(b)! which specifies that members shall provide for the protection of plant varieties
either through patents or an effective sui generis system.
&ublic ;ealth
It has already been mentioned that an important human right! certain processes of
globalization erode the right to medical care! and this is especially true in the area of
public health. The implementation of public health policies may be restrained by the
implementation of TRI%$. It forces all countries! rich and poor! to adopt the same! strict
guidelines on respecting corporate patents! trademar"s and copyrights. The TRI%$
greement guarantees monopoly ownership over! among other things! pharmaceutical
patents1 thus! a &T' member may not be able to suspend intellectual property rights
even to address critical public:health
5,
issues.
'ne of the most important areas of public concern relates to the availability and
prices of life:saving drugs. The move from process patents to product patents
dramatically reduces the ability of companies in developing countries to produce cheaper
versions of important life:saving drugs! especially those relating to cancer and
BIRDID$. The extent to which this can ma"e a difference is apparent in the very wide
differences in drug prices that can be observed in India! where process patents were
possible until the law which has 8ust been passed in 5666! and other developing countries
in sia where such patents were not allowed in the +,,6s.
Environment
&hile several new innovations can have adverse ecological and environmental
implications! the area of biotechnology research and application is perhaps the most
fraught in this regard. #any environmentalists are concerned that the present lac" of
controls and accountability in the system will be detrimental to the global environment!
especially as it is li"ely to accelerate biodiversity loss and could threaten natural
ecosystems.
5,
'nce an approach focused on public health is accepted! several articles may re9uire revision! for instance! rticle
5<.+ in order to exclude the patentability of Jessential medicinesK listed by &B'1 rticle F6 so as to incorporate an
explicit recognition of an Jearly wor"ingK exception for the approval of generic products before the expiration of a
patent1 and! rticle F+ in order to clarify the right to grant and the scope of compulsory licenses for public health
reasons.
&ithin the &T' >ommittee on Trade and Gnvironment! India has already indicated
the need to amend the TRI%$ greement in order to facilitate the access to and use of
environmentally sound technologies. The proposal re9uires the amendment of rticle F+
(compulsory licenses) and rticle FF (duration of patents)! and suggests that patent
holders should be sub8ected to an obligation of transferring environmentally sound
technologies on fair terms and most favorable conditions. It also proposes a financial
compensatory mechanism.
%ompulsor! 9icensing
>ompulsory licensing may occur due to the following reasons7 (a) when reasons of
general interest 8ustify it! national public authorities may allow the exploitation of a
patent by a third person without the owner2s consent. This involves the government
giving a manufacturer1 which could be a company! government agency! or other party1 a
license to produce a drug for which another company holds a patent! in exchange for the
payment of a reasonable royalty to the patent holder. The effect is to introduce generic
competition and drive prices down! as has occurred in India. >ompulsory licensing can
lower the price of medicines by <-O or more. Mimbabwe! for example! could issue a
license to a local company for an BIRDID$ drug manufactured by ?ristol:#yers
$9uibb. The Mimbabwean firm would then manufacture the drug for sale in Mimbabwe
under a generic name and it would pay a reasonable royalty to ?ristol:#yers $9uibb on
each sale.
=ive "inds of use without authorization of the right holder are expressly envisaged by
the TRI%$ greement7 (+) licences for public non:commercial use by the .overnment1
(5) licences granted to third parties authorized by the .overnment for public non:
commercial use1 (F) licences granted in conditions of emergency or extreme urgency1 (/)
licences granted to remedy a practice determined after administrative or 8udicial process
to be anti:competitive1 and (-) licences arising from a dependent patent.
In addition! since the greement does not state that these are the only cases
authorized! #ember states are not limited with regard to the grounds on which they may
decide to grant a license without the authorization of the patent holder. They are in
practice only limited in regard to the procedure and conditions to be followed. Thus! in
principle! compulsory licences can be issued for considerations of public health as well as
to prevent anti:competitive practices and possible uses connected with monopoly.
&arallel 5mports
nother strategy for coping with the effects of TRI%$ on high drug prices! for
example! is by parallel imports. %arallel importing involves a government or another
importer shopping in the world mar"et for the lowest priced version of a drug rather than
accept the price at which it is sold in their country. In the pharmaceutical mar"et! as has
been shown! prices tend to vary dramatically. =or instance! one study found that the retail
prices in U$D of +66 tablets of a commonly used anti:ulcer drug Ranitidine mar"eted in
its brand name Mantac by the multinational drug company .laxo in +- developing and
developed countries of sia %acific varied from U$ N F to +0F. ustralia and Cew
Mealand! two advanced affluent countries! recorded prices higher than eight developing
countries. #ongolia! a least developed country with the lowest per capita .C%! recorded
a price almost nine times that of ustralia and Cew Mealand. $ince parallel imports
involve imports of a product from one country and resale without authorization of the
original seller! to another! thereby allowing the buyer to search for the lowest world price.
?oth the promotion and transfer of technology! as well as public health or nutrition
could 8ustify derogation of the patenteeAs exclusive rights. $crutiny of the exceptions
existing in much national legislation gives an idea of the different possibilities U>orrea!
+,,,bV7 (+) parallel importation of the protected product1 (5) acts carried out on a private
basis and for non:commercial purposes1 (F) scientific research and experiments involving
the patented invention1 (/) preparation of drugs by unit and on medical prescription in
pharmacy dispensaries1 (-) a person being! in good faith! already in possession of the
invention covered by the patent1 and (3) tests carried out before the expiry of the patent to
establish the bio:e9uivalence of a generic drug.
>ompulsory licensing and parallel imports are currently permitted under the TRI%$
rules. In addition to these measures! there is scope within the TRI%$ greement (under
rticle F6) for a number of exceptions to exclusive patent rights. $uch exceptions must of
course meet certain conditions! that is! they must be limited! should not unreasonably
conflict with the normal exploitation of the patent! and exceptions should not
unreasonably pre8udice the legitimate interests of the patent owner. .iven these
conditions! there is a wide range of exceptions that an be provided that are within the
scope of rticle F6! such as 7 (+) acts done privately andDor on a non:commercial scale! or
for a non:commercial purpose! (5) use of the invention for research! (F) use of the
invention for teaching purposes! (/) experimentation for teaching purposes! (-)
preparation of medicines under individual prescriptions! (3) experiments made for the
purpose of see"ing regulatory approval for mar"eting of a product after the expiry of a
patent! and (<) use of the invention by a third party that had used it bona fide before the
date of application of the patent.
The )oha "inisterial "eet
&hen the &T'As fourth ministerial meet ended on Covember +/ 566+ at Doha!
Qatar! after an unscheduled sixth:day of negotiations! there were three declarations that
were released. These were7 the @Doha Development gendaA! or the ministerial
declaration which set out a road:map for a new round of trade tal"s! even though there
was no explicit mention of a round1 the declaration on a set of implementation issues
raised by the developing countries1 and a @political statementA on the TRI%$ agreement
and public health
F6
.
F6
greement on these declarations notwithstanding! there is many a 9uestion that remains unanswered. It is unclear to
what extent developing countries! led by India! were able to redress existing ine9ualities in the world trading system
and stall imposition of new burdens through a new round of negotiations.
#ains for 5ndia
The principal gain is in the political statement dealing with patents and public health.
In the past! some frican countries have won themselves the clearance to obtain cheap
imports of ID$ drugs from countries such as India! which do not yet recognize product
patents. #ore recently! even the governments in the U$ and >anada! who have been
votaries of strong patent protection! have expressed willingness to resort to similar
imports or to compulsorily license the production of ciprofloxacin in the event of an
nthrax emergency. $purred by these developments! developing countries and a number
of C.'s have been demanding more clearly specified and enhanced flexibility in
ignoring clauses of the Trade Related Intellectual %roperty rights (TRI%$) agreement and
overriding patents for public health reasons.
The developed countries want such flexibility to be provided for only in the event of
a public health JemergencyK such as an ID$ epidemic. s opposed to this! ?razil! India!
the sub:$aharan frican countries and some C.'s have been demanding greater
autonomy for countries in deciding the public health grounds on which they should be
able to resort to such measures. The political statement does go a part of the way in
providing for such autonomy! besides ma"ing special concessions to least developed
countries. Though this does not constitute a formal amendment of the Uruguay Round
greement! inasmuch as such ministerial level political statements are ta"en account of
by dispute:settlement panels when deciding on complaints of treaty violations! the
developing countries have indeed won themselves a victory vis:T:vis the developed
countries and the drug multinationals head9uartered there.
The declaration states that7
(a) Gach member has the right to grant compulsory licenses and the freedom to
determine the grounds upon which such licenses are granted1 and
(b) Gach member has the right to determine what constitutes a national emergency or
other circumstances of extreme urgency! it being understood that public health
crises! including those relating to BIRDID$! tuberculosis! malaria and other
epidemics! can represent a national emergency or other circumstances of extreme
urgency
F+
.
The second but minor victory for the developing countries was their ability to get the
ministerial meet to deliberate and ma"e a declaration on the more than /6 issues relating
to the implementation of the Uruguay Round that had been raised by them over time. The
focus of discussion here was on the need to modify or reinterpret specific clauses of the
Uruguay Round agreement because of its failure to deliver on its promises in terms of
F+
Bowever! the situation in countries! which have no manufacturing capacity to be able to effectively utilize
compulsory licensing! has been left ambiguous. The declaration merely states7 J&e recognize that the &T' #embers
with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in ma"ing effective
use of compulsory licensing under the TRI%$ greement. &e instruct the >ouncil for TRI%$ to find an expeditious
solution to this problem and to report to the .eneral >ouncil before the end of 5665.K This does wea"en the @flexibilityA
available to some countries.
benefits to developing countries. The declaration splits the implementation issues into
those that were settled at Doha and a number of @outstanding issues!A which would be
negotiated as part of the new round. Bowever! not much should be made of the @victoryA
involved in having some of the issues settled at Doha. ?arring some agreement on the
imposition of anti:dumping duties by the advanced countries! the most crucial
implementation problems such as those relating to domestic support for agriculture in the
U$ and GU and trade in textiles have been 8ust accepted as issues that are in need of
negotiation as part of a new enlarged round. That is! going against the grain of demands
from the developing countries! including India! in the run up to Doha! that
implementation issues need to be sorted out before any new round of tal"s is initiated!
almost all of those issues have been included in the agenda of the new round.
The ma8or setbac" here is that rather than settle the implementation issues in an area
where even the Uruguay Round had mandated a review that began last year! the
declaration ties up discussions on agriculture with discussions on a whole range of issues
that are to be ta"en up as part of a new round. This is significant because that set of
negotiations have been defined as a Jsingle underta"ingK! implying that countries do not
have the choice of 8oining an agreement on some of the issues while opting to re8ect
agreement on the rest. This would mean that the developing countries are being Jmade to
pay twiceK : they were bullied into signing an ini9uitous agreement at the time of the
Uruguay Round negotiations1 and! now! to redress some of that ine9uity they are being
forced to offer more concessions in new areas as part of the @single underta"ingA
mechanism. Third! after much hard bargaining! the developing countries have managed to
obtain a small concession in the area of agricultural support in the developed countries.
The GU had! after much stonewalling! to agree to reduce! Jwith a view to phasing
outK! of agricultural export subsidies. This is only a small advance! since no date has been
set for the phase out and since the real issue! which is the reduction in the use of
JpermittedK green: and blue:box subsidies by the developed countries to subsidize their
farming community! has been left to be renegotiated in the course of the new round. This
despite the evidence that many of those subsidies not only affect the volume of world
production and trade! but in the final analysis of world prices as well.
The fourth minor victory is in the area of geographical indications. .eographical
indication is a "ind of implicit copyright! provided! for example! to wine producers from
=rance for use of the word %hampagne. Developing countries have managed to include a
provision to discuss the extension of that privilege to commodities other than wine and
spirits. If that discussion leads to such an extension! it could! for example! help India to
file for protection regarding use of terms such as @basmati<, 8ancheepuram, 8olhapuri!
etc.! on geographical grounds.
=inally! India has won a symbolic victory on the inclusion of the @$ingapore issuesA.
The immediate agenda for the new round includes! besides implementation issues and the
already mandated negotiations on agriculture and services! only industrial tariffs! anti:
dumping duties and certain aspects of trade and environment. >ore labour standards have
8ust been referred to and the wor" of the I;' in this area ta"en note of. nd negotiations
on the so:called $ingapore issues! such as foreign investment! competition policies!
public procurement and trade felicitation! though not altogether dropped! are to be ta"en
up as part of the new round only after reconsidering the matter and generating an explicit
consensus on negotiations on these at the time of the fifth ministerial meet to be held in
566F. &hile agreeing to postpone final decision on these issues! the developed countries
have also put in a mandate for completion of negotiations by 566-
F5
.
&roblems that persist
disappointment at the Doha meeting was that the promise of greater transparency
made after the fiasco at $eattle was not delivered. Doha made clear the distance
developing countries as a group have to travel if they are to ma"e any real difference to
the une9ual international trading order. The most disconcerting was the innumerable
ways in which the developed countries conspired to divide the developing countries and
win ma8or concessions for them. The scenario as it evolved was indeed 9uite instructive.
To start with! the U$ set itself up as a reasonable negotiator demanding some
liberalization of agricultural trade plus inclusion of issues such as industrial tariffs and
anti:dumping duties in the agenda for a new round of trade negotiations. The GU! on the
other hand! remained intransigent on agricultural protection and subsidies! but put on the
table a range of new issues varying from the environment to investment and competition
policies. This almost predetermined the compromise! the GU gave in a bit on agricultural
trade! the developed camp as a whole agreed to discuss implementation! but in return got
a new round! which at the minimum had the issues raised by the U$ on the agenda and at
the maximum included all issues raised by the GU. The actual outcome included a new
round that had on its agenda a combination of issues lying somewhere between the
minimal demands of the U$ and the maximal demands of the GU.
The afterath of )oha
The Doha ministerial in Covember 566+ heralded a new round of multilateral tal"s!
including negotiations on agriculture. Bowever! sharp differences between member
countries debating mar"et:access issues at .eneva have ensured the tal"s are at a
standstill. Distortions in agricultural trade today will go only when these differences are
settled. Trade will help raise international prices of agricultural commodities to
remunerative levels! and ensure income stability for farmers in the developing countries.
F5
The symbolic victory of India and +5 other developing countries! which had pushed hard on these issues! was
enhanced when the chair of the final Doha plenary made the following statement7 J5 'ould such as to note that some
delegations have requested clarification concerning paragraphs =0, =>, =6 and =? of the 7raft 7eclaration. 9et me sa!
that 'ith respect to the reference to an @e+plicit consensus< being needed, in these paragraphs, for a decision to be
ta(en at the Fifth Session of the 6inisterial %onference, m! understanding is that, at that Session, a decision 'ould
indeed need to be ta(en, b! e+plicit consensus before negotiations on Trade and 5nvestment and Trade and %ompetition
&olic!, Transparenc! in #overnment &rocurement, and Trade Facilitation could proceed. 5n m! vie', this 'ould give
each 6ember the right to ta(e a position on modalities that 'ould prevent negotiations from proceeding after the Fifth
Session of the 6inisterial %onference until that 6ember is prepared to Aoin in an e+plicit consensus.K
India! li"e most other developing countries! is as"ing for better mar"et access for its
exportable agriculture commodities to developed countries.
FF
India and other developing countries want industrialized countries to substantially
lower their farm subsidies. The Doha mandate on agriculture commits member countries
to have JcomprehensiveK negotiations aimed at substantial improvement in mar"et
access! reduction of all forms of export subsidies! and substantial reduction in trade:
distorting domestic support. This position is similar to that of *apan! Corway! and Eorea.
India is in a position to ma"e reduction commitments on tariff as its average bound rate
for farm products is among the highest.
'n domestic support and export competition! IndiaAs position is similar to that of the
>airns .roup. 'n bound rates vis :T:vis applied rates! most developing countries would
have to negotiate from the bound levels as proposed by Barbinson. 'n the other hand!
$ingapore! Bong Eong! >hina! and others prefer negotiating on the basis of applied rates
as their applied rates are pegged at their bound levels. The three:band formulation
proposed by BarbinsonAs first draft proposes tariff reduction in the following manner7
zero to 56 percent! 56 percent to +56 percent! and +56 percent and above. The four:band
prescription suggested by him in the second draft see"s the following reductions : zero to
56 percent! 56 percent to 36 percent! 36 percent to +56 percent! and +56 percent and
above.
The Indian .overnment has indicated that it is important for the #ultilateral Trade
Cegotiations (#TCs) to address the inter:lin"ages among the three pillars in the
negotiations! namely! mar"et access! domestic support and export competition. ll food:
safety issues should be included in the $anitary and %hyto:$anitary ($%$) greement.
;abeling re9uirement should be considered in the greement on Technical ?arriers to
Trade. 'n the issue of domestic support! while developing countries are ill e9uipped to
provide essential subsidies to their farmers! developed countries can continue to give
subsidies to their rich farmers under various categories. In the interest of clarity!
transparency! and effective reduction of subsidies! there should be fewer categories or
boxes.
F/
lso! export subsidies for agricultural produce should be completely eliminated
within an agreed time. $imilar commitments are also needed for government:supported
export credits or credit guarantees.
33 $tuart Barbinson! >hairman of the &T'As griculture >ouncil came out with his first draft on
agriculture on =ebruary +<! 566F and a limited revision of certain elements on #arch +0! 566F. The
Barbinson draft needs modifications and any formula that is devised should first cover the concerns of
developing countries. =or items of staple consumption that affect food security! there should be an
exemption from the reduction commitment on tariffs. The U$ favours JambitiousK tariff reduction
commitments that the Guropean Union and many Third &orld countries do not agree with. The Indian
government is "een that the Uruguay Round approach for further tariff reduction commitments is followed
during the negotiations instead of a three: or four:band formulation for lowering the tariff Jacross:the:
boardK as proposed by Barbinson in the draft modalilities for negotiations on the farm sector.
34 lso! for the purpose of ensuring that the special interests of developing countries are ta"en
care of! special safeguard measures should be provided to these countries under rticle - of the
existing greement.
In India! the &T' and the import liberalization regime have been blamed for the
stoc" piling of foodgrain and the falling agricultural product prices. The removal of
9uantitative restrictions (QRs) on agricultural products has further added to the fears.
Bowever! while Indian agriculture is certainly exposed to the world mar"et! it is fairly
obvious that the blame has been shifted from domestic failure to external factors. There
are four distinct sets of &T':related issues confronting Indian agriculture that need to be
clearly understood and discussed in the ensuing public debate. The first is the fallout of
the removal of QRs. There has been no surge in imports! even where protection is not
being provided by a ban on imports but by customs duties. Bowever! agriculture
continues to be protected! especially! after some anomalies such as zero tariffs on cereals
and dairy products have been removed.
$econdly! the Indian .overnment appears to have chosen to place greater importance
on protecting agriculture than on liberalizing farm exports. This is apparent from the
demand for constituting a J=ood $ecurity ?oxK that will facilitate higher levels of
protection and codify provisions that already exist in the &T' agreements. n influential
section in the policy:ma"ing establishment has been pushing for India to become an
aggressive agricultural exporter. ?ut on the other hand 8oining the side of the agricultural
exporters at the &T' is at the cost of a lowering of import protection. &hile India
continues to demand ade9uate mar"et access for its exports! the .overnment has decided
against an aggressive position on liberalization of trade in agriculture.
The third issue is the functioning of the +,,/ &T' deal on agriculture! which far
from boosting trade! has been used by the rich countries to increase farm subsidies.
Gxperts in the country have demanded a review of this agreement! but such a review
underlies the preparatory wor" now going on at the &T' for future tal"s. ?esides! India
has already made official proposals to address the Jimplementation problemsK in the farm
pact. .oing further may force India to offer more concessions on imports. The fourth
issue is intellectual property protection. >ompelled as India was in +,,/ to agree to
provide sui generis protection to plant varieties! it had the choice of drafting its own
legislation. This could have contained innovative provisions to protect traditional rights.
Let! years of procrastination and inter:#inistry s9uabbling have seen disputes at the
&T' launched by several countries against India. =armersA problems are high costs! lac"
of ris" coverage! poor extension and storage facilities! low productivity! falling public
investment! poor mar"et development and limited purchasing power. nd these cannot be
hidden behind cries of protest against international trade.
Conclusion
Infrastructure in relation to post:harvest technology! including rural communication!
godowns! refrigerated storage! and transportation arrangements for perishable
commodities is inade9uate. The &orld Trade greement stringent re9uirements of
sanitary and phytosanitary measures are yet to be understood. There is an urgent need to
improve yield per drop of water. During the last few decades! farmers in various countries
have shifted from flow irrigation to sprin"ler! drip! and now membrane irrigation. %lant:
scale agronomy is replacing field:scale agronomy. %recision farming techni9ues need to
be adopted. >ontract farming and corporate farming! with increased investments needs to
grow. There is indeed an urgent need to 9uic"ly implement the %lant Rariety %rotection
and =armersA Rights ct as well as ?iodiversity ct without delay. Indian farmers need
ade9uate information. >omputerized systems of information need to be developed and
the benefits of cyberspace should be extended to poor farm families.
.iven the complexities and escape routes available to the western world in the
implementation of the agreements! one could 9uestion the methodologies followed in the
reduction commitment norms. #ar"et:access commitments have been tampered with
dirty tariffication. #oreover! already low rates of tariffs have been reduced as compared
to a reduction in high tariff rates.
F-
'n the other hand! some of IndiaAs low tariff bindings
may be re: negotiated. >alculation of price support within the product:specific #$ is
not clearly defined in the text. Therefore! it would be a good idea to bring a consensus
among the member countries on this issue. Developing countries that have net:taxed their
agriculture! may as" for credit of some sorts for having negative #$. =urther! blue:box
policies may be suggested to be eliminated altogether or moved out of the exemptions for
the calculation of current #$. #oreover! along with export subsidies! export credits and
guarantees may also be suggested to be brought under reduction commitments. The $%$
and T?T agreements do affect agricultural mar"ets. #odernizing our agricultural
processing will not only enhance our export:mar"et potential! it would also reform
domestic food 9uality.
Understanding the direction and magnitude of the effects of &T' agreements on
Indian agriculture is a very difficult proposition. $ome attempts have been made in the
past to 9uantify the effects of the &T' greement and trade liberalization on Indian
agriculture. &hile the direction of the gains to Indian agriculture may be correct! one may
not agree with the assumptions of their models! and the magnitude and distribution of
these gains. In the presence of imperfectly competitive export mar"et structures! the
increase in terms:of:trade for Indian agriculture may not be as high as predicted by the
computable general e9uilibrium studies that implicitly assume perfectly competitive
mar"ets. &hatever little improvement may occur in the terms:of:trade! it will have
negative or at best very little effect on farmersA welfare! as supply response to terms:of:
trade improvement is ambiguous. 'n this ground! developing countries may as" for
further and sharp reductions in the export subsidies and domestic support given by the
developed world. Indian agriculture will stand to gain through improvements in
irrigation! transport! agricultural extension services and research. Gxpenditures on such
items are exempt from domestic support reduction commitments under the green:box
policies.
In the emerging post:&T' world economic order! direct competition from imported
goods cannot be prevented. &ith the eventual dismantling of the 9uantitative restrictions
and reductions of industrial tariffs! our choice of warding off foreign competition is
nothing more than wishful thin"ing. $o! we must focus on how India can use the changed
conditions to earn benefits. =or this! first and foremost the economy has
F-
Therefore! the $wiss =ormula may be suggested to reduce higher tariffs by steeper cuts.
to identify and develop a modern infrastructure to facilitate agricultural exports. The post:
harvest technology and the storage facilities need to be upgraded. There is a need to
commercialize the farm operations by improving the management and mar"eting
techni9ues. This can be achieved by establishing mutually beneficial lin"ages with the
industry. Thus! there is plenty of scope for India to change from a mere producer to an
exporter of value:added and processed farm products and high 9uality seeds.