India: Subsidy-ridden US plans for market access spell doom for millions of farmers Print E-mail

Monday April 16 2007



Opening up of Indian imports market may prove fatal for farmers and food security


NEW DELHI, APR 15:  The suggestion of the developed world that India should open up its market for imports is likely to prove fatal for farmers and food security. US trade representative Susan Schwab in the last week urged India to open up its markets for imports, as it would help in its effort to contain the rising trend in prices. She said “Imports can have a positive impact for the average Indian who will then have the surplus for spending on health and education.”

This was expected from Schwab. US has always been asking for market access in the developing world, even as the developed countries continue to heavily subsidise their agriculture and depress global prices and erect tariff and non-tariff barriers. If in this situation the developing world follows Schwab’s suggestion seriously, it would amount to inviting a doom to their farm sector. The farmers’ organisation in the country have rightly reacted to Schwab’s statement. Krishan Bir Chaudhary of Bharat Krishak Samaj said “It is a matter of shame for US to ask for undue matter access in the third world, while it continues with its unfair trade practices. Schwab has ultimately disclosed US intention to destroy the food and livelihood security in the third world.”

Recently, India had the experience of reducing its applied tariff on wheat to zero. Imports of wheat was done on both government and private account, but at what cost? Last year in February when India decided to import wheat, the global prices shot up, in phases, from $ 173 a tonne on FoB to over $ 230 a tonne. Not only global prices of wheat but also freight shot up phenomenally as India became a bulk importer. Past experiences show that whenever India or China enter global market as bulk importers, prices shoot up and when they enter as bulk exporters the prices fall.

India imported 5.5 million tonne wheat on government account alone in the previous year. Did it help to contain the rise in prices ? The answer is No. The prices of essential commodities went skyrocketing and the price inflation rate measured on point-to-point movement in wholesale price index touched 6.7% by the last week of January, this year. The wholesale and retail prices of wheat also did not sober down. Government’s Economic Survey 2006-07 had to comment that dutyfree wheat imports did not help to check price rise, rather the rising global prices impacted the domestic market in a subtle way.

Previous year’s experience of dutyfree wheat import is an answer to Schwab’s claim– “Imports can have a positive impact (meaning cheaper) for average Indian who will then have the surplus for spending on health and education.”

In fact, wheat availability in the country in the previous year was sufficient to meet the country’s consumption needs. Government deliberately resorted to imports as it was unable to purchase wheat from farmers for the buffer stock as the pre-determined purchase price was low.

The reasons for rise in prices of essential commodities was, however, different. It was hoarding of stocks and subsequent market manipulations by traders, corporates and multinationals. Several cases of manipulations in futures trading came to the fore and the government had to initiate some cosmetic measures, falling short of a total drive against hoarding of stocks and market manipulations in all its manifestations.

Unilateral import liberalisation can also have another damaging effect. This is when the developed countries would have surplus stocks and they would be able to dump their highly subsidised products in the third world market. This would then severely affect the livelihood of farmers and ultimately in the long run endanger country’s food security.

Attempts are now being made by the developed world to water down the demand of developing countries for food and livelihood security through designation of special products and application of special safeguard mechanism. Farmers in the developing countries do not seek protection, but only justice. Real justice would be to remove all subsidies and support in the developed world to ensure a level playing field in global trade. Unless this is done, unilateral opening up of markets in the third world would spell a doom for millions of farmers.