The Hindu : FICCI seeks cut in farm export subsidies

Online edition of India's National Newspaper
Wednesday, Mar 17, 2004

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FICCI seeks cut in farm export subsidies

By Our Special Correspondent

NEW DELHI, MARCH 16. Even as negotiations for the agreement on agriculture have begun at the World Trade Organisation in Geneva, an apex industry chamber has urged developed countries to initially reduce export subsidies on products of special interest for developing countries like India. These include sugar, wheat, rice, fruits, vegetables, tobacco, butter, butter oil cheese, bovine meat and other meat, eggs and cotton.

At present, India imports many of these products in significant quantity from subsidising developed countries notably the U.S. and the European Union (EU). For instance, the country imports nearly 99 per cent of butter and butter oil from these countries at a cost of around $8 million, while the EU alone provided export subsidies to the tune of 325 million Euros during 2001-02. Similarly products such as meat, fruits, vegetables and tobacco are import in sizable quantities from these countries.

While making these suggestions, the Federation of Indian Chambers of Commerce and Industry (FICCI) has pointed out that prior to the Cancun ministerial conference of the WTO last September, the Group of 20 developing countries had suggested a two track approach to phasing out of subsidies. In the first phase, a shorter period, members would phase-out the export subsidies on products of interest to developing countries. In the second longer period, members would phase-out export subsidies on other product categories. The EU had then sought a list of products from developing countries for which export subsidies would be phased out in the first period.

For some of these products the subsidy level as measured by Export Subsidy Equivalent (ESE) is very high in developed countries. The ESE is the percentage of subsidy to the world price. This crosses 100 per cent in the case of rice, sugar, butter and butter oil, cheese and eggs. The chamber says the level of import tariff allowed for these products under WTO rules for India may not be sufficient to fully neutralise the effect of export subsidies.

While the overall thrust has to remain on eventual elimination of all forms of export subsidies as mandated by Doha Ministerial Declaration, in the interest of taking the negotiations forward, the FICCI suggests examining phase out of export subsidies on a set of products in the first period. It argues that this option can be complemented by other measures such as fixing export subsidies on per unit basis, and curbing the practice of "rollover.''

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