GATT, WTO and Indian Agriculture

GATT, WTO and Indian Agriculture!

The new GATT arrangement and WTO regime, which incorporated various compromise proposals of Arthur Dunkel and which was finalised at Geneva on 15th December, 1993, have some serious implications on Indian agriculture.

During the run up to the GATT agreement, fears were expressed from various corners that India’s interest in agriculture will be adversely affected as a result of the proposed agreement on agricultural issues in Uruguay Round.

Apprehensions were raised that the country may be forced to reduce the subsidies available to the farmers, phase out the public distribution system and compulsorily open up to agricultural imports.

It was also feared that the traditional rights of farmers to retain and exchange seeds may also be constrained. After making a lot of representation in the last meeting some additional provisions were made into the final agreement.

A thorough analysis of this new agreement leads to the conclusion that on the whole the country’s interests will not only be protected but India may also expect to benefit as a result of agriculture being included into the fold of GATT.

The agreement has stipulated that countries with an aggregate subsidy of more than 10 per cent of the value of agricultural produce will have to reduce them. But the current level of subsidy in India is well below this level and this stipulation will therefore not affect the country.

Moreover, it has been clarified from the new GATT agreement that the consumption subsidies for targeted groups of population as under our public distribution system which is primarily targeted for the rural and urban poor are legitimate and, therefore, can continue.

Farmers’ interest will also be completely protected once the proposed ‘sui generis’ legislation to protect plant varieties comes into effect. Under the proposed legislation, right of farmers to retain and exchange seeds will not be affected.

The central feature of the agreement on agriculture is the reduction in production subsidies paid by developed countries to their farmers and the rolling back of some of the non-tariff barriers which have restricted agricultural trade.

These provisions will provide benefit to India as the agricultural exports of the country enjoy a comparative and competitive advantage. Therefore, India’s agricultural exports will receive a welcome stimulus, at a time when the incentive structures in the domestic economy are beginning to work to their advantage.

Dunkel Plans and Indian Agriculture:

Arthur Dunkel, former Director General of GATT, offered certain definite proposals for the reform of the agricultural sector of various countries. The Dunkel Text has four definite proposals for the agricultural sector.

These include:

(i) A basic agreement on modalities of the reform programme;

(ii) A supplementary agreement on the modalities for specific binding commitments under the reforms programme;

(iii) A decision on application of sanitary and phycosanitary measures; and

(iv) A declaration on measures to assist food importing centres.

In respect of support measures to be adopted by the Government for the agricultural sector, the Dunkel plan provided—(a) Amber Policies and (b) Green policies. The developing countries normally apply policies in the “Green Box” which includes various government support measures for research, pest control, expansion of infrastructure, environmental protection etc.

These measures are very much required for the development of agriculture in the Third World countries.

The Dunkel plan has thus recognised the importance of developmental needs of the agriculture in the less developed and developing countries of the world. Accordingly, the government expenditure on food security and environmental protection have been kept outside the purview of the Dunkel Plan.

Moreover, the Dunkel plan has made provisions for the reduction of agricultural subsidies in developing countries, if the value of subsidies exceeded 10 per cent of the value of their total agricultural produce.

Now regarding the conditions of Indian agriculture, it can be observed that the country has achieved self sufficiency in food grains production. But considering its huge potential there is still vast scope to raise the productivity in Indian agriculture.

In respect of production of food grain crops, the country is lagging behind OECD countries. India is also lagging behind in respect of achieving growth rate in agriculture as compared to many Third World countries.

During the first two decades of green revolution (1968-69 to 1988-89), Indian agriculture recorded an average growth rate of 2.9 per cent as compared to that of 6.3 per cent in China, 4.4 per cent in Pakistan and 4.1 per cent in Thailand.

Thus, there is a need for increasing provision for research, modernisation; extension and expansion of infrastructural facilities for agricultural sector along with provision for subsidies for inputs to small and marginal farmers. But Dunkel proposal presents no threat to Indian agricultural subsidies currently at the rate of 5 per cent of the value of agricultural produce.

Thus under the present position, the Dunkel plan does not pose any threat of withdrawal or restraint on present trend of government expenditure on the development of agriculture in India.

Moreover, agricultural sector in India needs “Green Box” policy supports. In India presently only 25 per cent of the arable land is under assured irrigation as compared to that of 77 per cent in Pakistan, 48 per cent in China and about 47 per cent in Indonesia. This needs a quick redressal measure from the side of Government.

Moreover, under the new GATT arrangement, agricultural exports in India are expected to gain momentum in near future. Thus, in order to meet the challenges and opportunities open to the agricultural sector the Government should make provision for necessary restructuring measures so that the agricultural exports from India become very much competitive in the international market.

Steps taken to Protect Plant Variety by the Government:

In the wake of new General Agreement on Trade and Tariff (GATT) and more particularly after the formation of WTO, paving the way for both globalisation and liberalisation, the Government of India has initiated some important steps to quickly bring about legislation on the controversial issue plant variety protection in order to safeguard the interests of Indian farmers regarding the use and availability of seeds.

In India we have about 175 varieties of HYV seeds, out of which 96 varieties are developed by Indian scientists.

The Government has identified five important features of the proposed new legislation:

(a) The farmer can choose the best seed that he likes;

(b) The farmer can save seed from one crop and use it for replanting it in the next crop;

(c) The farmers can sell his surplus seed but not as branded seed in case of protected variety;

(d) The farmer can also become a whole-time seed producer and sell protected seed as a commercial enterprise with the consent of the right holder; and

(e) Our scientists will be free to use all seed varieties, including protected varieties, for experiment and research for development of new varieties.

Thus, the farmer would have the choice of buying the seed of his own choice. He would buy protected seed if it was found profitable to do so. The necessity of bringing this legislation emerged because of a kind of plant variety protection would be in the interest of the country.

Besides, the provision of high quality seeds to farmers was an important part of the government’s strategy for the development of agriculture. It is for these reasons that seeds were freely importable even now.

The agreement on trade related intellectual property rights (TRIPs) provides the signatory countries with the option to exclude plants and animals from the scope of patentability. As per this agreement, parties shall provide the protection of plant varieties either by patents or by an effective “sui generis” system or by any combination thereof.

This provision shall be reviewed four years after the entry into force of this agreement.

Thus, it is quite clear that the agreement did not impose any compulsion regarding patenting of seeds or other propagating material. “Sui generis”—a system of its own unique—implied a system different from other categories of intellectual property protection (such patents) and is in a class by itself.

Although the text of the TRIPs agreement does not refer to any particular international convention in the context of the “sui generis” protection of plant varieties, an international convention, which is known as “UPOV” (Union pour le protection des obtentions vegatals) and covers the protection of plant varieties, could be referred to for guidance.

The 1978 text of “UPOV” convention has the following broad contents:

(a) As regards the scope, it has been provided that only five genera or species would be protected initially and would be increased to 24 genera or species in eight years,

(b) The term of protection is 15 to 18 years,

(c) The right include production for the purposes of commercial marketing, offering for sale and marketing, and

(d) It is provided that the plant breeders’ right may be abridged to permit acts generally for experimental purposes on his holding of harvested material obtained by planting protected varieties in his own holding.

The main difference between patents and “sui generis” system of plant life protection in the 1978 version of “UPOV” was that the right in the case of the 1978 version of “UPOV” extended only to production for commercial marketing and commercial marketing of propagating material whereas in the case of patents, it would extend to production per se.

If the plant varieties were to be protected by patents, the farmers having bought the protected seeds would not be able to keep back a part of harvested material to be used for sowing in successive crops. But in the “sui generis” system of 1978 version of “UPOV”, on the other hand, the farmer would be entitled to do so.

The 1991 version of “UPOV” moves the system of plant variety protection nearer the patents system by imposing restrictions on the right of the farmers to produce the propagating material even for use on his own holding.

Under the final GATT Act “full discretion” had been given to signatory countries to adopt either the 1978 version or the 1991 version of “UPOV or even to make departures from either of the versions.

In a recommendation of far reaching consequence, the Parliamentary Standing Committee on Commerce, after considering the draft Dunkel proposals expressed the opinion that keeping the interest of the Indian farmers uppermost in mind while dealing with the issues pertaining to intellectual property rights’ application to agriculture, the traditional rights of farmers for preservation, sale and free exchange of seeds must remain unaffected.

The committee also expressed in its report on Dunkel draft that these safeguards should find specific mention in the GATT.

Provision of Subsidy in Indian Agriculture and New GATT Agreement:

The new GATT agreement has stipulated that countries with an aggregate subsidy of more than 10 per cent of the value of total agricultural produce will have to reduce them. Reduction of subsidy to agriculture under the agreement applied to developing countries like India, only if the value of subsidies exceeded 10 per cent of the value of their total agriculture production.

In India, the aggregate value of agricultural subsidies was not only far below the 10 per cent limit but also negative. Currently, the agricultural subsidy in India is ruling at the rate of 5 per cent of the value of agricultural produce compared with far higher rates in Japan and E.U. Clubbing of product and non-product agricultural subsidies will allow much greater flexibility to provide subsidies for agricultural production.

Thus, the Dunkel plan would in no way prevent India to subsidies its farmers in non-product specified subsidies like fertilizers, water, seeds, credits and pesticides as they do not exceed five per cent in India. In case of product-specific subsidies such as minimum support price, official estimates show that for 17 out of 20 items subsidies in India remain negative.

Only in case of sugarcane, groundnut and tobacco, subsidies remain positive but were still lower than 10 per cent threshold.

Thus, under the new agreements, all major agricultural support programmes were exempted from subsidy reduction commitments.

These included research, plant protection and disease control, extension services, training, provision of infrastructure, regional assistance programmes, environmental programmes, income support programmes, public stock holding for food security purposes, domestic food aid, crop insurance schemes, investment subsidies and input subsidies for low income and poor farmers.

Moreover, under the new agreement, consumer subsidies under the public distribution system (PDS) for the rural and urban poor are legitimate and are thus permitted. Thus, there is an explicit provision for exempting public distribution system from the agreement. Accordingly, PDS in India can therefore be continued.

Conclusion:

Thus, from the Indian perspective the Dunkel Draft on agriculture is a kind of mixed bag with the plus points outweighing the minus. No doubt, the new GATT arrangement will definitely raise the prices of agricultural inputs like HYV seeds, fertilizers, pesticides etc. but with this India’s market opportunities in exports of agricultural commodities would increase.

Thus, Indian agriculture and agri-business should get the kind of boost it has never known by exposing itself to the larger world market. The farm lobby would see major growth in exports in superior rice, vegetables, fruit, fisheries and meat products, vegetable oil processed products and flowers.

The reduction in export subsidies on agriculture by developed countries will make Indian agricultural exports more competitive in world markets.

Thus, Mr. Bibek Deb Roy of Indian Institute of Foreign Trade was of the view that “If agriculture is liberalised there will be higher input prices. But there will also be higher output prices and it is slightly unfair to look at the hike in input prices alone.”

Thus, under the present context, it can be finally observed that under the new GATT agreement, whatever negative aspects the Indian agriculture will face that can be suitably neutralized by responding to its positive aspects.

Thus, if the Indian agriculture can meet the challenges and opportunities open to it and if the developed countries do not put any trade barrier before the flow of Indian agricultural exports then India will definitely be able to overcome this threat and also become successful to gain sufficiently from this new world trade regime.