US, India Spar Over Agricultural Subsidy Data at WTO Meeting
Officials from India and the US engaged in intense debate at the WTO last week over whether New Delhi’s farm subsidies for wheat and rice are “vastly in excess” of the figures that the South Asian economy has reported to the organisation. The debate came following a formal submission from Washington that questioned New Delhi’s support practices and related data.
The discussion took place during a meeting last week of the global trade body’s Committee on Agriculture, which also featured discussions on a host of new or evolving agricultural support policies among major players.
Representatives from the South Asian nation argued that its official notification of agricultural domestic support was consistent with WTO rules in the area, along with past practice, and described a counter-notification submitted by Washington as an “exercise of futility,” according to a Geneva trade official.
The counter-notification, which was submitted by the US last month and covered marketing years from 2010-11 through to 2013-14, was the first such document ever provided to the WTO, though there is a provision in the trade body’s Agreement on Agriculture allowing for such claims. New Delhi had submitted an official notification for its domestic support in 2014-15 and 2015-16 a few days prior.
The US-India debate comes within days of a ministerial-level meeting between the top trade officials of both sides. While it is not immediately clear how much of a role agriculture will play in those talks, the two countries have lately been dealing with a series of bilateral trade irritants or concerns. For example, aside from the debate on agricultural support, the US recently announced that it would be reviewing India’s eligibility in the Generalised System of Preferences,” citing among its concerns the introduction of alleged trade barriers for imported medical and dairy products. (See Bridges Weekly, 19 April 2018)
Calculating farm support
India’s most recent notification showed a recent decline in trade-distorting “de minimis” support, which fell to US$1.5 billion in marketing year 2015-16, according to figures submitted by the government. Meanwhile, the country’s green box programmes amounted to US$18.3 billion, while US$23.6 billion was allocated to input and investment subsidies for low-income, resource-poor producers under a clause of the Agreement on Agriculture which allows developing countries to exempt payments in this area from WTO ceilings.
During last week’s meeting, the US identified four major ways in which India’s calculations differed from their own. Firstly, the US calculated India’s support commitments in Indian rupees, rather than US dollars. India has consistently used US dollars to report its agricultural domestic support to the WTO, which New Delhi mentioned during last week’s discussions. Washington argued that New Delhi should use rupees instead, given that this was the currency used to establish India’s original WTO commitments.
Secondly, the US said that India ought to calculate its domestic support using the total volume of production, rather than just the quantities procured under support programmes. Annex 3 of the Agreement on Agriculture specifies that countries should calculate support by establishing the gap between the government-set administered price and a pre-established reference price, and then multiplying this by the quantity of production “eligible to receive the applied administered price.”
Thirdly, the US said that India should also include in its notification certain state-level bonuses provided at a sub-national level. Finally, the counter-notification submitted by Washington uses data from India’s National Accounts Statistics to establish the value of agricultural production – a figure needed to calculate the “de minimis” threshold, which for most developing countries is set at 10 percent of the value of production for both product-specific and non-product-specific support.
India issued responses to all of these specific concerns. For example, along with noting its past history of how it reports data, India argued that its sub-national bonuses are not significant and only occur in some select cases, and said that the missing data on value of production is readily available online on government websites.
Australia, Canada, the EU, New Zealand, Paraguay, and Ukraine intervened to express appreciation for the analysis conducted by the US, according to the same Geneva trade official, along with raising some of their own concerns.
US, EU farm subsidy schemes also draw scrutiny
While the India-US debate was one of the most high-profile topics during last week’s meeting, Washington’s own agricultural value of production data also came under scrutiny from Canada, which questioned an apparent discrepancy in recent data on Washington’s 2015 support levels.
The new figures show the US provided US$17.2 billion in the most trade-distorting forms of support in that year, of which less than US$4 billion counted towards the US ceiling on trade-distorting “amber box” support, and another US$13 billion was classified as falling within “de minimis” thresholds. For developed countries such as the US, de minimis support is allowed up to five percent of the value of production for both product-specific and non-product-specific support.
The new data suggests that trade-distorting support levels reached a higher level in 2015 than at any point in the previous decade. (See Bridges Weekly, 26 January 2017)
The US reported another US$121 billion as “green box” payments, which are meant to cause no more than minimal trade distortion under WTO rules, and included over US$104 billion in domestic food aid payments under schemes such as the Supplemental Nutrition Assistance Program (SNAP). SNAP is more commonly known as food stamps, and is a federal entitlement scheme that provides support to millions of low-income people annually. SNAP is not tied to any requirements for buying domestic goods.
The US Congress is currently working on drafting a new Farm Bill with provisions on agricultural subsidies and food aid for the next five years, although support programmes for cotton and dairy have already been included under separate budget legislation that was passed in February. (See Bridges Weekly, 26 April 2018)
Other WTO members whose farm support policies also drew scrutiny included Canada, the EU, and Russia, among others. One of these, the EU, is also set to see some potentially significant overhauls to its farm support schemes. The European Commission recently unveiled legislative proposals for its Common Agricultural Policy (CAP) during the 2021-27 budget period, which will be the first without the UK as a member state. The proposals, which called for some spending cuts among other changes, are now due to be considered by the European Parliament and Council ministers. (See Bridges Weekly, 7 June 2018)