Bhaskar Goswami: Special safeguards weren't the issue, it was cotton

India had agreed to the US view on safeguards anyway. Fighting over it just diverted attention from the US refusal to cut cotton subsidies.

If one goes by news reports worldwide, the blame for the collapse of Doha Round negotiations in Geneva this July lies squarely on an “inflexible” adopted by India. Commerce Minister Kamal Nath appears to concur with this and has reiterated the point that India will protect the interests of millions of its farmers. Nothing could be farther from the truth.

Negotiations broke down after consensus was reached on 18 of the 20 issues tabled. On the 19th topic, India rejected the US demand for a diluted provision for Special Safeguards Mechanism, a tool that can protect against import surges. Since such imports can depress domestic prices and thereby impact income of farmers, India insisted on a lower level of imports as a trigger to invoke Special Safeguards Mechanism. This was opposed by the US and this standoff, it is believed, led to the collapse of the talks.

On the 8th day of negotiations the talks were deadlocked and Pascal Lamy, Director General of the World Trade Organisation (WTO), circulated a revised draft on Special Safeguards Mechanism as a compromise move (trade circles in Geneva suggest that the proposal was drafted by European Union). As is widely known, all drafts of developed countries are circulated at the WTO with US approval and this draft was no exception. Besides, Lamy is not exactly known for producing surprises for the US.

The revised text, although undermining the rationale of safeguarding before harm could occur, was acceptable to India on the 9th day. This was admitted by Kamal Nath. However, midway during the discussion Susan Schwab, the US Trade Representative, hardened her stand. Not only did she turn adamant against accepting a reduced import trigger, she suggested that it be revised upwards by 10 percent! Somebody sure was desperate to ensure that the negotiations fail while the discussion was on Special Safeguards Mechanisms, and India and China take the blame for it.

At the WTO, the US either negotiates from a position of strength or, if its defensive issues are raised, scuttles the negotiations. This is exactly what it did in Geneva this July. What activated this sudden hostile line of argument by the US is not very difficult to gauge. Since Special Safeguards Mechanisms were the second-last topic under discussion, an agreement on this would have brought the discussion to the last issue — cotton subsidies.

Cotton subsidy is a sore point for the US, which is perhaps why Lamy kept it as the last topic (in fact, at every round of negotiations, topics that the US is defensive about have always figured last). Around $3 billion of subsidies were paid by the US to its cotton farmers in 2006-07, which was deemed illegal at the WTO.

Forget compliance, the US intends to maintain these payments for the next five years through its 2008 Farm Bill. While direct support to cotton farmers came down to $1 billion in 2007-08, complete removal of this subsidy would be politically suicidal during elections this November, especially in the cotton growing states of Arkansas, Louisiana, Mississippi, Texas and California.

Since India had already agreed to the last proposal on Special Safeguards Mechanism which purportedly had blessings of the US, the sudden hardening of the latter’s position was clearly on account of the impending topic of cotton subsidies. Cotton is what broke down the negotiations, not Special Safeguards Mechanisms, so let’s not be misled.

Let us also not be misled by the claim that India protected the interests of its farmers. Had that been the case, it would have never agreed to the diluted provisions on Special Products, which entitles developing countries to undertake lower cuts for certain number of tariff lines to protect the food and livelihood security of its country and farmers.

India would also not have converged on Lamy’s final proposal on Special Safeguards Mechanism as it grossly falls short of what is required to protect its farming. It would have insisted on disciplining the Green and Blue Box subsidies that comprise 80 percent of total subsidies and have been found to be trade distorting. However, India chose to toe the US line on these issues and while subsidies continue to be the main problem, our negotiators are content with the magnanimous $2 billion reduction offer by the US.

A study by the Carnegie Endowment for Peace reported that successful implementation of the Doha Round will net 110 developing countries a meagre $6.7 billion in agriculture. This is less than what India alone annually spends on rural development. Further, this gain is only 16 per cent of the total benefits from the Doha Round, the rest being cornered by developed countries. UNCTAD has pointed out that the cost of implementing the Doha Round is four times the projected gains. So, any answers for why exactly, and what for, India is negotiating agriculture?

The author is with the New Delhi-based Forum for Biotechnology & Food Security