Indian Farmers demand Indian Government to Convince Bolsonaro that he should withdraw the WTO dispute against India, Where Bolsonaro & Co. are endangering India’s Sugarcane Farmers’ Future!
Jair Messias Bolsonaro, the current President of Brazil, has been invited as the Chief Guest at India’s Republic Day celebrations on January 26, 2020. Environmentalists and climate change activists have already started a campaign against the Government of India’s invitation to Bolsonaro, condemning his environmentally-destructive and exploitative policies in Brazil. However, Bolsonaro is threatening the livelihoods of Indian farmers more directly. Brazil has challenged the “support” that Indian government gives to its sugarcane farmers, alleging that it violates the rules of the World Trade Organisation.
Consider this: India is the world’s second largest sugar cane and sugar producer next to Brazil. India is also the world’s largest sugar consumer. India’s sugar exports are less than 1% of the value of the world sugar market. 50 million (5 crore) small and marginal farm families produce sugar cane in India and supply to sugar mills. Around 500,000 sugar mill workers contribute to the production of sugar in India. Sugar cane farmers in India are in deep crisis, with unpaid balances due from sugar mills to the farmers, touching around 24000 crore rupees. On the other hand, Brazil is the largest sugar cane and sugar producer, as well as largest sugar exporter in the world. Brazil accounts for about 45% of the global exports of sugar (29% in 2018). It is to be noted that Brazil, Australia and Guatemala export 70-75% of their sugar production and have a 53-55% share of the global sugar market.
Brazil et al drag India to the WTO Dispute Settlement Body
It was in February 2019 that Brazil raised questions on the domestic support measures as well as export subsidy measures that India provides for sugarcane and sugar. Brazil claimed that India’s support measures were inconsistent with WTO rules/Articles. Guatemala (4th largest exporter), Costa Rica, European Union (exports of 3 million tons a year), Australia (3 rd largest exporter, of around 3.7 million tons annually) , Thailand (world’s 2nd largest exporter in 2018) and others subsequently joined Brazil in this complaint which is now pending with the Dispute Settlement Body of the World Trade Organisation.
Brazil’s contention was that India has increased its Fair and Remunerative Price (FRP) for sugarcane from INR 1391.20 per tonne in 2010-11 to INR 2750 per tonne in 2018-19. FRP is the minimum price that the sugar mills have to pay to sugarcane producers supplying cane to the mills. State level additional support in the form of State Advised Price was also questioned.
It alleged that Government of India has approved assistance programs worth INR 55 billion to support the sugar industry in 2018-19. Brazil also pointed out that the Minimum Indicative Export Quota (MIEQ) fixed for sugar mills has increased from 2 million tons in 2017-18 to 5 million tons in 2018-19, leading to pressures on global sugar prices.
Brazil argued that India’s product specific domestic support for sugarcane is in excess of its de minimis entitlement of 10% of value of production as per obligations under some WTO Articles, and that India is not entitled to provide any export subsidies on sugar or sugarcane. Australia argued that
the support being extended by the Indian government is inconsistent with provisions of Agreement on Subsidies and Countervailing Measures too, because these are prohibited subsidies, and for failing to notify its subsidies.
A panel has been appointed by WTO on 28th October, 2019 to investigate into the complaints against India and a report will be submitted by the panel in 5 or 6 months.
THE REALITY OF INDIAN SUGARCANE FARMERS:
It is true that Government of India announces Fair and Remunerative Price (FRP) for sugarcane and various state governments announce State Advised Price. FRP is the minimum price that sugar mills then pay sugarcane producers, while SAP is followed by some states and some mills. The government announces the FRP so as to protect the farmers from exploitation by the sugar mills. The Indian government neither procures sugarcane nor pays any FRP to the farmers. Public sector mills are only 43 in number, compared to 732 sugar mills in the country, with the largest number being private sugar mills. Therefore, the Market Price Support is negligible, as the government does not procure from the farmers at the administered price. This is the actual reality.
WTO’S RIGGED REGIME
There are numerous structural and systemic issues with the way WTO has been created/rigged. For instance, during the base period of 1986-88, India was providing Amber Box support that was below the de minimis level, and was not entitled for AMS (Aggregate Measure of Support, which is capped at zero). While calculating Market Price Support (MPS) in the WTO regime, the external reference price is still that of (export or import prices of) years1986-88! Such an ERP was fixed at 156.16 rupees per ton, and this is being compared with the current FRPs (Rs. 2750/ton) on sugarcane without accounting for inflation, whereas the deflated SMP/FRP is only around Rs. 290.88/ton. In MPS calculations, countries like Australia have used total production of sugarcane in India as “eligible production” when they confronted India, and claimed that the domestic support by India to sugarcane in 99.8% of the Value of Production! It is to be noted that sugarcane itself is a non- tradeable commodity in the international market. On the other hand, a developed country like the USA provided product specific support to a tune of 64.41% of the value of production (in 2016). However, given its AMS entitlement, it is not considered to be in breach of its WTO commitment. Meanwhile, contrary to the claims and allegations of excessive support, Indian sugarcane farmers are reeling under a crisis. In most cases, they have not been paid crores of rupees of arrears due to them from sugar mills. Many sugar mills are in fact declaring bankruptcy and closing down. It is also clear that countries like Brazil, Australia Guatemala and others are trying to destroy India’s sugarcane and sugar production, and capture the market for themselves.
We cannot allow WTO to rule against Indian farmers:
The huge domestic subsidies that the Western countries give to their farm sector, which is dominated by agri-business and not small farmers such as in India, are going unchallenged and are on the rise. The US gives 57,901 USD per farmer as applied domestic support, the EU gives 8,286 USD. In comparison, Indian farmers get only 99 USD per farmer. This huge inequity has not been addressed at the WTO. Any talk on domestic support reduction in the developed world has been scuttled by the rich countries with the tacit support of trade cartels.
To add to the affront, the small amount of subsidy we receive is now being challenged at the WTO. Our farmers receive nominal support through the administered price, for supporting our public food programme. These support prices barely cover the cost of production in almost all the 26 crops that it is applicable to. We also receive a nominal input subsidy. All these, despite being nominal, are now being threatened under WTO’s imposed conditions.
The Peace Clause that is granted on the Food Security Proposal is not effective and it is not a guarantee against disputes. We are standing on very precarious grounds here – the very survival of our farmers is being challenged, which also threatens the country’s food security and our people’s right to food. There is a need for a permanent solution on the food security proposal.
From the time that multiple agreements including the Agreement on Agriculture, were signed in 1995, there have been consistent efforts to endanger our farmers’ lives and livelihoods in numerous ways, all in the name of free trade. Other than questioning domestic support to our farmers, in order to gain market access, there is a constant demand to cut our import tariffs. Farmers in developing countries such as India work under very difficult circumstances without much support from their
governments and need the protection that import duties offer. Developing countries are required to cut more duties under the formulae being considered and special and differential treatment is being weakened with every round of negotiations, with disastrous implications for Indian farmers. There is already a grave agrarian crisis and rising levels of farmers’ suicides in India.
The so-called achievement on export measures during the Nairobi Ministerial of 2015 was hailed as a major breakthrough by the WTO. However, export subsidies have low importance in terms of Indian agriculture, and the key issue for us is the unfair, rigged and differential rules on domestic subsidy/support for rich and poor countries. The WTO has not been able to deliver on a Special Safeguard mechanism (SSM) either, in spite of efforts by the G-33 during the Nairobi Ministerial. This is of tremendous importance to India as we face threats from import surges which wipe out many farm livelihoods in one go.
All the above clearly illustrate the structural and systemic problems with WTO and the way it has been rigged from its inception, coming back to haunt India and other countries which are seeking to protect the livelihoods of their farmers. If the WTO rules against India in this dispute, the lives and livelihoods of crores of families are at serious risk. The Indian government will not be in a position to announce any FRPs and cannot protect cane producers from being exploited by sugar mills. Local production will fall, and India will be forced to import sugar. Farmers’ crisis will further deepen, farm and mill workers will lose employment and there will be a massive increase in unemployment in the country side.
1. Indian government should demand to Brazilian President Bolsonaro to withdraw the cases at the WTO, as Brazil is directly threatening the future of sugarcane and sugar producers and workers of India.
2. India should notify product-specific support for sugar rather than sugarcane, and also notify its FRP policy, which is a new policy approach, as a budgetary outlay instead of an MPS (which it is not, in fact), and seek to protect the interests of the sugarcane farmers.
3. This sugarcane case initiated this time by Brazil under Bolsonaro illustrates yet again the rigged edifice of WTO and its unfair trade systems. There is a need for a serious re-think about trade under the WTO, by the Indian government. Agriculture should be kept out of the WTO.
For more information, contact Indian Coordination Committee for Farmers’ Movements at firstname.lastname@example.org/ email@example.com