Japan, US, EU want change in WTO rule on farm subsidy that will hurt India

Several members of the developed bloc have accused India & China of under-reporting their farm subsidies at WTO, which they believe distorts global trade.

File photo of PM Narendra Modi during a meeting with his Japanese counterpart Shinzo Abe | PTI

Tokyo: Japan is planning to push for a proposal that will transform a World Trade Organisation (WTO) framework for subsidies, seeking to resolve a longstanding grievance the developed nations have had with developing counterparts like India, a highly-placed source in the Shinzo Abe administration told ThePrint.

The US and the European Union (EU), the source added, are among the other countries that support the proposal.

At the heart of the row is WTO’s subsidy notification process, under which each member-state is obligated to inform the global trade watchdog about the exact amount of farm subsidies. Failing to report this is tantamount to a violation of international obligations.

Under the WTO’s Agreement on Agriculture, a developing country cannot offer subsidies amounting to more than 10 per cent of the value of its agricultural production, while the threshold stands at 5 per cent for developed countries.

However, several members of the developed bloc, including the US, have long accused India and China of under-reporting their subsidies at the WTO, a fact they believe distorts global trade.

“Japan, along with the US and the European Union and other members, co-sponsored at the WTO a proposal on reform of the notification system with a view to enhance transparency,” the official from Japan’s Ministry of Foreign Affairs told ThePrint. “This is a low-hanging fruit and can be easily achieved.”

Separate sources told ThePrint that the reform will involve either a uniform subsidy threshold for all countries or a tweak in the formula used to calculate it.

Japan, which is hosting the G-20 Summit from 28-29 June in Osaka, is going to take up the issue as part of their larger demand for reforming the Geneva-based multilateral trade body, the Japanese government official said.

Japan believes the WTO’s importance is waning in the backdrop of ongoing trade wars, especially the one between the US and China, which has had the global markets in jittery.

The body’s relevance has been challenged by US President Donald Trump, who has threatened to withdraw from the Geneva-based WTO if it didn’t stop treating his country “unfairly”.

‘Will accommodate all concerns’

Any move to change the subsidy notification process is likely to be opposed by India and other developing countries, which believe such a step would spell disaster for their poor and marginal farmers.

The Japanese government official said Tokyo was aware of the concerns. “We understand that some developing countries have objections to it. This is still under discussion in Geneva,” the official told ThePrint. “We will accommodate everyone’s concerns. This will be discussed at the G-20 Summit.”

In February, Australia and Brazil had filed a complaint against India at the WTO over its sugar subsidies, with Australian Trade Minister Simon Birmingham expressing concern that subsidies to Indian sugar farmers had created a “glut” in the global market and pulled the prices down.

Last year and this February, the US came down heavily on India for “under-reporting subsidies” for farmers cultivating multiple crops, complaining to the WTO that the country’s programme of minimum support price (MSP) for rice and wheat were in violation of rules.

“The United States expects our trading partners to comply with the reporting requirements they agreed to when joining the WTO,” US Trade Representative Robert Lighthizer had said in November 2018.

“Accurate reporting and improved transparency of these programmes is an important step in ensuring that our trading partners are living up to their WTO commitments and helps achieve more market-based outcomes through the multilateral trading system,” he added.