Test Paper 2

Directions: Study the passage below carefully and answer the questions that follow.


The World Trade Organization (WTO) Ministerial Conference, which commenced in Hong Kong on December 13, 2005 adopted a declaration on December 18, 2005 after 6 days of acrimonious negotiations between developed and developing countries. Although initially there was a show of unity among developing countries especially on the issue of agriculture, which was reflected in the formation of the G-110, the final outcome of the Ministerial Declaration has been thoroughly anti-development. The Ministerial Declaration has not only failed to address substantially the concerns of developing countries but has actually paved the way for an eventual trade deal by the end of 2006, which is going to be severely detrimental to their interests. It is clear by now that the so called “Development Round” launched in Doha in 2001 has been manipulated by developed countries, especially the United States and the members of the European Union, to push for further trade liberalization in developing countries while they continue to protect their economies through high subsidies and non-tariff barriers. Far from redressing the asymmetries of the global trading system, the Doha round seems to be heading for another catastrophe for the developing world.

The E.U. stuck to its intransigent position on the deadline of 2013 for the elimination of export subsidies and developing countries gave up their demand for an earlier end date despite the initial collective efforts of the G-110. The gross inadequacy of this so called ‘concession’ can be understood from the fact that exports subsidies comprise less than 2 per cent of the total farm subsidies in the developed world. There has been no concrete commitment on the reduction of domestic support other than export subsidies. The E.U. can continue to subsidize agriculture to the tune of 55 billion Euros a year. The E.U. budget adopted recently ensures that nothing can be touched in the agriculture budget till at least 2013. The U.S. budget reconciliation process and the final vote in the Congress are set to extend domestic support to agriculture and counter- cyclical support to commodities up to around 2011. Even in the case of cotton, the agreement to eliminate subsidies by 2006 is restricted to export subsidies only and does not include other forms of domestic support. The U.S. refused to give duty-free access to exports from Least Developed Countries (LDCs) for 99.9 per cent of product lines and the final agreement was on 97 per cent of them, which would enable the U.S. and Japan to deny market access to LDCs in product lines such as rice and textiles. Much of the aid for trade for LDCs, which is being showcased by developed countries as a ‘development package’, is disguised in conditional loan packages that are contingent upon further opening up of their markets.

India’s prime interest in agriculture was to ensure the protection of is small and marginal farmers from the onslaught of artificially low-priced imports or threats thereof. The proposals for agricultural tariff cuts, which are already on the table, are quite ambitious and the G-20 has already committed itself to undertake cuts to the extent of two-thirds of the level applicable to developed countries. Moreover, India has 100 per cent tariff lines bound in agriculture with the difference in the applied level and the bound level not very marked in many lines. In this context, the systematic problem faced by India’s small and marginal farmers practicing subsistence agriculture will only get aggravated as a result of the impending tariff cuts that have been agreed upon. The government claims that the right to designate a number of agricultural product lines as special products based upon the considerations of food and livelihood security and to establish a special safeguard mechanism based on import quantity and price triggers, which have been mentioned in the Ministerial text, adequately addresses the concerns of Indian farmers. The claim is questionable since the nature as well as the extent of protection under the category of special products remains restricted and the special safeguard mechanism, admittedly , is a measure to deal with an emergency and is off ‘a temporary nature’. Therefore, seen in the light of the insignificant reductions in domestic farm subsidies by developed countries, tariff reduction commitments by developing countries seem to be totally unjustifiable. Developing countries have also agreed on the Swiss formula for tariff cuts under Non-Agricultural Market Access (NAMA). Although the coefficients will be negotiated later, it is unlikely that developed countries will agree upon sufficiently large coefficients for the formula that would ensure adequate policy space for developing countries in future to facilitate development of different sectors of their industries. The Ministerial Text’s ritual references to ‘less than full reciprocity’ and ‘special and differential treatment’ fails to conceal the fact that the flexibilities provided by the July framework regarding the nature of the tariff reduction formula, product coverage, the extent of binding and the depth of cuts have been done away with. Moreover, no concrete commitment has been obtained in the Ministerial Text for the removal of the Non-Tariff barriers by developed countries, which is their principal mode of protection, despite developing countries making such major concessions on industrial tariff cuts. The fact of the matter is that developing countries. And India has facilitated the adoption of this bad deal in the back drop of an acute crisis faced by Indian agriculture. Unfortunately, developing countries have lost the opportunity to rework fundamentally the iniquitous agreement on Agriculture and protect the domestic policy space vis-a-vis industrial protection by developing countries, which could have been achieved by galvanizing the unity of the G-110.

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