G. Srinivasan

New Delhi , June 24

DEVELOPING countries exporting agricultural products may have a say in the ongoing WTO farm trade talks for the elimination of the profligate farm subsidies by the rich world to its farmers. But the developed countries have their own way to persist with high subsidies to produce surplus grains that all but goes to distort the global grain prices to the dismay of third world farmers.

The evidence to this apparent paradox emanates from two latest reports of the Organisation for Economic Co-operation and Development (OECD) issued in Paris.

The OECD Agriculture Outlook on the farm sector paints a disconcerting picture that stiffer competition, coupled with higher productivity, would result in a further drop in real prices for most basic food commodities, thereby aggravating the adverse terms of trade for farm good exporters of the poor countries.

The inter-Governmental think-tank of 30 rich countries in its Monitoring & Evaluation Report of farm practices of its members found "little" change in the level of producer support in 2004 since the late 90s for all the OECD countries.

Thus, it has fallen from 37 per cent of farm receipts in 1986-88 to 30 per cent in 2002-04, but this level of support was reached seven years ago in 1995-97.

The average level of support to farmers remained unchanged in 2004 at 30 per cent of overall farm receipts, most of which continues to be given through trade-distorting measures such as the propping up of market prices.

OECD reckons that in 2004 the value of support to producers was an estimated $279 billion or 226 billion euros.

Including support for general services to agriculture such as research, infrastructure, inspection and marketing and promotion, and total support to the agricultural sector was equivalent to 1.2 per cent of the OECD GDP in 2004.

For the OECD as a whole, transfers to agriculture as measured by the Total Support Estimate (TSE) amounted to $378 billion or 305 billion euros in 2004.

Within the OECD, support to producers in 2002-04 was below 5 per cent of farm receipts in Australia and New Zealand but averaged around 20 per cent in Canada, Mexico, and the US and 25 per cent in Turkey.

At 34 per cent, the level of support in the EU was above the OECD average of 30 per cent, reflecting the ill-effects of the costly common agricultural policy (CAP) of the community.

Support to producer in Japan and Korea averaged 60 per cent and around 70 per cent in Iceland, Norway, and Switzerland.

Highlighting the wide difference in the level of support and protection between commodity, the OECD said that for 2002-04, the average OECD commodity percentage producer support estimate (PSE) was below the overall commodity average of 30 per cent for wool and eggs (under 10 per cent), poultry, pig meat and oilseeds (about 35 per cent) for sheep meat and other grains and milk (approximately 40 per cent) and significantly above for sugar (54 per cent) and rice (80 per cent).

It is to be noted that rice is produced in only six OECD countries but benefits from very high levels of support in Japan and Korea (80 per cent) and moderate levels (around 30 per cent in the EU, Mexico, and the US).

In contrast, sugar, which is produced in more OECD countries, benefits from relatively high level of support about everywhere.

OECD contends that since most farm support extended to producers is still either output- or input-linked, a high share of support goes to larger farms.

Such price support to larger firms can increase rather than reduce farm income disparities not only within the OECD but between developed and developing countries, as the latter have no pronounced larger farms.

As agriculture holds the key to breaking the logjam in trade talks under the Doha Development Agenda (DDA), the delay in concluding the DDA has led to increase in the number of agriculture-related WTO panel disputes.

While both developed and developing countries have been the complainants, OECD countries have almost always been the respondents with panels having covered a broad range of issues including domestic support, export subsidies, and market access (the so-called three pillars), besides State trading enterprises and phytosanitary requirements.

OECD hoists the warning signal that "Government intervention continues to be significant creating important spill-over effects on production, trade, and the environment. The current level, composition, and spread in support levels across commodities in OECD countries still create distortions that demand further attention from policymakers."

This should bestir the G-21 agriculture alliance spearheaded by India, Brazil, and China to demand action in the form of removal of domestic support and export subsidies ungrudgingly being doled out by the rich world to its farmers, according to trade policy experts.

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