In the backdrop of the rising global prices and the government resorting to drastic cuts in tariffs on many agricultural commodities, India?s negotiating position at the farm talks in the WTO may be weakened.

The recent rise in global prices has completely changed the earlier scenario where the developing countries accused the developed world for depressing global prices through heavy subsidies and thereby minimizing the gains of Third World producers. Several factors are, however, responsible for the turnaround in the global situation. The reports of Unctad, UN ESCAP, OECD and other UN agencies have held massive bio-fuel programme in Europe and in the US as one of the main cause for the rise in global food prices.

The bio-fuel programme in the developed world backed by heavy subsidies has caused many farmers to cultivate crops for producing fuel rather than for food.

The prices of bio-fuels have shot up in tandem with the fossil oil prices and the bio-fuel prices have had a spilling effect on food prices

The member of the Planning Commision, Abhijit Sen agrees with the view and says : ?The government has reduced tariffs with the good intention of importing food at cheaper prices to combat the price inflationary trend in the country. But this may soften our negotiating position at the WTO as we have already begun reducing our tariff barriers. It now would be difficult for the developing countries to raise the issue that developed countries? subsidies depresses global prices. Many poor net food-importing countries are facing problems of importing food at high prices.?

Another factor contributing to the rise in global food prices is the subprime crisis and the meltdown in the equity market. The investors are now shifting their investments to commodity markets. Sen says : ?The same thing is seen happening in India also.?

However, at the global level there are few big corporate players who dictate the prices of food. Even the farmers in the developed world do not benefit from the price rise. For instance the Canadian Wheat Board paid farmers between $ 260 to $ 284 a tonne for various qualities of non-durum wheat, while the global prices peaked to over $ 250 a tonne on March 27, this year. In India farmers were paid Rs 850 a quintal while wheat was imported at Rs 1650 a quintal.

India has banned exports of some agro commodities and discouraged exports of other commodities and has reduced tariff barriers to facilitate cheap imports with a view to check the rising domestic price inflationary trend. But opening for imports at this stage would result in ?importing inflation? when global prices are high.

The Chairman of the Central Organisation for Oil Industry and Trade (COOIT), Davish Jain has rightly pointed out that the major exporting countries very well know that the populous countries like India and China would import food at any cost to meet their needs and therefore would not hesitate to jack up prices.

The same has been the case with vegetable oil imports. Thus faced with such a situation the India and the developing countries would need to find a suitable alternative way in handling global trade.