By Sachin Sharma, The author works at the Centre for WTO Studies. Views are personal
Given the global uncertainty caused by the Russia-Ukraine war, pandemic, and fear of recession, Indian agricultural exporters and farmers have high expectations from the upcoming budget to address these concerns. Diversifying export baskets and destinations and focusing on value addition and trade-facilitating measures would be pivotal in enhancing agricultural exports. These measures would be critical since the agricultural export subsidies would not be maintainable under the WTO after 2023. Why export subsidies would be incompatible with WTO rules and the challenges ahead merit a discussion to achieve $100 billion worth of exports by 2030 under the agriculture export policy.
Before the establishment of the WTO, some countries/regions such as the US and the EU were providing massive export subsidies to dump their agricultural products in the international market, which adversely affected the farm income in poor countries. These members acquired the flexibility to provide export subsidies under the WTO Agreement on Agriculture (AoA). Surprisingly, this flexibility was ruled out for other members including India, who historically did not give export subsidies. However, as a special and differential treatment (S&DT), developing countries, including India, could provide export subsidies only for reducing marketing and transportation cost for agricultural products.
Export subsidies became a contentious issue in agriculture negotiations as developing countries consistently demanded in various WTO ministerial conferences (Hong Kong,2005 and Bali, 2013) to eliminate these subsidies. Finally, the Nairobi ministerial decision in 2015 gave a breakthrough where all members agreed to eliminate export subsidies. The decision extended the S&DT provision, which permitted the marketing and transportation-related export subsidies for the developing and the least developed countries (LDCs), till the end of 2023 and 2030 respectively.
Over the years, to offset infrastructural inefficiencies and associated costs, India has used the S&DT provision to provide export subsidies for the marketing and transportation of agricultural products including tea, coffee, fruits, vegetables, and sugar. However, India’s export subsidy measures were subject to strict scrutiny at the WTO. In 2018, the US challenged India’s export-related measures at the WTO which has implications for both agriculture and non-agricultural products. Additionally, Australia, Brazil, and Guatemala brought a dispute on domestic support and export subsidy measures concerning sugar in 2019. These disputes are still pending before the appellate body of the WTO. The final decision may take longer due to the non-appointment of the judges resulting in a dysfunctional appellate body. Regardless of the verdict, India is not permitted to provide any agricultural export subsidies after the 2023 deadline, as per the Nairobi decision.
Exporters from developing countries face a plethora of challenges owing to domestic infrastructural inefficiencies, international quality standards, and inadequate export and market promotion measures, among others. Such hurdles make the playing field in international trade uneven for these exporters in comparison to their counterparts in rich countries. Acknowledging the Nairobi decision deadline on export subsidies and the concerns of exporters, the Indian government initiated multiple WTO-compliant agricultural export measures.
The Agricultural & Processed Food Products Export Development Authority (APEDA) is facilitating agricultural export through it financial assistance scheme for efficient export infrastructure, complying with international food safety standards, and market development in foreign countries. Measures such as developing the district as an export hub, e-certificates for exports purposes, Krishi UDAN to assist farmers in transportation, Development of Enterprise and Service Hub (DESH), Remission of Duties and Taxes on Exported Products (RoDTEP), and coverage of food processing industries under Production-Linked Incentive (PLI) scheme are enabling an efficient eco-system to address the multiple issues faced by exporters.
Backed by various initiatives and agriculture export policy, India’s agricultural exports increased to $50.2 billion in 2021-22, resulting in a $17.8 billion trade surplus for agriculture and allied sectors. Within the first half of 2022-23, India already exported $26.7 billion worth of agricultural and marine products. To further boost this, the Indian government has been proactively engaged in trade agreements with several countries.
Though agriculture exports exhibit a remarkable performance, India has a long way to go to achieve the $100 billion target by 2030. With no room to maneuver for export subsidies in near future, agriculture export promotion, market development, and the proactive role of state governments would be critical. A way forward could be to improve the ‘traceability’ of agricultural commodities which can negate concerns regarding biosecurity and food safety, and improve market access. APEDA’s traceability system for horticulture products like ‘GrapeNet’ is a step in the right direction.
Additionally, product differentiation and branding would be key to compete in the international market. India can leverage geographical indication (GI) for exporting agricultural products at a premium. GI signifies that a product originated from a specific geographical location and possesses the reputation and qualities of the place like Darjeeling and Kangra tea. It is expected that the upcoming budget would allocate substantial funds to facilitate this.
Coauthored by Ahamed Ashiq and Paavni Mathur, Centre for WTO Studies