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As midterms approach, Republicans step up rhetoric on India’s trade practices
India has consistently maintained that this position is based on both an erroneous reading of the nature and intent of India’s price support mechanisms and underplays the scale of America’s support to farmers.
As elections for the House of Representatives loom, a group of Republican Congressional representatives from America’s agricultural belt or with agricultural interests have stepped up the rhetoric against India’s agricultural subsidies — alleging that these distort global trade and put American commodity producers at a disadvantage — and asked the Joe Biden administration to take up the issue against India at the World Trade Organisation (WTO).
India has consistently maintained that this position is based on both an erroneous reading of the nature and intent of India’s price support mechanisms and underplays the scale of America’s support to farmers.
On Friday, in a letter to Biden, 12 representatives in the US Congress alleged that India’s practices are “dangerously trade-distorting on a global scale and impact US farmers and ranchers”. They alleged that while WTO rules allow governments to subsidise up to 10% of the value of production of a particular commodity and export that commodity without fault, India had “abused WTO rules and subsidised more than half of the value of production for rice and wheat”.
The representatives went on to say that India did not play by the rules, a dispute settlement case against India would be widely welcomed, and added, “We urge the Administration to take our requested action through filing a formal request for consultations with India at the WTO and to continue monitoring other WTO member’s domestic support programs that undermine fair trade practices.”
India’s agricultural subsidies have been a long-standing issue in trade negotiations with the US. As India sees it, the US perspective glosses over the fact that, on a per capita basis, American support to farmers far exceeds that of Indian support. The letter also ignores India’s developmental challenges and the fact that these price support mechanisms are meant to take care of its vulnerable population, a duty that only intensified during the pandemic.
People familiar with trade issues between the two countries believe that the letter is closely tied with American domestic politics, and suggest that as the US heads towards elections, the Congressional representatives are stepping up the pressure on the administration as a signal of support to their base of relatively well-to-do farmers, especially as many of these leaders face competitive elections.
Among the signatories are Rick Crawford, Bruce Westerman and French Hill from Arkansas; Tracey Mann and Jake LaTurner from Kansas; Julia Letlow and Clay Higgins from Louisiana; Michael Guest from Mississippi; Vicky Hartzler from Missouri; Virginia Foxx from North Carolina; and David Valadao and Doug LaMalfa from California.
All 12 are Republicans. Ten of them represent strongly Republican states where agriculture is heavily supported. And the two California representatives on the list are closely linked to agricultural lobbies, with Valadao representing dairy interests and LaMalfa a fourth-generation rice farmer.
Experts also point out that the US position is also based on a methodological flaw. Biswajit Dhar, one of India’s leading trade experts and professor at Jawaharlal Nehru University, said that successive American administrations had “unfairly targeted India’s agricultural subsidies using the provisions of the WTO Agreement on Agriculture (AoA)”.
Dhar said, “Subsidies, according to the AoA, are calculated by comparing international prices of agricultural commodities prevailing in 1986-88 with their current administrative prices announced by the government. This is an entirely erroneous methodology, for it uses a set of prices existing more than three decades back as the benchmark against which Government of India’s administered prices is compared for calculating subsidies.”
He said that India had consistently argued in the WTO that for this methodology to make sound economic sense, it needed to be revised by either using international prices of a relatively recent period and/or to account for inflation. “The US and other advanced countries have refused to do so, it seems, for putting India under the scanner”.
In January this year, 28 representatives of Congress had written to US Trade Representative, Katherine Tai, alleging that American commodity producers were operating at a clear disadvantage compared to their competitors, primarily from India. “We ask that you swiftly take action to reverse the trend of non-compliance by India with WTO domestic support requirements by initiating a dispute settlement case.” They had called China and India “repeat offenders”.
Indian diplomats, it is learnt, had quietly reached out to all the representatives and put forward India’s case. The fact that the latest letter has only 12 signatories is seen as an outcome of India’s diplomatic offensive in conveying its point of view in American political circles.
