India, China join hands to demand an end to farmer subsidies in wealthy nations

• The two countries have pointed out that the $160 billion-worth of farmer subsidies in developed markets distort the global trade order.
  
• India and China recommend that these countries halve the difference between the level of support they provide and the maximum level of support allowed by WTO by 2019.
  
• In July last year, India and China said that rich nations provide subsidies of between 50%-100% of the total value of production of commodities like wool, cotton and tobacco.
  

After years of receiving flak for their farmer support schemes, New Delhi and Beijing have jointly called for an end to farmer subsidy schemes in developed markets like the United States and European Union (EU).

The two countries are arguing that the $160 billion-worth of subsidies to farmers in developed nations like the US, EU and Canada for commodities like cotton and tobacco are a contravention of global trade rules because they distort the market.

Specifically, India and China recommend that these countries take steps to halve the difference between the level of support they provide and the maximum level of support allowed by WTO. The latter measure, referred to as the Aggregate Measurement of Support (AMS), caps a subsidy at 10% of the total value of production for a developing country, and at 5% for a developed nation.

India and China don’t expect change to happen overnight and without any resistance. They have reportedly proposed a series of steps that these countries can take to gradually reduce their support schemes by 2019.

As mentioned before, farmer subsidies are an important point of contention between India and the US, with the latter expressing disapproval at the former’s MSP schemes for wheat and rice.

The WTO divides agricultural subsidies into three categories - green box, comprising non-trade distorting schemes; blue box, comprising subsidies that are slightly trade-distorting; and the AMS or amber box, those subsidies that are significantly trade-distorting and need to be phased out.

Up until now, because of the way WTO rules are drawn up, most of the support given by rich nations to their farmers fall under the “green box”, since this involves direct income support. Meanwhile, schemes used by developing countries like minimum support schemes come under the “amber box”.

In a proposal submitted in July last year, India and China pointed out that the support rich nations provide to their farmers goes up to between 50%-100% of the total value of production of some commodities such as butter, rice, wool, cotton, tobacco, olive oil and tomatoes. The paper received the support of around one hundred countries.