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Last Updated : Apr 16, 2019 08:15 PM IST | Source: Moneycontrol.com

US opposition to India's 'developing country' tag unlikely to hold water

US has claimed that several members that have moved up on economic and social ladders are still enjoying preferential trade treatments

Kamalika Ghosh @GhoshKamalika

USA approaching the World Trade Organisation (WTO) to seek a review of the 'developing country' status for countries like India and China is unlikely to get accepted as it is very difficult to get rid of special treatments offered to developing nations in agriculture – the sector that the US is aiming for.

The US has claimed that several members, including China and India, that have moved up fast on economic and social ladders since the formation of the WTO in 1995 are still enjoying special and preferential trade treatments by "self-designating" themselves as developing nations.

The rise of China has led to the US and the European countries to have a less liberal attitude towards developing countries than what they had in the past. "In such a situation, the principle of self-election - every country decides for itself whether it is a developing country -  will be contested more and more in future by developed countries," said Anwarul Hoda, professor at the Indian Council for Research on International Economic Relations (ICRIER).

India, China and some other countries have refuted USA's claims in a separate paper presented at the WTO. These countries have stated that in various key indicators, ranging from per capita income and human development indices to agriculture, the gap between them and the rich nations is too stark to miss.

In any debate on development, per capita income is the most crucial indicator of progress. In 2017, the per capita gross national income (as per Atlas method) of India was just $1,800, way below $54,530 in Singapore, $28,380 in South Korea and $8,690 in China, according to the World Bank data.

"As far as exports subsidies were concerned, that was a big concession given to a number of developing countries. They were allowed to give export subsidies on manufactured goods which are banned for developed countries. But a number of developing countries, including India, were given the privilege to continue with export subsidies on manufactured goods. Export subsidies, subsidies contingent on exports, were banned by the WTO as a general rule but these developing countries were given the privilege of continuing with it," said Hoda.

However, even for such subsidies, there was a provision of graduation. If the developing countries achieved a certain proportion of world exports in individual products, they would not be entitled to subsidise that specific product. Apart from this, if the developing country concerned was benefitting from that concession had acquired a share of 3.25% of all products, then it has to be graduated out of the concession.

As part of special and differential treatment, developing countries get longer time frames to implement commitments and greater flexibilities in adopting measures to improve their presence in global markets. Developing countries can provide considerably larger input subsidies and minimum price support (they can offer product-specific farm subsidies up to 10 percent of the value of production, against 5 percent for developed countries, although the latter enjoy other flexibilities). Developing countries can also continue to provide indirect export subsidies until 2023, five years after the deadline for elimination of all forms of export subsidies.

"It would be extremely iniquitous if India is to be treated on a par with the US (developed countries) at the WTO, given that the per capita income of the US is over 30 times higher than India's," said Abhijit Das, head of the Centre for WTO Studies at the Indian Institute of Foreign Trade.

USA is primarily aiming for concessions enjoyed by developing countries in agriculture since developing countries are generally given certain concessions there.

"In agriculture, it is not just their status as developing country that counts. What counts is that in developed countries like US, agriculture is run commercially. In India and even in China and many other countries, it provides livelihood to millions. So there has to be a special treatment. It is very difficult to think of getting rid of that," said Hoda.

USA's domestic support per farmer was $60,586 in 2016, 267 times of India's ($227). Beijing's support ($863) was almost four times of New Delhi’s. Massive subsidies have led to huge competitive advantage of farm products of developed countries in the global market. While agriculture accounts for less than 2 percent of the total employment in the US, it is as much as 44 percent in India and 20 percent in China, suggesting much lower level of industrialisation in these countries.
First Published on Apr 16, 2019 08:15 pm
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