PM Modi's Balancing Policy ;No to North(WTO) for Food security for India's Poor But Subsidies to Indian Corporates
Analysis: Ten Reasons for Saying 'No' to the North Over Trade
- India's decisive stand last week not to adopt the protocol of amendment of the trade facilitation agreement (TFA) unless credible rules were in place for the development issues of the South was met with "astonishment" and "dismay" by trade diplomats from the North, who described New Delhi's as "hostage-taking" and "suicidal".
It obviously came as something of a shock for representatives of Northern interests that any party should have the brass neck to place the interests of its constituents on the negotiating table.
After all, why should such banal issues as food security and poverty get in the way of a trade agenda heavily weighted in favour of the industrialised countries?
New Delhi was demanding nothing more than credible global trade rules to ensure that "development," including the challenges of poverty, in the countries of the South take precedence over the cut-throat mercantile business interests of the transnational corporations in the North
In fact, it was India's firm stand for permanent guarantees for public stockholding programmes for food security that turned this trade agenda upside down at the World Trade Organization (WTO) last week, putting paid to the adoption of the protocol of amendment for implementation of the contested TFA for the time being.
India and the United States Thursday at the WTO to reach agreement on construction of a legally binding decision on a "permanent peace clause" that would further strengthen what was decided for public distribution programmes for food security in developing countries at the ninth ministerial meeting in Bali, Indonesia, last year.
The Bali decision on food security was one of the nine non-binding best endeavour outcomes agreed by trade ministers on agriculture and development.
For industrialised and leading economic tigers in the developing world, the TFA – which would harmonise customs procedures in the developing world on a par with the industrialised countries – is a major mechanism for market access into the developing and poorest countries.
The failure to reach agreement came during a closed-door meeting between India and the United States organised by WTO Director-General Roberto Azevedo in an attempt to break the impasse between the world's two largest democracies.
New Delhi was demanding nothing more than credible global trade rules to ensure that "development," including the challenges of poverty, in the countries of the South take precedence over the cut-throat mercantile business interests of the transnational corporations in the North.
Trade diplomats from several developing and poorest countries in Africa, South America, and Asia say India's "uncompromising" stance will force countries of the North to return to the negotiating table to address the neglected issues in the Bali package concerning agriculture and development.
These issues are at the heart of unfinished business in the Doha Development Agenda (DDA) negotiations, the current round of trade negotiations aimed at further liberalising trade.
"It is important to keep the battle alive and India has ensured that the big boys cannot simply walk away with the trade facilitation agreement (TFA) without addressing the concerns on food security and other major issues," one African official said.
The industrialised countries and some rising economic tigers in the developing world are unhappy that they cannot now take home the TFA without addressing the problem raised by India and other developmental issues in the Doha Development Agenda negotiations.
Many developing and poor countries in Africa and elsewhere were opposed to the TFA but they were "arm-twisted" and "muzzled" by the leading super powers over the last three months. African countries, for example, were forced to change their stand after pressure from the United States, the European Union and other countries.
The TFA was sold on false promises that it would add anywhere up 1 trillion dollars to the world economy. During the Bali meeting last year, the Economist of London, for example, gave two different estimates – 64 billion dollars and 400 billion dollars – as gains from the TFA, while the International Chamber of Commerce gave an astronomical figure of 1 trillion dollars without any rational basis.
"Those predicted gains [from TFA] evaporate when one looks at the assumptions behind them, such as the assumption that all countries in the world would gain the same amount of income from a given increase in exports," said Timothy A. Wise and Jeronim Capaldo, two academics from the Global Environment and Development Institute at the U.S. Tufts University.
At one go, the TFA will provide market access for companies such as Apple, General Electric, Caterpillar, UPS, Pfizer, Samsung, Sony, Ericsson, e-Bay, Hyundai, Huawei and Lenova to multiply their exports to the poorest countries.
It would drive away scarce resources for addressing bread-and-butter issues in the poor countries and direct them towards creating costly trade-related infrastructure for the sake of exporters in the industrialised world.
Here are ten reasons why trade diplomats from the developing and poorest countries say India's stand will bolster their development agenda:
1. India's stand on food security brings agriculture, particularly unfinished business in the DDA negotiations, back to centre-stage.
2. The Doha trade negotiations were to have been concluded by 2005 but remain stalled because a major industrialised country put too many spanners in the negotiating wheel.
3. Major industrialised countries have been cherry-picking issues from the DDA which are of interest to them while giving short shrift to core "developmental" issues.
4. Issues agreed in the Doha negotiations, such as the agreed on August 1, 2004, the Hong Kong of December 2005 and the un-bracketed understandings of the December 2008 , have all been pushed to the back burner because one major country does not want to live up to them.
5. The Fourth Revised Draft Modalities for Agriculture provided an explicit footnote to enable the developing countries to continue with their public stockholding programmes for food security. That footnote was the result of sustained negotiations and a compromise solution among key WTO members such as the United States, the European Union, India, Brazil, Australia and China, but the United States refused to accept the footnote because of opposition from its powerful farm lobbies.
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6. Trade-distorting practices in cotton which are harming producers in Benin, Burkina Faso, Mali and Chad are supposed to be addressed "ambitiously", "expeditiously" and "specifically" by the distorting countries in the North. But cotton is now being swept under carpet because a major industrialised country does not want to address the issue because of its farm programme.
7. Trade facilitation was one of the Doha issues but not the main item of the agenda at all. It was actually dropped from the Doha agenda in Cancun, Mexico, in 2003 and was brought back in 2004 due to pressure from the United States and the European Union. The core issues of the Doha agenda were agriculture, services and developmental flexibilities.
8. A major industrialised country which pocketed several gains during the negotiations refuses to engage in "give-and-take" negotiations based on the above mandates and has turned the Doha Round upside down.
9. Industrialised countries along with some developing countries have formed a coalition of countries willing to pursue what are called "plurilateral" negotiations, only to undermine the DDA negotiations which are multilateral and based on what is called a "single undertaking" (that is, nothing is agreed until everything is agreed). Currently, these countries are negotiating among themselves on services, expansion of information technology products and environmental goods even though these issues are being negotiated in the Doha Round.
10. Delay in the adoption of protocol will pave way for a healthy debate to reinvigorate the multilateral trading system which is being undermined by those who created it in 1948. The developing and poor countries want credible and balanced multilateral trading rules to replace what was agreed over 25 years ago in order to continue their "developmental" programmes with a human face.
Herein lies the crux of the issue – are the major powers of the North prepared to go along with a global trading system that puts the interests of the majority of the world's people before their own interests?
How Much Can We Forgo To India Inc?
To the social subsidy whiners, please check corporate write-offs column
July 2014 The TV anchor asked eagerly of Arun Jaitley whether he would take hard decisions or, in the case of a bad drought, revert to loan waivers and (obviously wasteful) subsidies. The finance minister replied that it depended on the situation as it unfolded but he hoped he wouldn't have to return to such steps. "We hope so too," said the anchor fervently. Which was cute, coming from someone pushing a wish list of the corporate world as hard-hitting journalism. A corporate world which has on average received Rs 7 crore every hour (or Rs 168 crore every day) in write-offs on just direct corporate income tax alone. And that for nine years running. (Longer, but we only have data for those nine years.)
And that's if we look only at corporate income tax. Cast your gaze across write-offs on customs and excise duties and the amount quadruples. The provisional figure written off for the corporate needy and the and the belly-aching better off is Rs 5,72,923 crore. Or Rs 5.32 lakh-crore if you leave out something like personal income tax, which covers a relatively wider group of people.
It's close to three times the amount said to have been lost in the 2G scam. About four times what the oil marketing companies claim to have lost in so-called "under-recoveries" in 2012-13. Almost five times what this year's budget earmarks for the public distribution system. And over 15 times what's been allocated for the MNREGS. It's the biggest giveaway, an unending free lunch that's renewed every year. Gee, it's legal, too. It is government policy. It's in the Union Budget. And it is the largest conceivable transfer of wealth and resources to the wealthy and the corporate world that the media almost never look at.
It's tucked away at the very rear of the budget document. A seemingly innocuous annexure. It's title, though, is disarmingly honest. 'Statement of Revenue Foregone.' (see:http://indiabudget.nic.in/ub2014-15/statrevfor/annex12.pdf) There are those who point out that this should more correctly read 'forgone' and not 'foregone'. The former actually describes the process of relinquishing or abstaining from something. In this case, from collecting taxes that are legitimately due. The budget document says 'revenue foregone'. However, the write-offs are anything but semantic.
So it totalled Rs 5.32 lakh-crore in 2013-14. But budgets only started carrying that annexure a few years ago, and we only have the data from 2005-06 to 2013-14. In those nine years, the corporate karza maafi amounted to Rs 36.5 lakh-crore. That, in case you like the sound of the word, is Rs 36.5 trillion. (Okay, so for the record, these were all UPA years. But let's see next year if the NDA proves even slightly different).
For those stricken by number-crunchitis: that works out, on average, to Rs 1,110 crore every day—for nine years. That's one hell of a free lunch. Sure, there are elements that benefit wider groups. Like personal income tax concessions (which is why they're excluded from the calculations here across those nine years). But do look at some of the big items.
In more than one year since 2005-06, the item hogging the biggest write-offs in customs duty was 'gold, diamonds & jewellery'. Not quite the province of the aam aadmi or aam aurat. In 2013-14, the amount was Rs 48,635 crore. That was more than the amount written-off on machinery. Greater than what was written off on vegetables, fruits, cereals and vegetable oils. In 36 months between 2011-14, duty write-offs on gold, diamonds and jewellery totalled Rs 1.67 lakh crore.
Yet, the concern is over a one-time loan waiver to millions and millions of farmers (which never touched the most needy of them). Or 'food subsidy' worth less than ten rupees a day per person below the poverty line in the hungriest nation on earth. Not over giveaways to the corporate world and the better off that cross 1,100 crore a day on average in nine years. There is hand-wringing over a rural employment guarantee programme that, at its very best, cannot give Rs 15,000 in an entire year to a family of five. Not over corporate karza maafi that works out across those nine years to Rs 1.28 lakh per second.
We could have used that Rs 36.5 trillion a bit differently. You see, with that sum, you could:
Fund the Mahatma Gandhi National Rural Employment Guarantee Scheme for some 105 years, at present levels. That is a hell of a lot more than any agricultural labourer would expect to live. You could, in fact, run the MNREGS on that sum, across the working lives of two generations of such labourers. Current allocation for the scheme is around Rs 34,000 crore.
Fund PDS for 31 years (current allocation Rs 1,15,000 crore).
By the way, if these revenues had been realised, around 30 per cent of their value would have devolved to the states. So their fiscal health is affected by the Centre's massive corporate karza maafi. Even just the amount foregone in 2013-14 can fund the rural jobs scheme for three decades. Or the PDS for four-and-a-half years.
Here's a media full of market televangelists who preach every night about the need to trim subsidies. Why not start with those above? Well, because so many media outlets are part of corporations locked in the feeding frenzy at the subsidy trough. But to return briefly to the semantics of loot and grab (versus crumbs off the table). Give the poor and hungry assistance worth less than Rs 10 a day to help them have just a tad more food—that's a subsidy. Give trillions of rupees to the rich—that's an 'incentive' or at best a 'deduction'. Even the otherwise frank 'Statement of Revenue Foregone' titles many giveaways as 'incentive/deduction' or, at best 'concessions'.
It's not as if governments or officialdom are unaware of how regressive all this is. The 2009-10 budget said in so many words: "The amount of revenue foregone continues to increase year after year. As a percentage of aggregate tax collection, revenue foregone remains high and shows an increasing trend as far as corporate income tax is considered for the financial year 2008-09. In case of indirect taxes, the trend shows a significant increase for the financial years 2009-10 due to a reduction in customs and excise duties. Therefore, to reverse this trend, an expansion in tax base is called for."
I wrote about this at the time. And the language and tone changed from the next year. No more calls for reversal. I wonder why? Yet, the budget still notes a rising trend in plutocrat plunder. Even this year, it notes: "The total revenue foregone from central taxes is showing an upward trend." Now remember, the same class of 'subsidy beneficiaries' loot public sector banks of countless thousands of crores. By the time this piece is out, the All-India Bank Employees Association will have revealed the names of wanton defaulters who currently owe the banks tens of thousands of crores. These are names governments have refused to reveal even to Parliament on the plea of the RBI Act and banking secrecy.
Who says industry has been doing badly? The amounts recorded as written-off in the Statement of Revenue Foregone for 2013-14 are 132 per cent higher than they were in 2005-06. (Even with the budget document gently, sometimes silently, clucking its tongue at the trend). Corporate karza maafi is a growth industry. And an efficient one.
(Magsaysay Award-winner Palagummi Sainath is the country's foremost chronicler of the travails of farmers. A shorter version of this piece appeared on his blog, www.psainath.org)
In an earlier version of this article, because of a typo, the years 2005-06 to 2013-14 were referred to as 'NDA years'. This was corrected online to 'UPA years.'-- Sunday, July 20, 2014.