People's Democracy

India Yields to Pressure at Bali

Prabhat Patnaik

THE Indian media for which the WTO meeting at Bali was of no more than passing interest made out on December 7 that India had achieved a great victory at that meeting. Even The Hindu’s headline read: “India’s Stand Prevails at Bali”. The media were merely echoing the view of the Indian government whose commerce minister even took pride in the fact that it was the Indian draft that was put up for endorsement to the member countries. The truth regrettably is exactly the opposite.

MATTER OF

REGRET

India accepted, against its own earlier stated stand, the so-called “Peace Clause” that gave it just four years during which no objections would be raised against its food security programme and negotiations would take place on the issue. After these four years, whatever is agreed to in the interim will come into effect. Such agreement, as things stand, is likely to relate to details of WTO rules and what should constitute violation of such rules. But the basic principled position which India had been insisting on all the time in the run up to Bali, namely that the right of a nation to provide food security to its people should not become subject to WTO restrictions at all, has been given up. The fact that this abandonment of a basic principle has been enshrined in a draft prepared by India itself is a matter not of pride and celebration but of regret.

What is more, while India and a few other countries have been accommodated under the “Peace Clause”, other poor countries that may now embark on food security measures, will not get any similar accommodation. The “Peace Clause” itself in other words has been invoked only to cope with the present exceptional situation in which the WTO finds itself, namely that some countries have introduced food security measures, which others, notably the advanced capitalist countries, are objecting to as being “trade distorting”.

India therefore has not even succeeded in protecting the right to introduce food security, where it has not already been introduced, of any of the G-33 countries whom it was leading at Bali. The Indian government has yielded to pressure and lost an excellent opportunity to set right an unequal arrangement on the people of the third world.

The opportunity was excellent because the WTO negotiations had made no progress since the Doha round, even though nine ministerial meetings had been held. This stalemate, instead of being a cause for concern, should have given the developing countries greater bargaining power. True, when multilateral negotiations make little headway, the advanced countries start arm-twisting the third world through bilateral or regional arrangements: they do not in short get thwarted by such “minor obstacles” as the absence of an agreement at a ministerial meeting. Nonetheless, a stalemate at a ministerial meeting can help in stiffening third world resistance and put new life into the move to undo the unequal arrangement embodied in the WTO. Let us briefly see why this arrangement is unequal. (See also People’s Democracy, December 1, 2013).

Prior to the World Trade Organisation (WTO) there was an arrangement called the General Agreement on Tariffs and Trade (GATT) which provided for negotiations between countries to fix their tariff rates, without tying their hands in any way. The WTO however invoked, and got the world to accept, a philosophy, namely that free trade is a desirable state of affairs. And herein lay its specificity.

This is the philosophy that had been invoked under colonialism. The colonising countries, having earlier protected themselves  from cheaper third world imports and thereby launched their own industrial revolutions, had gone all over the world in search of markets, and had used this philosophy as a battering ram to break down all barriers to their (now cheaper) goods. They had used it in other words to cause the destruction of craft production (“deindustrialisation”) in the third world, after having rejected it when it had suited them.

The theoretical foundation for free trade is totally vacuous, so much so that John Maynard Keynes, the most outstanding modern-day bourgeois economist, had remarked in 1933 in The Yale Review: “I sympathize, therefore, with those who would minimise, rather than with those who would maximise, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel – these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national” (emphasis added).

ABSURD

PHILOSOPHY

The argument for free trade assumes that all resources are always fully employed through the spontaneous functioning of capitalist markets (which entails inter alia an acceptance of Say’s Law, rejected by both Marx and Keynes, that there can never be insufficient aggregate demand in a capitalist economy). It assumes in other words that “deindustrialisation” as in colonial India which caused mass impoverishment is an impossibility. It also assumes that any intervention in income distribution is better done through direct cash transfers rather than through interference with the “free market price”, which in turn presumes that such cash transfers have no effect on the “free market” price. This absurd philosophy of free trade was imposed upon the world through the WTO; and that was the specific hallmark of the WTO as opposed to the earlier post-war international trade arrangement.

It is an unequal arrangement because under it the advanced capitalist economies, both the US and the EU, can give subsidies to their agriculturists amounting to as much as half the GDP originating in agriculture, with no questions asked (since these are cash transfers); but, if a country like India provides subsidies to its agriculturists in excess of 10 percent of the GDP originating in agriculture, then that is not permissible (since such subsidies are given in the form of price support, even though in a country with more than 12 crore  agriculture-dependent households there can be no other way of giving subsidies).

But even this is not all. The subsidy is calculated by comparing the actual price with an “international reference price” which is thoroughly antiquated and has not been changed since the 1980s. The reference price for rice for instance is a meagre 264 rupees per tonne, so that the CACP-recommended minimum support price of Rs 1310 per tonne for common-grade paddy for 2013-14 appears to involve Rs 1046 of subsidy per tonne. But in view of the enormous rise in costs of production since the 1980s, the actual subsidy is a trivial amount.

Even this unequal treatment of different nations however does not constitute the main issue, which relates to two other points: first, a nation must have absolute freedom to provide food security to its people, unhindered by any trade arrangement; and second, a nation’s parliament must be supreme in making laws, which no international body must have the capacity to override.

On this second point of course it may seem invidious to blame the WTO. India is represented at WTO meetings by its government and it is for the government to ensure that any overriding of the supremacy of the parliament by an international body is prevented. The fact that the government of India agrees to let the food security arrangement, which has been legislated by parliament, become subject to scrutiny by the WTO, is the fault of the government and not of the WTO. It is symptomatic of the Manmohan Singh government’s obeisance to imperialism.

But on the first of these points the WTO arrangement itself must be faulted (though the Indian government cannot escape blame for accepting such a flawed arrangement). The very idea of food being subject to free trade, instead of being a matter of national self-sufficiency, is wrong, since it exposes countries to coercion by imperialism. The US administration had used precisely such coercion in the sixties, which was an important reason for India hastening with the launch of the so-called Green Revolution.

Food self-sufficiency however is necessary for an additional reason as well, quite apart from the issue of imperialist coercion. To insist that countries should produce only such crops where they have a “comparative advantage”, ie, they should in effect produce cash crops which cannot be grown in the advanced countries and import foodgrains from them in lieu of the export of such cash crops, is flawed for two obvious reasons: one, in the event of a collapse of cash crop prices relative to foodgrains, the country pursuing such a strategy would face a famine. It would not have enough foreign exchange to import food-grains, as happened in Africa some time ago when heart-rending pictures of famished African children were splashed across the world’s media. Two, even if the country has enough foreign exchange to import food, cash crop production could well entail reduced employment and hence reduced purchasing power in the hands of a segment of the agriculture-dependent population which again exposes it to food shortage and famine-like conditions.

For these reasons Keynes’ homily “let goods be home-spun” is particularly apposite in the case of food-grains: “let food be home-produced”. The flawed philosophy of free trade underlying the WTO is particularly flawed when applied to food-grains. Food security therefore must mean not only the provision of adequate food to everyone, but also the production of adequate food for everyone. At any rate, countries wishing to enlarge domestic food production, through whatever subsidies they choose to give, must not be hindered by the free trade philosophy of the WTO.

Food security therefore must above all be completely outside the purview of the WTO. The Indian government has lost the opportunity to press this point at Bali; but even if the present government has failed to do so, this point must be pressed by India, and by the third world collectively, in the future.