An Ecological Angle to the WTO Talks

India’s ‘obstinate’ stand at the Doha talks is a well known fact. Western media is making such a fuss with this and attacking particularly the food-subsidy borne by India that, at times, Indian citizens who work with non-Indians feel a bit embarrassed or try to defend India just on the basis of a kind of patriotism, taking it a priori that India’s stand is good for Indian economy. Nevertheless,  whatever may be the merit or demerit of trade policy or trade negotiations from the economic viewpoint, there is a dearth of understanding of ecological fallouts of trade policies in public discourse.

In many commentaries on WTO deadlock we find that “current WTO rules limit subsidies to farmers in developing countries to 10 percent of the total value of agricultural produce”. This begets a question: who said these rules are OK, sacrosanct and unchangeable? Why not put an amount cap per hectare in $-PPP instead? Moreover, that price is absurdly fixed as 1986-1989 average price! The IOSR Journal of Agriculture and Veterinary Science in one of its recent issues had a paper which gave an exemplary exposure regarding total subsidies farmers get in different countries: the Euro farmers got $82 per hectare, US and Japanese farmers got in between $32-35 per hectare, Chinese farmers got $30 for each hectare whereas in India farmers got only $14 per hectare (Salunkhe and Deshmush, 2012).

Trade-negotiators of India and developing countries can also argue that subsidies of more than $30/Ha (in 2011 $-PPP) are trade-distorting and hence should not be tolerated. Plus, the ‘price’ of produce in 1 Ha of US farm is artificially held high, so that the subsidy appears less in relative term. This is also ‘trade distorting’.  Then, what is distorting to one may be acceptable to others. No one can enforce such ‘standards’. Over and above this subsidy, the US government pays farmers by crop-insurance subsidies. That is a hefty amount, almost $14 billion in 2012, which is seven times that amount spent in 2000! More than 10,000 farms in USA got $100,000 – $1,000,000 each in federal crop insurance subsidies and 26 farms received more than $1 million. The bottom 80 percent of farms numbering 389,494 each received $5,000 on an average that year. Can the USA tell us how much Indian farms get in the form of subsidies?

If we leave aside the question that whether direct and indirect subsidies for farming and farmers distort trade, we can safely say that subsidies for agriculture à la mode or agriculture as it is done nowadays will contribute towards distorting nature by monoculture, depletion of ground water and its nitrate pollution, pesticide and fertiliser leaching to streams and other surface water bodies, a reduction in number of beneficial insects, diminution of soil health and so on so forth. Anyway, let us get back to trade.

Trade policies and political considerations together may affect other policy forming. For example, a US government sponsored publication once mentioned: High energy prices, increasing energy imports, concerns about petroleum supplies particularly after the Gulf Wars, and greater recognition of the environmental consequences of fossil fuels pushed for transportation biofuel. Out of these four reasons the first three were obviously not related to environmental-concerns. Rather the bio-fuel development policy was related to economic, trade and political considerations. Then an environmental aspect was added to paint it greenish. However, the overall result was ‘ungreen’.

Formerly agricultural lands were meant to feed humans and also domestic animals. Now, agricultural land is feeding cars! What about the old ‘beneficiaries’ of agriculture? Two options remained: eat less or eat up non-agricultural lands under forest or grass. Around 2005-06, when biofuel scientists and engineers were busy seeing (and showing) whether sugarcane or corn or soya was better, some environmental economists were noting that quite an amount of forest land and savannah were getting converted to agricultural land. To counter this observation the biofuel and government lobbies did some researching and they declared that no, they were rather increasing land utilisation and thus meeting the increased yield without eating up forests or savannah.

But their study revealed two interesting loopholes: (1) They had to admit that indeed ‘small’ amount of land has to come from forests, in case of Brazil it is only 15% of the extra land that will be needed for biofuel, and that small forest area was only 750 square km. They want us to believe their story in spite of converting 120,000 sq km of non-agricultural land to agriculture in Brazil in this biofuel era. (2) They claimed of increasing cropping intensity – that is how many times a year a certain piece of land is harvested – and their cropping intensity figures showed how US, EU and other big economies actually underutilise their arable land: In USA their cropping intensity was only 0.82 – much less than half of that in Punjab, Haryana or West Bengal or, say, of China! They are telling the world to increase cropping intensity and make agricultural-land exhausted while they keep their land idler to keep grain price high.

Now, what may be the ecological cost of not having Right to Food and agricultural subsidies in India? We know that there are a lot of pilferage and inefficiency in India’s food distribution and acquisition systems. But, after all, at least a fraction of it reaches a part of the target population. The effect is not insignificant. To cite two quite recent studies: # A recent Harvard experiment with Chennai cycle-rickshaw drivers showed that when individuals were provided with an additional 700 calories per day, labour supply and earnings increased approximately 10 percent within five weeks. Just imagine how malnutrition is hampering labour contributing capacity of the poor. # Professors Himanshu and Abhijit Sen showed that compared to the counterfactual of no PDS, PDS increased per capita calorie intake of the population as a whole by about 6% in 2009-10, up from a corresponding contribution of about 3.5% in 2004-05. The percentage would be higher for poorer sections whose food baskets are more dependent on PDS like subsidised programmes. Those are more important as undernourishment is increasing in India.

Therefore, such government schemes cannot be written off just due to obstinacy of US & EU countries. Malnutrition makes people susceptible to diseases. As much government food supply schemes contribute to nutrition that much those also help in fighting spread of diseases and thus keep health-bill of the country at a comparatively reduced level. If India doesn’t have scheme for an assured minimum level of nutrition for all citizens, India’s environment, as much as the biosphere is concerned, will be more vulnerable. According to FAO, poverty and malnutrition also act towards injudicious resource use and increased stress on scarce resources. Then, a undernourished citizen will have less power in contributing labour which will reduce his own earning and reduce productivity – and this two-pronged flaw, with some multiplier effect, may affect and distort the market and society further.

India’s expenditure in this field is not high. This year’s budget of the NDA government allotted some 1.15 trillion for it, which is only 0.35 trillion more than previous year’s figure. ‘Trillion’ sounds big, but if divided by our population, 1.2 billion, our per capita food subsidy comes to a paltry Rs 2.60 per person per day! India’s defence spending is twice that amount! If we add fertiliser subsidy to it, then per person per day food+agro subsidy will be Rs 4 at most. So, Indian government should rather increase the subsidy to shift Indian agriculture to organic and ecological agriculture.

We may look at defence budgets of some countries. Defence budget of the USA is more than defence budgets of China, Russia, India, Japan, UK, Germany, France, Saudi Arabia all put together! Defence expenditure in the USA is more than $4000 per person per year. Surely this defence budget is meant for safeguarding US businesses, trade, profit, properties and US citizens. But it is also trade distorting as it pulls resources to unproductive, destructive and wasteful uses. It also places excess requisitions to selected defence companies who otherwise would not have got such high valued orders.  Additionally, promoting unnecessary use of natural resources, it put pressure on already strained resource bases, it supplies a good part of greenhouse gas emission from USA and US forces overseas, and it supplies the world with dangerous, poisonous and radioactive items.

So, India’s Doha stance has nothing to be embarrassed of. Rather, the US-EU shrewd move to divide the G-77 in this issue must be addressed properly.

published in Business Economics, 15-31 Sept, 2014

the author is a chemical engineer and environmentalist