Hardly noticed by the media in Pakistan, the consensus reached in the Nairobi Ministerial Conference of the 162-member World Trade Organisation (WTO) to abolish all agricultural export subsidies was a major development for the global economy.
The Ministerial, it may be mentioned, is the highest decision-making body of the WTO and the abolition of export subsidies was being discussed since WTO’s Hong Kong Ministerial in 2005 where it was proposed to abolish export subsidies in developed countries in five years and in developing nations in eight years.
Members at the Nairobi Ministerial have, however, agreed to end the export subsidies immediately in rich countries and in three years in developing countries. As per the agreement, the developing nations having entitlement to give agriculture subsidies under the Uruguay Round would abolish such subsidies by 2018.
However, these countries can support agriculture products’ exports under Article 9.4 till 2023. The decision in Nairobi will also discipline export credit and finance being provided by developed countries to their corporate farmers resulting in removal of many price distortions unfavourable to developing economies.
Surprising, however, was the India’s failure to achieve its objectives at the Conference which included amending the Agreement on Agriculture (AoA) making public stockholding permanent, having special law for safeguarding measures to protect domestic products against international competition and not to allow reduction of its entitlement of Article 9.4 of AoA which has now been reduced from 2028 to 2023.
On the other hand, considering food needs, market failure and national calamity resulting in economic hardships, Pakistan along with many developing countries will have a special provision to support agriculture exports until 2030.
The consensus reached in Nairobi is undoubtedly a win-win situation for all the countries in the world, at least in theoretical terms and on long-term basis. Although, the provision of agricultural export subsidies was supported by many countries due to its impact on export expansion and providing basic necessities of life to the poor and ordinary households at cheaper rates, yet such an approach was inherently flawed because it always leads to poor allocation of scarce resources and failed to provide a level-playing field to various countries.
The abolition of export subsidies would result to some extent in optimum allocation of resources, higher growth and fairer world trade. The market determined price signals would ultimately provide the basis for reaping the benefits of comparative advantage in production. It seems that Pakistan’s WTO delegation led by Commerce Minister Khurram Dastgir was able to make a convincing case to defend the country’s interests. While developed countries were required to abolish export subsidies immediately, Pakistan got seven years more than its competitor developing countries to remove export subsidies to agriculture sector.
For instance, while Indian export subsidies will end in 2023, which is one of the main competitors of Pakistan in international market, particularly in rice and sugar, Pakistan’s right to give export subsidies will continue up to 2030. This could improve prospects for Pakistani farmers and agriculture exports. Pakistan was also reportedly successful in resisting the move by large developing countries to continue subsidising export of public stocks amassed in the name of food security.
Full marks are due to the efforts of Pakistani delegation but the new measures and provisions could only benefit the country’s agriculture sector and exports if the productivity of agriculture sector could be maximised by adequate provision of energy, enough quantity of irrigation water and the upgrading and efficiency of agricultural extension services to bring the latest technology, knowledge and inputs at the doorsteps of farmers’ houses.
Source: Business Recorder