Costly unfair advantage
Apr 07, 2022
NEW DELHI, INDIA – Last week, the Government of India submitted their 2020/21 domestic support notifications to the World Trade Organization (WTO), covering their producer subsidy payments for rice, pulses, oilseeds, and other grains. India’s notification claims the government provided $6.9 billion in support to rice farmers in the marketing year, up from a reported $6.32 billion the prior marketing year.
Under WTO rules, members can provide domestic support on a crop-specific basis so long as it does not exceed 10 percent of the commodity’s total value. India valued its domestic rice production at $45.56 billion, meaning they are admittedly subsidizing 15.14 percent of their total value of production.
India has now exceeded its 10 percent de minimis cap for three years in a row, claiming exemption from WTO rules under the WTO’s Bali Decision’s ‘peace clause’ for developing countries. The Bali Decision allows for developing countries to exceed their de minimis limits for public stockholding as long as the programs do not distort trade and they meet other transparency criteria.
“Unfortunately, we very much know that India is indeed distorting trade through release of long grain from their government stocks at prices below the procurement price and that rice is leaking into export channels bound for markets across the globe,” said Peter Bachmann, USA Rice vice president for international trade policy. “That low-priced Indian rice has forced rice exporters across southeast Asia to provide complimentary subsidies to stay competitive in the market, suppressing world rice prices and completely disadvantaging Western Hemisphere rice exporters like the United States who operate within their WTO commitments.”
In 2018, the U.S. government demonstrated that India is out of compliance with its commitments in a counter-notification to the WTO of India’s domestic supports for rice and wheat. The U.S. demonstrated that India breached its de minimis limit of 10 percent for rice by providing subsidies exceeding 74 percent to 84 percent of their total value of rice production between 2010/11 and 2013/14. India has continued to operate those programs and, in some cases, expanded programs since that counter-notification was filed.
India announced last fall that they would be providing a record setting level of fertilizer subsidies this year, exceeding $20 billion, to shield producers from skyrocketing input costs and as a result, maintain artificially low export prices.
“It is inexcusable that India continues to toss aside WTO rules, incorrectly calculate their subsidy levels, and distort global rice prices,” said Louisiana rice miller and USA Rice Chair Bobby Hanks. “We hope the U.S. government will intervene and lead the charge to confront India at the WTO as soon as possible. The current market situation, driven by India, is putting the future of the U.S. rice industry in jeopardy.”
In March, India was criticized by the U.S. through the WTO’s Committee on Agriculture for lack of transparency around domestic support programs for rice, wheat, and other commodities. The U.S. was joined by Australia, Brazil, Canada, European Union, Japan, Paraguay, Thailand, and Uruguay in voicing concerns to India.