“Kamal Nath's Walkout A Cheap Drama”

  S P Shukla, former Commerce Secretary and India's representative at GATT talks, is an ardent campaigner against imperialist globalisation. In this interview with Liberation, he talks about whether the Prime Minister's relief package is likely to alleviate cotton farmers' suicides, and the implications of Commerce Minister Kamal Nath's walkout of the WTO talks at Geneva for Indian agriculture and peasantry.

Lib: I believe you recently attended a gathering of cotton farmers in the suicide-belt in Maharashtra . What would you say are the central concerns of distressed farmers? Does the PM's relief package address these concerns?

SPS: On July 1, the same day as the PM's visit to Vidarbha, I attended a State Level Conference of cotton-producing farmers at Akola , Maharashtra . Farmers' representatives from each district of Maharashtra attended the Conference. Representatives form Marathwada and Dakshin Maharashtra too attended the Conference but a large contingent came from Vidarbha.

N D Patil, a leader of the PWP (Peasant and Workers Party) was one of the main organisers of this Conference. The farmers were disillusioned with the kind of initiatives that Sharad Pawar had been taking – as the Agriculture Minister, and also as leader of the Maratha peasantry, as he styles himself.

The two central slogans they chose – as the point around which peasantry could be rallied and educated – were ‘Ban Imports' and ‘Assure Minimum Remunerative Price'. Interestingly, farmers at the Conference, unanimously and with a clear understanding, declared that they were not interested in loans – even loans at zero per cent interest! The real problem lies with the price – the current production cost is Rs. 2400-2500 a bale; farmers are getting not more than Rs. 1700 a bale; and it is bound to result in the kind of distress leading to suicides we are witnessing. In such a situation, even a zero interest loan is no good to them; farmers felt such loans to be completely irrelevant.

The Government is talking of big irrigation schemes – even these, the farmers felt, were irrelevant, since all these irrigation schemes, even if implemented within the next 6-10 years, would cover not more than 16% of the farmers – 84% of the farmers would still remain outside the reach of the irrigation areas. Farmers said, “All we need is a well in our fields, with co-operatives and other small schemes, we can manage. Big irrigation schemes are not a priority for us.” So, in one voice, they all agreed that the key demand, which must be met to address the question of suicides by cotton farmers, was to stop imports and ensure a minimum remunerative price.

The carryover stock of cotton bales, as on April 1 this year, is the highest ever in history – 74 lakh bales. Obviously, no one is interested in buying cotton from the farmers. And you also have continuing imports of cotton at a very cheap price – at 10% duty. Now this has made the problem totally unsolvable. Obviously the farmers' central demand was to stop imports. And for that, as we explained at the rally, it is not enough to say, raise the tariffs to 60%.

You see, there is a possibility that the peasant struggle will degenerate into a struggle between western Maharashtra and Vidarbha: the sugarcane cultivators versus the cotton cultivators. That's the easiest way to pit them against each other, and it has a long history. Sharad Pawar being a leader of western Maharashtra (coming from Satara, with the sugar lobby behind him), it was felt that he is protecting sugar every time – and neglecting Vidarbha. At the rally, it was pointed out that this was a superficial way of looking at the problem: the real struggle was one of policies. Today, it is cotton, tomorrow, it is wheat – and next, it may well be sugar! So we need to look at things in a policy perspective and come to conclusions that are valid for the peasantry as a whole.

So it emerged in the course of discussions that tariff for protection may not be enough – we must insist on the right to impose quantitative restrictions. However, the slogan for the movement is ‘Stop Imports' (how it is done is a matter of detail); and ‘Give us Remunerative Price'.

The Prime Minister, who was on that very day having his press conference, was asked what he had to say on the question of minimum remunerative price. He said, “We can't do that; the monopoly procurement scheme has failed, and we can't start it again. Also, we can't start it for one State; it's a problem for the whole country.” Secondly, when asked about a ban on imports, he replied with some hesitation that it can't be done immediately, but he would appoint a Committee.

Lib: I'm sure many would like to see the peasantry move from suicides towards united struggles. What plans do the Maharashtra cotton growers have to join hands with the movements in other parts of the country?

SPS: The Conference resolved that on 8 August, there will be a dharna at all the district collectorates in Maharashtra , culminating possibly in a morcha at the State Assembly at the capital of Mumbai later in August. They visualise a broad movemental front – cutting across the political spectrum (at the moment the entire Left spectrum is there, also academicians, some radical elements who have broken away from the Shetkari Sangathana). They are also seeking ways of linking up with peasant groups in Andhra Pradesh, Uttar Pradesh – with these movements that are coming up all over.

Lib: Minister Kamal Nath walked out of the WTO talks at Geneva , claiming that his priority was to safeguard the interests of the Indian farmers. What is your opinion?

SPS: I think Kamal Nath's walkout is a cheap drama. The talks ended in that stalemate – why? The basic reason was that the US and EU did not come to an understanding on agriculture; what the developing countries do does not influence their behaviour. This has happened in 1988, then in 1990 in Brussels .

Currently the EU is not satisfied with two things. One is the offer of reduction in domestic support – the Amber Box support – which the US has offered to bring down by about 23 billion dollars. Now, the first thing we've got to understand about all this talk about reported subsidisation in various boxes is that it is just the tip of the iceberg: there's a whole lot that is not reported. The total subsidisation in America is much, much bigger than what they report. And in the last two years they have not reported either, so one does not know how much they have increased. But even according to their own figures, their offer is something like 23 billion dollars. The current bound rate is something like 27-29 billion dollars; they want to bring it down to 23. Now, the actual level of Amber Box support is 19 billion dollars, so it will still mean a water of four billion dollars over and above what they are giving. So the EU's point is, they must come down to something like 15 to 17 billion dollars.

The US is not prepared to do that. And the EU is also worried about their inclusion of counter cyclical payments in the Blue Box, which had been done in the July Framework itself and clinched at Hong Kong . So they are worried because they know that this will go on increasing, which will mean again unfair competition for the EU exports in the world market. Therefore they are holding back, and demanding a better offer. The Americans are saying it's a substantial offer, and EU is not doing enough by way of reduction of tariffs of market access to Europe , and also the non-tariff barriers that they have – on GM foods and other things. They say that the EU has kept a big loophole in their offer in the name of sensitive products – a whole range of products are excluded in which the US has an interest, and unless something is done to stop this, EU isn't offering anything substantial for negotiations.

Lib: What implications does the stalemate between EU and the US have for developing countries?

SPS: Now all this has a kind of side implication for the developing countries. Because when the Americans talk of market access then they say that the EU isn't doing enough, and also that the developing countries are not doing enough. The US Trade Representative Susan Schwab said that “the three Ss are our problem” in market access. One is the sensitive products of EU, another is the special products of the developing countries, and the third is the special safeguard mechanism of the developing countries. They have gone on record saying that the developing countries' demands for SP and SSM (special products and special safeguard mechanisms) are unacceptable – and these are precisely what Kamal Nath is claiming as his achievement!

Both US and EU are unanimous that the market access of developing countries – both in agriculture and industry – must improve, and only then are they willing to reduce subsidies and tariffs to give better access to the agricultural products of developing countries.

Interestingly, on the first day of the Conference, Pascal Lamy said, “I think 20 is the landing zone for some kind of a compromise”. So what is this magic figure of 20? The Americans, he said, must bring down their Amber Box domestic support to 20 billion dollars (which is still 1 billion dollars above the applied levels). So he gives them a little less water. In terms of the second ‘20', he says that as regards market access, what G-20 says is a likely compromise: i.e that developed countries should reduce their tariffs by 54%. The EU offer is already 51%, so it's in the same region, and he says the US should also follow suit, and some compromise can be worked out. The counterpart of that would be that the developing countries should implement their offer of reduction of market access by two-thirds, that is the reduction of tariffs to two-thirds of what the developed countries do. Two-thirds of 54% is 36% - so 36% reduction of tariffs in the developing countries market is what Lamy proposes. The third area of negotiation is NAMA – and here he proposes a coefficient of 20 in the Swiss formula for reduction of tariffs for the developing countries. Now, 10 is the coefficient for the developed countries. US is saying they'll not agree to anything above 15 for the developing countries. Lamy is proposing that all agree to 20. Now any worthwhile protection of industries in developing countries can take place only when the coefficient is in the region of 120, 150, 180 and so on! So the proposed landing zone of 20 is meaningless! And mind you, in that landing zone, he doesn't talk of special products or of SSM – which are the flags Kamal Nath is holding up as the great protection mechanism he has invented.

Lib: What do you think of Kamal Nath's claim that he walked out because there was no negotiating space left for India in the talks? Where do you see the negotiations heading, eventually? What will they hold for India and other developing countries?

SPS: What bargaining power will developing countries have when they yield on both these basic issues in the market access? Now, the only bargaining power developing countries had was the opening up of the services market, which India and Brazil gave it for the asking, and the rest of the developing countries were bludgeoned into accepting it in Hong Kong . Now what is the bargain remaining – in the two remaining areas, it is all ‘Give, give'; there is no ‘Take'!

In this situation, if Kamal Nath says he walked out of the meeting to protect the interests of millions of Indian farmers, he is just misleading. After all, he has been able to do nothing for them till now – he relinquished the negotiating space long ago. His only claim is the SP and SSM – and these are hardly his invention. Look at the history of these, and we find that these evolved out of the G-33, where it was Indonesia and others, not India , which took a lead. And now the fact is that even the idea is being torpedoed by the US .

It is quite clear that the banner of protecting agriculture through SP and SSM that Kamal Nath is holding won't wash – you won't be allowed to get much out of these. As opposed to that, you have agreed to reduce your tariffs by two-thirds of what the developed countries do. Now even if Mr. Lamy's landing zone is accepted, India will have to reduce its tariffs by 36%. The average level of Indian tariffs on agricultural products is 115. Reduce this by 36% - and it comes down to 74%. So there will have to be substantial reduction in a whole lot of tariffs – and if your average has to come down to 74% from the present level of 115%, it's a substantial reduction.

All along I have been arguing that even if you have high level of tariffs, that doesn't solve your problem; the reason being that the international agricultural products price fluctuations are too sharp. If you see the prices from 1995-96 to 2001-02, you will find that for items like soyabean and cotton, 100 has become 37! Which means a more than 60% reduction. What does this mean in tariff terms? Supposing you were in equilibrium and protecting your market when the price was 100, with, say 30% of tariffs. If the price falls from 100 to 40, the protection you will need is 90. So what you will need is a very high increase in tariffs to actually protect; and you'll also need variability, i.e. you can't bind it at a lower level. Now, it is clear that we will be bound to substantial reduction, and there is no guarantee that the fluctuation will be eased out.

All indications, therefore, are that our farmers' problems will be worsened, because subsidisations will continue in the developed countries' agriculture, and our markets will be thrown open by an offer of 36% reduction in the current level, and also binding them down. With the result that the exposure of Indian farmers will be worse. And therefore Kamal Nath's claim has no basis.

I feel that the Lamy formula will hold ground – the EU and US will grudgingly agree to this, which is a bad formula for us. This is due to faulty negotiating strategy and faulty perception of our interests. And despite the Conference ending with a big show of unity by the developing countries, the fact is that once Brazil and India accept the landing zone formula of Lamy, no negotiating space will be left.