SHUBHADEEP ROY
Globalization of Agriculture: Its Implications
Shubhadeep Roy*
The change in the global scenario in general and agriculture in particular, has brought out a lot of challenges and opportunities to the researchers, extension personnel and farmers. It is important that these functionaries should have the understanding of several aspects of globalization and its implications for making efforts to get by the challenges and to court its opportunities. The national economics are being rapidly transformed into global economics and globalization has led to global market and global economy. This drastic and hasty change is primarily due to the dynamics of information revolution, speedy transport and best means of communications such as telephone, television, computer network, internet, satellite etc. We should aware that no country can afford to remain isolated, unconnected to the global market and global perception.
There was a considerable amount of debate in India at the time of the introduction of the globalization, it being a dramatic departure from the protectionist, socialist nature of the Indian economy up until then. However, reforms in the agricultural sector in particular came under severe criticism in the late 1990s, when 221 farmers in the south Indian state of Andhra Pradesh committed suicide. The trend was noticed in several other states, and the figure today, according to a leading journalist and activist, P. Sainath, stands at 100,000 across the country. (Sainath, 2006) Coupled with this was a sharp drop in agricultural growth from 4.69% in 1991 to 2.06% in 1997. (Agriculture Statistics at a Glance, 2006) This writing seeks to look into these and other similar negative trends in Indian agriculture today, and in analyzing the causes.
So “The Globalized World - What does it mean? It means the very fast movement of people which results in greater communication. It means that because of IT revolution people can lay a hand on with each other in any part of the world. It means trade and economy of each country is open in non-intrusive way so that all varieties are accessible to consumer of his choice. It also means that mankind has achieved liberation to a level of where we can say it means a social, economic and political globalization.”(Balakrishnan). Though the exact definition of globalisation is still unavailable a few definitions worth viewing:
Globalization is the reduction of transaction cost of transborder movements of capital and goods thus of factors of production and goods. (Stephen Gill).
The process of globalisation not only includes opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNC’s, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution. (Guy Brainbant).
And in general we can say that, Globalization is the process of making things global, i. e. involving the whole world, especially in an environment characterised by unprecedented flow of capital, goods, and people across the planet.
Whenever we talk about globalization some specific terminologies come before us like GATT, WTO, IPR, Domestic subsidies, UPOV etc.. I will discus these things one by one.
GATT: The General Agreement on Tariff and Trade, an international forum, was established in 1948 with the intend to reduce the trade barriers like quotas and custom duties, and to encourage international trade. In July 1993 the final agreement, an amended form of Dunkel’s Draft, popularly known as Eighth round or Uruguay round of GATT, was ultimately signed. On April, 1994, the final document was signed by 124 countries of the world including India at a Ministrial Conference at Marrakesh in Morocco.
ADVANTAGES OF GATT MEMBERSHIP:
1. “It provides a stable & predictable system in which global trade can be easily carried out.
2. It provides means of setting disputes between countries on trade matters.
3. It encourages free multilateral world trade and enables reduction in TARIFF.
4. It establishes fabourable balance on trade on long term basis.
5. To encourage industrial countries to assist developing countries by liberalizing trading conditions & by not expecting reciprocity in trade concession negotiations.
6. To protect the environment & to promote sustainable development
7. Progressive liberalization & elimination of Tariff & Non-tariff barriers in trade of goods.
8. Rejection of all form of protectionism.
9. Elimination of discriminatory treatment in international trade relations.
10. Integration of developing & developed countries & economics in transition into the multilateral system.
11. Maximum possible level of transparency.”(Than et al, 2006)
The WTO came into existence on 1st January, 1995 to replace GATT with the following aims:
1. “To facilitate the implementation, administration & operation of Uruguay round agreement.
2. To provide a forum for negotiation among member countries in their multilateral trade relations.
3. To administer the dispute settlement procedures.
4. To preview national trade policies.
5. To co-operate with other international institutions especially IMF and World Bank in order to ensure more meaningful compatibility in global economic policies.” (Than et al, 2006)
WTO AGREEMENT ON AGRICULTURE:
The member countries will have to import agricultural Products to the extent of 3% of domestic consumption. The alternative would be to export produce, which would have higher price in international market and import cheaper food. The AoA commits all WTO members to long term reforms which would make agriculture trade fairer, distortion free, and more market oriented.
AOA and Developing countries
“This agreement could actually serve to encourage exports in LDCs and reduce dumping by developed nations if it had been implemented with a proper assessment of the state of the agricultural sector in developing countries. As it stands, the agreement allows countries which have been using measures for import restraint and domestic subsidy to retain protection for their agricultural sector throughout the implementation period whilst those countries which were not using protective measures earlier are prohibited from introducing them. This exacerbates the problem by allowing countries, which distorted trade in the past to continue doing so while those who have never done so are prohibited to use protective measures in future. This has made developing nations to be even more vulnerable to dumping by low cost producers” (GENTA RESEARCH OFFICE, 2000)
MAIN ELEMENTS OF AoA:
1. Removal of all quantitative restrictions, variable levies, import bans & non-tariff measures and replace this by Tariffs.
2. Restrictions of subsidies granted by Govt. to farmers to support price level with a view to keeping out imports. However subsidies which are not trade distorting are allowed under AoA.
3. Commitments to reduce export subsidies (36% developed countries in 6 years & 24% developing countries in 10 years).
IMPLICATIONS OF AoA FOR INDIA
Implication of AoA contains provision in 3 broad area of trade
1. Market access
2. Export subsidies
3. Domestic support
MARKET ACCESS:
1. Market access for agril. Product is to be governed by a “tariff only” regime.
2. Non-tariff barriers such as quantitative restrictions on import (i.e. quotas, permits, import licensing) were to be removed.
3. Tariffs resulting from this tarrification process as well as other tariffs are to be reduced by a simple avg. of 36% over 6 years in developed countries and 24% over 10 years in developed countries.
EXPORT SUBSIDIES
Developing countries are free to provide certain subsidies, such as subsiding of export marketing costs, internal and international transport and freight charges etc.. India is making use of these subsidies in certain schemes of APEDA especially for facilitating export for horticultural product.
DOMESTIC SUPPORT
Domestic support measures, according to the agreement, are meant to identify acceptable measures of support to farmers and curtailing unacceptable trade distorting support to farmers.
1. Support with no, or minimal distortive effect on trade (Green box and Blue box measure )
2. Trade distorting support (Amber box measure)
SOME RELETED TERMS:
Intellelectual Property Right: IPRs refer to the legal ownership by a person or business of an invention/discovery attached to particular product or process which protects the owner against unauthorized copying or imitation. There are seven types of IPR viz., Copyright, Trademarks, and Geographical Indications, Industrial designs, Patents, Integrated circuits and Trade secrets. (Than et al, 2006)
THE SUI GENERIS: The sui generis system is a milder/diluted form of a patent and it provides a framework of plant breeders rights (PBR) through which protection is accorded to the breeders, researchers and farmers with regard to use and exchange of seeds and plant genetic material. Crucially, this framework has two important clauses viz. "Farmer’s Privilege" and "Researcher’s Rights".(Than et al, 2006)
UPOV: It is international conventions for protections of new varieties of plants. Under UPOV, 1978, the farmer can exercise the freedom to save or retain seeds, derived from protected plant varieties for own use in future sowing period. No objections to limited & non-commercial exchange of seeds, but commercial sells or multiplication of propagating material are prohibited. (Than et al, 2006)
CHALLENGES OF GLOBALIZATION TO INDIAN AGRICULTURE:
1. India does not have any comparative advantage as a wheat exporter, as compared to the developed countries like USA, Canada & Australia will be in competition for this crop. (Vyas,1999)
2. The non- product subsidy of India has risen from 4.05% in 1986 to 7.52%, stricking distance of allowed 10%.
3. High level of subsidization by the developed countries depress world price & reduce the competitiveness in the developing country.
4. Some rich countries sell their produce in artificially low cost that undercuts the market for the efficient or low cost producer.
5. Indian Govt. is not in a position to bear the subsidies to make Indian agriculture compatible with the US countries.
6. Pesticide residues in food crop have become major non-tariff barrier in export of food crop.
7. Indian farmers have to face certain challenges in dairy sector to reduce the cost of production.
8. Constrains in production of export quality Grape- high cost of production, lack of infrastructure facilities, unskilled labour, and lack of guidance about quality parameters. (Khot et. al, 1999)
9. Increase in cost of cultivation by high vol. use of fertilizer, irrigation & labour used by farmers.
10. Challenges of WTO to Indian agriculture like higher cost of production & cheap import of grain lead to misery of farmers.
11. Challenges in agricultural market.
12. Challenges related to tariff.
13. TRIPS issues.
14. Negative impact on the economy.
OPPORTUNITIES PROVIDED BY GLOBALIZATION:
1. To take advantage of global liberalization, intuitional mechanism is necessary viz. contact farming, consolidation of land holding, corporate farming, extension, credit, infrastructure facilities, Producers association, etc. will not only improve production but boost export. (Vasudev, 2001)
2. Immense opportunity for India to enter global market through high economic return from enterprise, increase in demand, changing food habit, availability of better credit & marketing facilities.
3. Technology development & adoption at primary production & post harvest stages will play a major role in meeting the domestic requirement & enhancing competiveness.
4. India has a good potential to enter into the global market through floriculture.
5. India has a great potentiality of increasing export of live goat, meat, goat skins and other products.
CONCLUSION:
It is clear that the liberalisation policies adopted by the government of India played a foremost role in the agrarian crisis that is now being played out. However, this is not to say that privatization, liberalization and globalization are per say bad, or inherently hostile to an economy. It is the ‘one size fits all’ brand of liberalisation adopted by the IMF and the World Bank which forces countries to privatize, liberalise and globalize without exception which has failed. Without taking into account the state of an economy, and in this case, the state and nature of the agricultural sector in India, the IMF and the World Bank, with the cooperation of the Indian government, embarked on mismatched reforms, which have caused misery and despair among millions of Indian farmers, driving large numbers of them to suicide. It is also essential to break the link between aid and liberalisation, which caused India in the first place to accept the conditions of the IMF. Remember that India was on the verge of a financial crisis in 1991 when it applied for the IMF loan and accepted its conditions—perhaps the course of economic reform in India would have taken a very different course if there was no urgent need to borrow from the IMF. The start to this process may have already occurred: recognizing the failure of its liberalisation policies, (and perhaps also the failure of DFID with AP’s power reforms) the Blair government of Britain announced in 2004 that it will no longer make liberalisation and privatization conditions of aid. In another blow to the neo-liberal lobby, Chandrababu Naidu suffered the worst ever defeat in the 2004 state elections in his party’s history, with rural AP clearly rejecting his brand of World Bank sponsored liberalisation. The battle, however, has not yet been won. It is essential for the rest of the G8 to follow Britain’s example in order to influence World Bank and IMF policy towards India to ensure blind liberalization is not pursued, and so that countries like India can adopt tailor-made reforms to suit our economy.
Reference
‘Agricultural Statistics at a Glance’, Indian Farmers Fertilizer Co-operative Limited, New Delhi, August 2006.
Balakrishnan C. (2004), Impact of globalization on developing countries, google.com
GENTA Research Office (2000) "Trade Liberalization: Impacts on African Women" Prepared for The International Gender and Trade Network (IGTN) meeting, Cape Town, South Africa
Gill S S and Brar J S (1996) Global market and competitiveness of Indian agriculture: some issues. Econ. Political Wkly 31: 2167-774
Khot B B, Swant G K, Patil R P (1999) Scope for production of export quality Grapes. 4th Agricultural Science Congress-Sustainable Agricultural Exports, Feb. 21-24, 1999, p 226
Sainath, P 2005, ‘No lessons from past mistakes’, The Hindustan Times, viewed 4 June, 2006.
Sainath, P 2005, ‘Spice of life carries whiff of death’, The Hindu, February 13, 2005.
Thanh, N C, Garg L, Singh B, and Saini G S, Globalization of agriculture and its Implications,2006, Jain Brothers
Vasudev, N. 2001. Small farmers and WTO. Keynote Paper and Abstracts.P. 20
Vyas V S(1999) Agricultural trade policy and export strategy. Econ. Political Weekly,28(12): 28-32.
* M.Sc. Student, Division of Agricultural Extension, IARI, New Delhi-110012
