When do Australia, Brazil and Guatemala file complaints and what are the rules?
the story So FarIndia this week filed an appeal with the Appellate Body of the World Trade Organization (WTO) over the decision of the WTO’s Disputes Settlement Panel on sugar subsidies last month. The Disputes Settlement Panel of the World Trade Organization gave the verdict That India, by subsidizing sugar producers, was breaking rules made under the General Agreement on Tariffs and Trade (GATT), which regulates international trade.
What is this?
In 2019, Australia, Brazil and Guatemala filed complaints against India at the World Trade Organization, arguing that the Indian government’s subsidies to sugar producers were against the rules governing international trade. They argued that these subsidies, which include both domestic subsidies as well as export subsidies, exceed the limits imposed by WTO trade rules. According to WTO regulations, the subsidy cannot exceed 10% of the total value of sugar production. These countries believe that the subsidy given by India has increased the production of sugar and has significantly reduced the price of sugar in the global market. Two years later, the World Trade Organization ruled in December that India’s sugar policy was favoring domestic producers through subsidies to the detriment of foreign trade. The panel recommended that India withdraw its alleged restricted subsidies under production support, buffer stock and marketing and transport schemes within 120 days of the adoption of this report. India has said that the decision of the WTO dispute panel has drawn some “wrong” conclusions about domestic plans to support sugarcane growers and exports and that the panel’s findings are completely “unacceptable”.
India is the second largest producer of sugar in the world after Brazil and it is estimated that more than 50 million people depend on sugarcane cultivation alone for their livelihood.
What is India’s stand?
India has argued in the WTO that it does not give direct subsidies to sugarcane farmers and thus does not break any international trade rules. However, this argument has not convinced other countries, which maintain that, among other things, the central and state governments in India mandate a minimum price (fair and remunerative price, or FRP) at which sugar mills Can buy sugarcane from farmers. , In fact, in August last year, the Center had fixed the FRP at Rs 290 per quintal and called it the “highest ever” FRP for sugarcane procurement. Individual states also set minimum purchase prices that may be higher than the central price to accommodate for conditions at the local level.
The high purchase price for sugarcane, set by the government, is believed to have led to an oversupply which has led to a fall in sugar prices. In fact, many sugar mills have fallen into debt trap as consumer demand for sugar has remained stagnant. The low price of sugar has affected the revenue of the mills, their ability to pay the farmers and forced the closure of many mills. To help the sugar sector, the Center has made it mandatory for ethanol derived from sugarcane to blend with fuels such as petrol and diesel. According to the food ministry, the country’s sugar production is likely to remain stable at 30.5 million tonnes in the next 2021-22 season as more sugarcane will be diverted to make ethanol.
State governments and the Center have also intervened regularly to reduce the debt burden on sugar mills. Earlier this month, the Center decided to restructure loans worth over Rs 3,000 crore given by the Sugar Development Fund to sugar mills. Without such assistance, it may not be possible for sugar mills to procure sugarcane from farmers at the minimum prices fixed by the government. In addition, the Center regularly sanctions funds to encourage sugar mills to export sugar based on sugar prices in the global market. In last year’s budget, the Center allocated a total of ₹3,500 crore for the export of 6 million tonnes of sugar.
what lies ahead?
The decision of the WTO Appellate Body on the dispute shall be considered final. If India refuses to comply with the decision, it may face retaliation from other countries. This could be in the form of additional duty and other stringent measures on Indian exports. Such retaliatory measures may benefit producers in these countries but affect consumers who have enjoyed lower sugar prices due to subsidies offered by India. It should be noted that the WTO was established to prevent such tit-for-tat-like tariffs that reduce international trade.
Incidentally, the WTO’s appellate body is not functioning due to differences among member states on the appointment of members, and disputes with it are already pending. America had banned the appointment of members.
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