ENGL2201 SEM C 2012

Model Critical Research Report Writing: the WTO and India

Background Looking at world development and the emerging picture in terms of global trading between nations, it is important to consider the role played by the WTO. The World Trade Organization came into being in 1995 and since its inception 157 nations have joined (WTO 2008). Being involved in this global economic process means that governments endorse legally- binding controls and regulations which are intended to prevent barriers to trade between nations. This is central to the commitment to the promotion of world trade, so as to enable closer international economic cooperation and sustainable growth. As commercial linkages become more firmly established and production levels increase worldwide, it follows that international agreements are having an increasingly significant effect on the lives of ordinary people. The WTO also has as its stated objectives the aim to raise living standards and promote global integration (2008). Member countries can therefore expect to achieve social improvements for their citizens. Overview India is one of the founding economies of the World Trade Organisation and has played a significant role in the formulation and implementation of its regulatory policies. Some commentators would argue that the WTO has provided the main impetus for Indias continuing upsurge in GDP (Marelli & Signorelli 2011), whilst others would contend that Indias involvement has been beset by problems (Shah 2009). Major changes have occurred as the WTO Agreement on agriculture and other trade liberalisation measures have shifted the focus to export-oriented cash crop agriculture whilst allowing the inflow of cheap imports. Nevertheless, despite these changes in the Indian economy, India remains a largely agrarian country, with 16.6% of GDP and employment of about 60% of total workforce (Gangoli 2009). India has as its main objective to find ways for efficiently managing the economy towards meeting the needs of the mass of the population. For this to happen, it must develop its domestic industries and markets through further diversification of products and make gains in global export markets. Such developments will prove to be a huge challenge to the politicians and planners at national and state level, especially with regard to farmers who continue to lobby the government for help in preserving their livelihoods. Introduction The subject of agriculture as a central feature of global production has been a key point of discussion in WTO negotiations. Application of WTO provisions on agriculture involves many contentious issues for developing countries with primarily agrarian economies. These are generally understood in relation to matters of a nations Market Access, Domestic Support and Export Subsidies. In relation to this, accusations have been made over the power of highly productive developed member nations to hold the biggest share of world markets. There are thus arguments that the poorer nations are disadvantaged and unable to compete (Oxfam International 2012). A second main point of contention relates to the difficulty for nations to fully implement WTO principles, due to their particular economic imperatives. In other words, the unpredictability of global markets means that competition between nations is causing a return to protectionist policies as governments prioritise their national interests (Irwin 2011). Focus In view of the huge importance of farming in India as a provider of jobs and incomes for so many, the production and saleable value of vital commodities such as edible oil and that of cotton as a major cash crop can be explored. Issues 1

relating to the cultivation of oil seeds can be found in an article by Ray Parshuram (2007), who asserts that WTO membership equates with Protection for the rich; free play of market forces for the poor. From a more general perspective, Mamta Badkars (2012) news article reports that 'India bans exports of cotton and prices instantly surge. The author highlights the current circumstances pertaining to national interests and the need for governments to ensure protection for their own industries. This essay intends to examine the usefulness of the two authors comments on Indias current position as a major producer and trader of these products on the global market. Discussion Article 1 Parshuram (2007) asserts that the implementation of WTO policies has adversely affected the livelihoods of Indian farmers. He explains this by stating that trade liberalisation has led to the removal of import tariffs, leaving farmers more vulnerable to external market forces. More specifically, he spells out the realities of the situation for small landowning palm oil seed producers in Southern Indian states when facing the effects of reduced import duties for agricultural products. This has put farmers at a disadvantage, unable to sell their products for an adequate remuneration, and has led to an extremely desperate situation for many, with the result that thousands of farmers have committed suicide (Parshuram 2007). The author further claims that the severity of the difficulties currently felt amongst Indias farming communities can be directly blamed on the level of involvement with the international trading system and wider global markets. Although his claims appear accurate and well-supported by research, the authors work can be seen as narrow-minded and unreasonable. It seems he is making the common assumption that the needs of small producers are not properly considered by the WTO in its system of policy implementation. It could be argued instead, that whilst one form of commodity production can no longer be competitive, diversification of the economy will work towards replacing it. Indias agricultural system may have made some attempts to move with the times (Upadhyay 2011), yet as it is still largely dependent on smaller producers for its cumulative GDP, it cannot yet hope to compete with better organized players on the world market. Article 2 In her news article, Badkar (2012) reports that the government has banned exports of cotton without giving a reason for its decision, although Indian textile companies have claimed they are losing competitiveness because of high cotton prices in India. Thus, the Ministry of Trade regulator is believed to have prohibited cotton exports to reduce prices domestically. According to Badkar (2012), as India is the world's second largest cotton producer, this unilateral action is expected to impact global supplies of the commodity and drive up international prices. Indeed, the Indian government has been accused in this case of attempting to fix prices for the domestic market to promote exports of Indian textiles. As a result, there have been complaints from other nations about Indias ability to subsidize its textiles industry and prevent other producer companies from competing on the world market (Sen 2012). There is no mention of this connection between cotton production and Indian government subsidies in Badkars (2012) article. Her unwillingness to state the full facts might be considered as an example of personal bias towards the Indian government. She also fails to describe the potential harm caused to the livelihoods of cotton farmers at home and abroad. The lack of openness in this case seems to exemplify the resurgence of pro-national protectionist policies pursued by governments that the WTO intends to rid international markets of. Findings & Recommendations The plight of Indias cotton and oil seed farming shows that there are forces at work in the global economy that cannot be easily addressed unless all nations begin negotiations with the intention to honour their pledges. Unfortunately, it appears that individual nations will continue to behave according to their particular economic and political interests in what is an increasingly volatile global economy, fraught with the consequences of unilateral action and negative outcomes. The fact of governments reverting to protectionist policies is an indicator of the instability of world financial markets and commodity prices. If it is true that farmer suicides in India are now 2

becoming commonplace, this may be due to the inability of the WTO to implement effective policies to ensure fair outcomes for the worlds primary producers. The idea of integration into international markets is not working well for all, and has played havoc with the future prospects of agricultural producers in India. Considering this, the promise of improved lifestyles through participation in WTO-led market initiatives may, after all, be a mirage. Finally, one of the key factors for the success of the WTO in India as in other developing countries, would be to ensure there is adequate provision for ensuring social stability and sustain even economic growth. In this way, the people who are in the most vulnerable of positions, in other words the ordinary farm workers, can also gain the rights to a livelihood they deserve for their labour.

References Badkar, M 2012, India bans exports of cotton and prices instantly surge, Business Insider.com, 5 March, vol. 733, no. 4, viewed 26 November 2012, <http://articles.businessinsider.com/2012-03-05/markets/31122796_1_cottonfutures-cotton-prices-farmer-suicides>. Gangoli, C 2009, WTO and Indian agriculture, viewed 23 November 2012, <http://www.slideshare.net/charudatta/wto-and-indian-agriculture>. Irwin, DA 2011, The Return of the Protectionist Illusion: Trade barriers once again threaten the global economy, and the U.S. isn't helping, The Wall Street Journal, viewed 23 November 2012, <http://online.wsj.com/article/SB10001424052702304058404577492882405657846.html>. Marelli E & Signorelli M 2011, China and India: Openness, Trade and Effects on Economic Growth, The European Journal of Comparative Economics, vol. 8, no. 1, pp. 129-154, viewed 22 November 2012 <http://eaces.liuc.it/18242979201101/182429792011080106.pdf>. Oxfam International 2012, Learn more about regional trade agreements, viewed 21 November 2012, <http://www.oxfam.org/en/campaigns/trade/riggedrules/rtas_depth>. Parshuram, R 2007, Protection for the rich; free play of market forces for the poor, InfoChange News & Features, February, viewed 12 November 2012, <http://infochangeindia.org/agenda/cost-of-liberalisation/protection-for-therich-free-play-of-market-forces-for-the-poor.html>. Sen, A 2012, US moves WTO accusing India of giving fresh export subsidies to textile industry, Economic Times, 30 October, viewed 20 November 2012 <http://articles.economictimes.indiatimes.com/2012-1030/news/34817445_1_textile-exports-exports-of-cotton-yarn-export-target>. Shah, A 2009, Trade liberalisation: Looking beyond the WTO, Financial Express, 15 December 2009, viewed 21 November 2012, <http://www.mayin.org/ajayshah/MEDIA/2009/p_world.html>. Upadhyay, A 2011, Exports in a changing world, The Hindu Business Online, 25 October, viewed 19 November 2012, <http://www.thehindubusinessline.com/opinion/columns/ashoak-upadhyay/article2571236.ece>. WTO 2008, Ten Misunderstandings about the WTO, viewed 20 November 2012, <http://www.wto.org/english/res_e/doload_e/10mis_e.pdf>.