Why do India and US disagree on farm subsidies? -Dipti Jain


Roots of disagreement lie in how farm support is calculated under WTO, with US blaming India for under-reporting subsidy given for wheat and rice

Farm subsidies seem to have become a major flashpoint in the escalating global trade war. In May, India came under attack from the US for its minimum support price (MSP) policy for foodgrain. India hit back, along with China, to demand that developed nations give up the bulk of their farm subsidies from 2019 onwards, escalating a demand that both countries had made in 2017.

The roots of the disagreement between India and the US lie in the way farm support is calculated and classified under WTO (World Trade Organization) rules, a Mint analysis shows. The US has alleged that India had been grossly under-reporting the subsidy it provides for wheat and rice production.

In its filings, India claimed that the market price support (MPS) it provided to rice was 5.45% of its value of production in 2013-14, well below the prescribed limit of 10%. MPS is the gap between MSP, at which the government procures rice and some other crops, and the “external reference price” (ERP), set by WTO at 1986-89 prices.

The US has alleged that India’s MPS to rice in 2013-14 was much higher at 77% of production value. Similarly, the US alleged that India has been reporting a negative MPS for wheat, whereas the actual MPS is around 65% of production value. There are two main reasons behind the discrepancy between the calculations by India and the US: The choice of the dollar-rupee exchange rates and the choice of quantity considered. Adjusting for these two parameters, we find that there was not much difference between the filings of the two countries.

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Livemint.com, 16 August, 2018, https://www.livemint.com/Politics/sIEswdOoThm3a1mGyDDGyN/Why-do-India-and-US-disagree-on-farm-subsidies.html

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