Indian Subsidy on Sugar Exports Questioned in WTO

India’s new support programme for sugar sparked comment among a number of delegations with some urging India to remove immediately what they described as export subsidies. It was said that this will impact world trade. These discussions took place when WTO members met as the Agriculture Committee on 21 March 2014.

The discussion was about one of 31 sets of questions and answers, a key part of the agenda of the committee, whose major responsibility is to oversee the present Agriculture Agreement and members’ commitments in agriculture.

Costa Rica too on the mat

The largest number of comments from delegations were on India’s sugar programme. The topics that also aroused interest included Costa Rica’s on-going breach of its domestic support limit resulting from its guaranteed rice prices and its intention to correct this breach in 2015 (the US said it appreciated the fact that Costa Rica had shared information consistently but that breaches of commitments are always a serious concern), Thailand’s rice support programme known as “paddy pledging”, Canada’s reclassification of pizza toppings to prevent traders avoiding import duties, and India’s domestic support for rice and wheat and its food security programme.

And a voluntary solution has been found to the long-running question of how to update the 1995 list of significant exporters - used to define who should provide information on their exports in order to help members monitor whether exports might have hidden subsidies. The solution is voluntary because members have failed to agree on a formal decision.

India’s Export Subsidies for Sugar

Australia, Colombia, Brazil and the EU asked India about a new policy announced in February involving incentive payments to Indian sugar exporters. Along with the facts and figures they sought, some of them asked what the legal basis under the WTO was for the export subsidies. Several pointed out that India has agreed not to subsidize exports.

India said the policy is designed to encourage diversification away from white sugar to raw sugar and that no intervention payments have been paid yet. India said export subsidies will be notified to the WTO.

Australia said the 3,300 rupees per tonne incentive payment is the equivalent of 14-16% of the world price. Since India is the third largest exporter of sugar this threatens to seriously distort trade, Australia said and it asked India to remove export subsidies immediately. It said that the amount envisaged could potentially finance all its own exports half way across the Pacific Ocean.

The Agriculture Agreement allowed developing countries to subsidize marketing costs and internal transportation costs during the agreement’s “implementation period” (under Article 9.4).

Brazil asked how India could justify the subsidies since there has been no consensus to extend these special provisions for developing countries. Previously, in response to similar questions raised in the past, India argued (see the 2012 question-and-answer document G/AG/W/103) that developing countries are still allowed to use the special provision because the 2005 Hong Kong Ministerial Declaration says, “developing country Members will continue to benefit from the provisions of Article 9.4 of the Agreement on Agriculture for five years after the end-date for elimination of all forms of export subsidies” - and export subsidies still have not yet been eliminated.

Sharing the concerns were Paraguay, Thailand, El Salvador, Canada, the US, Pakistan and New Zealand.

India’s domestic programmes (AG-IMS ID 73003, 73039, 73053, and 73066): Members continued to question India about details of its support programmes for rice and wheat and its stockholding programme for food security. Some asked when India is going to circulate more up-to-date information on its domestic support - the most recent notification is for the 2003/04 year. India said the notifications are being prepared.