While Indo-US relations have been on an unprecedented high, trade ties between the world’s two largest democracies have steadily deteriorated with India heaping blame on the US a breakdown in trade negotiations at the World Trade Organisation (WTO). It has not helped that seven major Indian states have either banned or placed severe restrictions on the sale of soft drinks manufactured by US beverage giants Coca-Cola and Pepsi Co after an NGO in New Delhi, the Centre for Science and Environment, alleged that these beverages contained excessively high residues of pesticides. The US now threatens to withdraw the benefits of a three-decades-old generalised scheme of preferences (GSP) that allowed duty-free access to certain Indian goods and media reports suggest that Washington is sitting on applications filed by three Indian banks to open branches in America.

As India’s principal trade negotiator publicly blamed the intransigence of the US for the impasse in the Doha Round of talks at the WTO, analysts here argue that any movement forward on international trade negotiations is contingent on US first agreeing to cut farm subsidies before developing countries start opening their markets to non-agricultural products from the West.

Speaking at a public function organised by the Confederation of Indian Industry (CII) in the weekend, Gopal K Pillai, special secretary to the federal ministry of commerce and industry, pointed out that farmers comprised barely two per cent of the US population and agriculture accounted for a similar proportion of the gross domestic product of the world’s biggest economy. By seeking to increase subsidies to this small section of less than six million people, the US administration had pitted their interests against those of nearly 90 per cent of world’s population, he added.

Pillai said only 10 per cent of world trade was in agricultural commodities. “Close to 70 per cent of the value of agricultural produce in the US does not benefit from disbursement of government subsidies that are given to certain crops like cotton, soybean, corn, wheat, rice and a few dairy products,” he told IPS. During negotiations in Geneva in late June and early July, the position of the US government was that instead of cutting “trade distorting” subsidies it would in fact increase agricultural subsidies from $19 billion to $23 billion. In exchange, the US was asking developing countries to cut tariffs on imported non-agricultural products by as much as 90 per cent. “It was not possible to negotiate,” he said.

Author of The WTO: A Discordant Orchestra, TK Bhaumik said, “It is important to complete the unfinished agenda because the imbalances of the Uruguay Round are still waiting to be corrected.” Pillai and others believe that trade negotiations at the WTO can resume only

if the US backs down from its rigid position on agricultural subsidies. “The US and the EU cannot continue to refuse to realise the emergence of the new group of developing countries in the WTO,” said an expert. — IPS