WTO: Why India and China are saying no to the USA


China and India rarely find common ground. They are the most populous countries in the world and have two of the fastest developing economies, but while one is ruled by a communist regime, the other is governed by an unruly coalition government. They do not share the same point of view concerning the USA.

Bruce Einhorn and Mehul Srivastava

China has long supported Pakistan, India’s bitter rival. And Indians gaze enviously at China’s productive force, while the Chinese want to replicate the successes of Indian IT services. However, after the collapse of the latest global trade talks, the two Asian giants find themselves in the same boat. Negotiations at the World Trade Organization in Doha, Qatar, on trade liberalization came to an inglorious end on July 29 over disagreements over agricultural subsidies. The US blames India and China for what it perceives as intransigence. Other nations, too, berate New Delhi and Beijing. For example, rather than focusing on how they can help solve global problems, India and China “have focused too much on their own interests”, said the Chief of the Council of Ministers in Japan, Nobutaka Machimura, during a press conference which took place on July 30.


The criticism may be scathing, but the two Asian giants are not ready to succumb to foreign pressure. Both countries are enjoying strong economic growth, driven by foreign demand for their production and outsourcing services. At the same time, Indian and Chinese leaders must also worry about economic hardship in the countryside, where hundreds of millions of farmers have struggled to compete with imports from the US and other countries.

China, for example, tried for several years to relieve the devastation that affected its countryside. The economy in the country’s wealthy coastal provinces has prospered, falling behind rural areas home to some 500 million people (BusinessWeek.com, 2/16/07). When it comes to competing with US agribusiness, “Chinese farm households are very weak,” says Wang Yong, senior lecturer and director of the Peking University Center for International Political Economy in Beijing.

It is certain that Chinese farmers are not able to meet all the needs of the country. Imports of soybeans, which are the staples of Chinese food, soared 53 percent last year, worth $11.5 billion, according to statistics conducted by China’s Ministry of Agriculture. ‘Agriculture. Total agricultural import receipts for 2007 amounted to $41 billion, an increase of 28% over the previous year. While Beijing has taken some steps to ease the burden on local farmers by reducing taxes, the imbalance continues to worry leaders such as President HU Jintao and Premier Wen Jiabao, who have frequently mentioned the need for stimulate development in rural areas. “The government is facing very strong pressure from the farmers,” Wang said.


The sudden pressure from the Indian government is even greater. While leaders in Beijing must worry about unrest in the countryside, senior officials in New Delhi must contend with a real rural revolt. The Naxalites, a violent Maoist insurgent movement based in rural parts of eastern and central India, have targeted poor farmers to recruit them into their movement.

The government has other reasons to worry about the overwhelmed farmers. For India’s Congress-led coalition, farm subsidies remain a crucial support for the elections. Almost 70% of the population lives in the countryside and the vast majority of Indian income comes directly or indirectly from farm produce, even though agriculture accounts for less than a fifth of India’s economy, which is estimated to be around a trillion dollars. ‘If the government were to agree to something that will put an end to our agricultural sector, then the political operations completed will be completed.’ says MS Swaminathan, director of the National Commission for Farmers in India, who spearheaded the green revolution in that country during the 1970s. of people’.

Over the past decade, while India embraced reforms that have started to be implemented and revitalized most developed sectors, agricultural growth has lagged, even as the rest of the country’s economy has lagged. increased by 8 to 10%. On Indian cotton farms, for example, the reduction in subsidy costs, due to government price controls, has already had disastrous effects. Unable to compete internationally in the cotton market, cotton farmers in central India region, which is the second largest cotton producer after China, have spent a decade going deeper and deeper into debt. According to government estimates, more than 160,000 farmers committed suicide because they could not repay their debts. This prompted the government to announce that it would exempt farmers from paying the $15 billion they borrowed from its current budget.


Part of the reason for India’s tough stance on the agricultural sector is the crippling food price inflation the country faces. The cost of basic products such as cereals, beans or lentils has increased by 25% over the past three years. According to Karkade Nagraj, an agricultural specialist at the Madras Institute for Development Studies, it is essential to maintain a certain stability in the agricultural sector if we want to stop the annual inflation rate, which is almost 11% and which not only threatens the current government but also heralds decades of meager incomes and low yields of nutritional products among the poor Indian population. ‘You cannot isolate what is happening to Indian farmers from what is happening in the economy of the rest of the world because of WTO policy,’ he says. Due to the crisis in the financial market, a large amount of money circulates in the markets of other commodities, which leads to locking up money in these markets. In such a condition, if the agricultural sector is opened up, then the farmers could increase their profits, but this situation will not be maintained for long.’
Preoccupied with their own rural problems, Chinese and Indian officials show little sympathy for the US and other countries that subsidize farmers. The Americans, Europeans, and Japanese ‘are asking the weakest countries to dismantle their protective measures without doing so in their own countries’, announces Shi Yinhong, professor of international relations at the University of Population in Beijing. ‘It’s about double standards’.


The misunderstanding can, however, go both ways, since the people of China and India have inordinate ideas of the sacrifices that foreign governments can ask of their farmers. . ‘People in developed countries don’t fully understand the difficulties of developing countries,’ says Shi. They think rich countries have much more room to make (concessions) on their own.’
Moreover, due to the global economy affected by the American downturn, credit restrictions, and rising oil, steel and food prices, again according to Shi, the governments of the two sides of the debate are anxious to risk taking bold steps. This means that China and India are even less likely to back down in the current dispute over trade.

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