Making hay with India

Islamabad should seek a separate agreement with New Delhi on agriculture trade

Making hay with India
Given the highly contentious and complex nature of the agriculture trade between India and Pakistan, the two countries need to negotiate a separate agreement on agriculture trade.

Now, there arises a basic question. What is the raison d’etre of having a separate agreement on agriculture trade when these two countries are the signatories of an already existing free trade agreement between South Asian Nations called SAFTA?

The first and the foremost reason is that agriculture is a sensitive issue globally. It is a sector that relates to the rural economy of every agriculture-producing nation in the world. Agriculture also impacts the critical and sensitive issue of food security and food production.

World Trade Organization (WTO) is considered to be a global watchdog on trade related issues. It defines and explains the rules and legal procedures through which the trade in all sectors has to be carried out among its signatories. In the WTO’s framework, the legal discipline applied to the trade in agricultural goods and the trade in non-agricultural goods is distinctive. It is very interesting to note that the legal obligations regarding the trade in agriculture are enshrined in a separate Agreement on Agriculture (AoA) in the WTO regime.

[quote]Trade in agriculture is dealt with in a separate Agreement on Agriculture in the WTO regime[/quote]

The reason for this distinctive treatment and a separate agreement on agriculture within the WTO framework is based on how agricultural trade was negotiated in the General Agreement on Tariff and Trade (GATT), which predates the WTO.

A recent study by Lahore University of Management Sciences (LUMS) revealed that during the GATT period (1947-94), several rounds of multilateral trade negotiations were held between the contracting parties, but they could not agree on a substantial reduction in protection for agricultural goods. Moreover the ban on quantitative restrictions or quotas in Article XI of the GATT had an exception for quotas for agricultural products. Furthermore, article XVI.3 of GATT discouraged export subsidies for agricultural products so that a subsidizing country might not end up in having a more than equitable share of the world market for the particular subsidized good, the powerful nations like US and Japan succeeded to get waivers and circumvent this non-stringent provision altogether.

Women work in fields near Multan in southern Punjab
Women work in fields near Multan in southern Punjab

During the last GATT round (Uruguay Round, 1986-94), there was a push for some amount of liberalization on trade in agricultural goods and that too on the emergence and insistence of Cairns Group (a coalition of agri-exporting countries including Canada, Australia, New Zealand and Brazil) that AoA was concluded and in its article 20, it was formally acknowledged that this agreement was merely a beginning of the liberalization process on agriculture trade.

The LUMS study found that the most practicable reasoning of having a separate agreement on agriculture between India and Pakistan comes from the currently practiced North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico. It is important to mention here that whereas all of the agreement was negotiated trilaterally, Agriculture was negotiated bilaterally between the three partner countries in NAFTA and three separate agreements were signed between each pair of parties.

The study also focuses on SAFTA and how it deals with the agriculture issue between its member countries. It is important to see how agriculture is treated in SAFTA, because agriculture is a critical issue for both the economies. More recently, in the Bali package announced in December 2013, India’s proposal for provisionally excluding the challenges to public stockholding programs that purchase crops for food security purposes was accepted, giving more unrestricted space to the Indian government to pursue trade distorting subsidies that might have adverse effects on neighbouring countries in general and Pakistan in particular.

Moreover, in the SAFTA Agreement there is no mention of agriculture or agricultural goods in the main agreement. It is an astounding fact indeed that a free trade agreement has been negotiated between the countries, which are primarily agriculture based and there is no mention of it in the main agreement. It may be deciphered from this fact that the negotiators of the SAFTA were not contemplating the trade in agricultural goods under the framework of SAFTA.

So, we can safely assume that Pakistan and India may sign a separate agreement on agriculture following the NAFTA model with a few variations owing to regional and other measures. This would also be consistent with the “special arrangement” language covering trade between India and Pakistan in article XXIV.11 in the GATT agreement. SAFTA agreement itself envisages additional measures in article 3.2 (a) which states that “SAFTA will be governed by the provisions of this agreement and also by the rules, regulations, decisions, understandings and protocols to be agreed upon within its framework by the contracting states”.

In this way, Pakistan and India may also resolve the issue of heavily subsidized Indian produce by negotiating more rationally. Furthermore, the concept of tarrification can be used to do away with the non-tariff barriers (NTBs) Pakistani exports face while entering the Indian market. By this tarrification concept, every NTB can be converted into a tariff, which would be equivalent to the value of that particular NTB.

Finally, as India and Bangladesh and India and Sri Lanka have already negotiated bilateral agreements between them, there is no harm in considering the negotiation of a bilateral agreement on agriculture trade between India and Pakistan.

The writer is a section officer in the Ministry of Commerce. He may be reached at