US Attacks India’s Cotton MSP

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India has dismissed a counter notification issued by the US alleging New Delhi’s minimum support price support (MSP) for cotton breached the permitted levels that it reported to the World Trade Organization (WTO), people familiar with the development said. The notification comes at a time when the US itself is paying heavy farm subsidies to its own cotton growers.

The US has alleged that India paid trade-distorting subsidies to its cotton farmers well in excess of the limit of 10% for developing countries. “It appears that India provides MSP for cotton vastly in excess of what it has reported to the WTO,” the US said in its nine-page notification.

Washington’s latest counter notification, which is the second of its kind after a similar notification on India’s rice and wheat several months ago, says: “India’s apparent MSP for cotton appears to have been between 53% and 81% of the value of production in each of the covered years (2010-2017).”

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“India appears to be providing significant MSP both in terms of absolute value and as a percentage of the value of production (VoP), for cotton.”

The minimum support prices for agricultural commodities is calculated as the difference between the applied administered price and external reference price prevailing in 1986-88 multiplied by eligible production. India had all along opposed the methodology adopted for arriving at the MSP. India, along with more than 45 countries of the G-33 farm coalition, had demanded that the MSP be calculated by using an external reference price of a recent period instead of 1986-88, which was built into the equation following the Uruguay Round of trade negotiations.

But the US and other erstwhile farm trade-distorting countries such as the European Union, Japan, Norway and Switzerland, vehemently blocked India’s efforts for changing the methodology.

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“The US wants to paint India with a dark brush as a culprit for global distortions in cotton trade in which the US and the four poor West African countries-Benin, Burkina Faso, Mali, and Chad-are the main victims,” said a trade envoy, requesting anonymity.

A senior Indian trade official, also requesting anonymity, said: “The US’ counter notification is a cut-and-paste job of what Washington previously did on India’s rice and wheat and it is based on a flawed and erroneous methodology.” India will categorically dismiss the notification on cotton when it comes up for consideration at the special negotiating session, the official added.

Moreover, the US has used the rupee for calculating the market price support, while India calculates in dollar terms, which makes a tremendous difference, said an analyst on global farm trade.

Also, the US was wrong to use total production for the calculation of MSP as opposed to India’s calculation based on the procured production. Further, the Cotton Corporation of India does not procure more than 1% of the total production of cotton, the analyst said.

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In short, the US wants to pit India against poor West African countries who are seeking substantial reduction in cotton subsidies provided by the US, he added. “Incidentally, the US was already condemned by the WTO’s appellate body for distorting global trade in cotton.”

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