PUNJAB'S AGRICULTURE UNDER WTO REGIME
HAMMAD BADAR & QAMAR MOHY-UD-DIN
Sep 17 - 23, 2007
The Agreement on Agriculture (AoA) of the World Trade Organisation (WTO) is of great significance for developing countries with respect to their economies and food security. The agreement rests on three pillars i.e. market access, domestic support and export competition. Among these, the domestic support commitments in favour of agricultural producers under the provisions of the WTO include the government measures of assistance, whether direct or indirect, to encourage agriculture and rural development. In WTO terminology, the domestic support is annexed with three boxes i.e. Amber, Blue and Green.
The domestic support measures included in Amber Box i.e. payments and subsidies paid to producers are to be reduced, but not eliminated and are based on annual level of support provided to producers of agricultural products expressed in monetary terms pronounced as Aggregate Measurement Support (AMS). Developed countries were to reduce their AMS by 20 percent during the implementation period (six years for developed countries and ten years for developing countries) and developing countries faced 13 percent reductions. Blue Box embodies certain direct payments to farmers aimed at limiting production and are specifically exempted from reduction commitments. This type of support is given only in European Union and United States.
The Green Box measures comprise of forms of support that are considered to have no or minimally distorting effects on production or trade. Green-box supports are not only permanently exempt from reduction but are also identified as non-actionable subsidies. These include such policies as general government services (in areas such as research, pest and disease, and so on); public stockholding for food security purpose; domestic food aid; direct payments to producers; decoupled income support (that is, support not related to or based on production); structural adjustment assistance; payments under environmental programme; and payments under regional assistance programmes.
The domestic support reduction commitments under the WTO have many implications for developing countries like Pakistan where agriculture is mainstay of the economy. From agriculture point of view, the province of Punjab plays pivotal role as it is the major contributor towards total agricultural production of the country. If agriculture in the Punjab province performs well, the overall agricultural growth rate of the country also improves considerably. In the province, agriculture sector is a major source of income and employment and a generator of demand for the products of the other sectors.
The province is playing a leading role in agricultural production. It contributes about 63740.4 thousand tonnes which is about 59.85 percent towards total agricultural production in the country. Commodity wise Punjab is contributing 74.12 percent cereals, 81.75 percent pulses, 55.45 percent cash crops, 9.39 percent edible oils, 59.95 percent fruits and 77.54 percent vegetables of the total productions of these commodities at national level (Table 1). Total agricultural production of Punjab over the years has increased considerably. In the year 2003-04, Punjab produced 63740.4 thousand tonnes of agricultural produce, almost 62.21 percent higher than the agricultural production of 1990-91 i.e. 39655.3 thousand tonnes.
AGRICULTURAL PRODUCTION OF PUNJAB AND PAKISTAN IN 2003-04
Total Agri. Production
Source: Agricultural Statistics of Pakistan (2004-05)
Despite this significant role of agriculture in the province, this sector is beset with many problems. Majority of the farmers in the Punjab are small with land holdings up to 5 hectares and owners of such farms are practicing subsistence farming under deficit as their yield of major crops is far less than the progressive farms. One of the major causes of low productivity is the use of inappropriate/inefficient mechanization and modern means of production technology. Farming community lacks proper knowledge and is not properly equipped to meet the challenges of modern agriculture. Majority of the farmers are illiterate and are unable to make rational decisions on their own and need institutional support. Moreover market mechanism is not well established and not capable enough to provide proper economic signals to all the stakeholders. All these factors justify that domestic support to agriculture sector should be continued rather enhanced. Under WTO regime, there is an ample scope for raising domestic support outlays without contravening the AoA. That agreement sets no ceiling on green box and Special and Differential Treatment expenditures and does not erect direct consequences for policy. Rather, the main problem seems to be very low levels of support to agriculture, given the important role of the sector in the economy. In the following, various suggestions have been extended for the provision of domestic support in the Punjab province within the framework of various WTO rules.
Total Aggregate Measurement of Support (AMS) throughout the implementation period as notified by Pakistan is negative implying that agriculture sector in Pakistan and Punjab, instead of receiving support under the Amber Box, were rather taxed. Pakistan has no reduction commitments in case of AMS. Therefore Pakistan can utilize this cushion by increasing its support falling with in the preview of AMS so that first it attains positive sign and then further it can use de minimus provision for agriculture sector and rural development, without contravening the provisions of AoA of WTO. In this regard, wheat crop is very important from food security point of view; the price support programme for wheat should be continued as current total AMS in Punjab is negative.
Since Green Box type domestic support has no limit, therefore, the Government of Punjab should explore the possibilities to provide domestic support under Green Box. This will enable the needy sector to get due share. The provincial government should increase investment in rural public domain such as agricultural research to further improve agricultural technology and to provide producers with better production conditions that are comparable with their foreign competitors. In this direction, Govt. of Punjab should (a) accord high priority to agricultural research and investment spending on agricultural research should be increased manifolds immediately, (b) ensure that major proportion of budget of the various research organizations is incurred on the operational research (c) bring drastic institutional changes in the provincial research organizations in order to stem the current outflow of competent agricultural researchers. (d) fill all the vacant positions in the research organizations of the province. Fresh recruitment, promotions and appointment against various administrative posts should be on merit and should be tied up with performance, (e) ensure agricultural research be problem solving and target oriented.
Agricultural extension plays a key role in improving agricultural productivity. Presently the budgetary allocation for agricultural extension is also far less than the current needs of the province. Government should lay special emphasis on improving extension services in the province and funding in this area should be increased.
Timely and cheap access of farmers to various agricultural inputs like distribution of improved seed and fertilizer should be improved. Seeds should also be made available in case of natural calamity and seed storage infrastructure should be developed. Grants should be provided to both public and private seed corporations for maintenance of certified and foundation seeds. The core poor should be given improved seed and fertilizer at cheaper rates and in small packs. In this regard, the recent announcement by Govt. of Punjab to provide subsidized seed and fertilizers to small farmers (with less 12.5 acres of land) is timely step in right direction.
Infrastructural development should be accorded high priority in the budgetary allocations of the government. Public expenditure on the irrigation, and land reclamation should be further enhanced and spendings on canal lining and laying down of water courses for overcoming water losses during conveyance of water to the tail end farms should be increased. In water deficient areas, water conservation techniques should be introduced and promoted among the farmers. Where installation of tube wells is feasible, farmers should be provided incentives and technical expertise for tube well installation. In this connection, electricity should be provided at subsidized rates to the agriculture sector. In our neighbouring country India, power to agriculture is offered at a very low price; in a few cases it is even free. Like many Indian states, the government can also adopt policy of irrigation subsidies to facilitate its resource poor farmers.
Commodity loan programs allow producers of designated crops to receive a loan from the government at a crop-specific loan rate per unit of production, by pledging production as loan collateral. Following harvest of the crop, a farmer may obtain a loan for all or part of the new crop. The government can adopt such policies to issue commodity loans to the farmers to facilitate production and to render them free from the exploitation by middlemen and wholesalers. Furthermore, loans for marketing, storage and transportation purposes of agricultural commodities should also be arranged.
Pest and disease control including general and product specific and disease control measures such as early warning systems, quarantine and eradication has assumed paramount importance because of Sanitary and Phyto-Sanitary Agreement of WTO. The government should ensure proper pest and disease control mechanism in line with the international standards if the object is to increase agricultural exports. A strict system of inspection including general inspection service and the inspection of particular products of health, safety, grading and standardization purposes should be enforced and inquiry points at various places should be set up.
Agricultural marketing in the past in Pakistan has largely remained ignored but disposal of occasional surpluses of some of agricultural commodities; emergence of agribusiness sector and challenges posed to agrarian economy by WTO has increased its importance. The farmers of Punjab in general and small farmers in particular lack modern marketing techniques that result in high post-harvest losses. Although separate Ministry of Agricultural Marketing in Punjab province has been established but there is a need to make it vibrant and functionally working for the provision of various marketing related services to the farmers. Farmers should be facilitated in the product preparation, handling, storage, bargaining, grading, standardization, packing and disposal of their produce. Market information system should be strengthened in order to provide information to all stake holders and bring coordination in agricultural markets.
The contribution of agriculture labour in increasing agricultural production of the province of Punjab has been quite significant in spite of the fact that labour in our country is not equipped with modern techniques used in Agriculture sector. It is therefore, urgent need of the time to arrange training programmes not only for the farmers but other stakeholders as well. Govt. in this regard should chalk out comprehensive trainings programmes. Various programmes and projects should be initiated in collaboration with research and training institutes and agricultural universities.
All the above suggested sectors, sections, categories need domestic support of the provincial government. The suggested provisions can help directly or indirectly, the agricultural and rural development in the province. The government can extend domestic support to the above suggested areas without contravening the provisions of AoA of WTO.
Lecturer, Dept. of Marketing & Agribusiness, University of Agriculture, Faisalabad (firstname.lastname@example.org)
Chairman, Dept. of Business Management Sciences, University of Agriculture, Faisalabad