Why EU deal is better for farmers than one with US, Pg26

Key Highlights:

• India is hesitant to include agriculture in its Free Trade Agreement (FTA) with the US due to livelihood concerns and farm subsidies.
• In 2015-16, India had 146.45 million operational agricultural holdings, contrasting sharply with the US's 1.88 million (2024) and the EU's 9.07 million (2020).
• The EU's average annual Producer Support Estimate (PSE) was $97.3 billion (2022-24), while the US's was $38.2 billion.
• India's PSE was a negative $73.1 billion (2022-24), indicating a net taxation of farmers due to suppressed prices, despite high input subsidies.

Detailed Insights:

• India's reluctance to open its agricultural market stems from the need to protect the livelihoods of a large farming population dependent on agriculture.
• The EU's interim trade agreement with Mercosur faced opposition in the European Parliament due to concerns about increased agricultural imports.
• PSE includes government payments to farmers and commodity market price support, reflecting policies that create gaps between domestic and international prices.
• While India's input subsidies are high, domestic restrictions and export curbs lead to suppressed farm gate prices, resulting in a negative PSE.
• An FTA with the EU could benefit India by boosting exports of seafood, fruits, vegetables, beverages, spices, and rice.
• A sterilisation duty could be levied to neutralize subsidies provided to EU farmers, offering protection against imports if needed.

Key Concepts Involved:

• Free Trade Agreement (FTA): An agreement between two or more countries to reduce or eliminate trade barriers.
• Producer Support Estimate (PSE): An indicator of the annual monetary value of gross transfers from taxpayers and consumers to agricultural producers.
• Sterilisation duty: A duty levied to neutralize the effects of subsidies provided to producers in another country.