Prime Minister Justin Trudeau has a rare opportunity to raise agricultural issues at the highest level in India later this month when he meets with Prime Minister Narendra Modi. He must be sure to press the importance of transparency in India’s agricultural policy.
There needs to be an acknowledgement between agricultural trading partners that the actions of one country have significant ramifications in the other, undermining trust — a key factor in any trading relationship.
In November, India placed a surprise 50 percent import duty on peas, followed by a 30 percent tariff on imports of chickpeas and lentils in December; this after Canadian farmers significantly increased planted acres of pulses in recent years, in part to meet the growing demand in India, which is the world’s largest importer of pulses.
Yet India seeks to become self-sufficient in pulses. Last year, its annual output grew to slightly less than 23 million tonnes — just short of annual consumption — from a regular output of 17 million to 18 million tonnes. The Indian government is so confident in the country’s production of pulses that it lifted an 11-year ban on exports.
However, because India imported 6.6 million tonnes of pulses last year, including 3.2 million tonnes of peas — an increase of 40 percent over the previous year — a good crop created by two consecutive years of good monsoon seasons and government support prices would mean an oversupply if that level of imports continues. That would send the price lower than minimum support levels established in India, hence the import duties to curb competition from abroad.
Minimum support level prices are important for a reason.
India faces a daunting task in the agricultural sector. The average farmer income is one-third that of non-agricultural workers. Twenty-three percent of rural households are below the poverty line. There are about 119 million farmers and 144 million agricultural workers in India. Combined, they comprise 21 percent of the population.
Floods, debt and crop failures mean farmer suicides are high, representing about 11 percent of all suicides in India.
So when things get tough in the agricultural sector, the Indian government is going to act, whether out of moral imperative or political expediency. The government has set a target of doubling farmer incomes by 2022, a goal deemed almost impossible by observers.
Still, India’s trading partners must deal with the fallout of the government’s changing agricultural rules.
Imposing sudden duties on agricultural imports leaves Canadian farmers floundering, searching for alternative markets for their harvest, and dealing with lower prices. (Yellow pea prices fell 25 percent after India’s import duty was announced.) And shipments already on the way to India were subject to the import duty.
India also periodically muses about ending Canada’s exemption to fumigation costs associated with the use of methyl bromide, which seems suspiciously like an import barrier because Canada does not have the pest subject to the required fumigation.
Trudeau needs to press for price transparency, seeking a longer lead time for imposition of duties and country specific fumigation orders based on evidence.
While India’s import rules would still vary from year to year, depending on the success of crops, these steps would help to create a more reliable trade environment for Canadian farmers as they make decisions about what to plant.
The two countries are working on a trade agreement. That’s the best way to ensure a stable trade relationship, but transparency and trust must be at the centre of any agreement.
Bruce Dyck, Karen Briere, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.