Average tariffs on trade in agriculture still hover around a level of 40 per cent, compared to an average 4 per cent tariff on manufactured goods.

As a potential net exporter of agricultural products, it is very much in our interests to push for a sharp reduction in tariffs and bound rates. Megatariff barriers prevent us from exploiting our natural comparative advantages. Japan, for example, imposes a prohibitive tariff on rice imports into the country. Since we are a net exporter of rice, the exclusion of Japanese markets obviously affects us.

Tariff Rate Quotas are anothertariff issue Indian negotiators might consider at the farm talks. The European Union, in particular, uses these quotas to give preferential access to producers based on trade patterns from the past. This makes it difficult for Indian exports to capture new markets in these economies. Once the quota of imports are filled, further imports are subjected to a high tariff rate. In effect, this prevents Indian exports from expanding their markets in the EU countries. We might either ask for an increase in the quotas allotted under these schemes, or ask for a reduction in the over-the-quota tariffs imposed. Tariff escalation, a process by which tariffs are increased as the product undergoes processing, limits the potential market of the food-processing sector in India. Since this is a sector with great export possibilities, it seems likely that we will be looking to minimize tariff escalation practices around the world.

Possibly the most controversial topics in these talks will revolve around the role of domesticsupport prices and policies. The problem with domestic support policies is that they severely distort the incentives to producers. The United States Department of Agriculture estimates that the European Union spends around $115 billion annually on domestic support policies for agriculture. Japan spent some $70 billion and the United States itself spent around $60 billion. Calculated on a per unit of output basis, the EU and Japan both spent around 30 cents on subsidies for every dollar of farm output produced. Given the vast amounts spent in India on input subsidies, one might suppose that this is one area we would be better off keeping quiet about. But since output prices are kept artificially low in India, it turns out, according to the World Bank, that Indian agriculture is `disprotected' by around 9 per cent. This means that instead of policy providing artificial incentives to boost production, agricultural production is actually taxed relative to world production. Asking for a cut in the domestic supportto agriculture in these countries would benefit us.

Take, for example, the effect of a cut in domestic supports in Europe. As the support price within declines, the demand for these goods increases. This means that the exportable surplus of the farm sector decreases. At the same time, lower output prices might force some of Europe's farmers to reduce their production of commodities. Again, this reduces the exportable surplus left at the end of the day. Naturally, as the supply of European exports in the open market decreases, net exporters like India gain. The Uruguay round, under it's so-called `Green Box' policies, allows for decoupled income support, so that our poorer farmers can be compensated for any decline in fortunes as a result of subsidy reforms.

Closely linked to these issues is the question of export subsidies in the trade talks. The EU, which accounts for around 84 per cent of all export subsidies granted, needs to maintain a large programme of export subsidies precisely because of it'sdomestic support policies. High intervention prices create a large export surplus from the EU farm sector. But since these prices inside the EU are much higher than elsewhere, the only way the EU can sell this surplus is to sell it at world prices, and bear the difference between world and common market prices itself.

This problem becomes even worse during times of low farm prices. Since the EU is bound to maintain a specific support price for its farmers, the difference that has to be borne by the EU becomes even larger. Notice also that in times of low prices, this export subsidy forces world farm commodity prices even lower.

Unless the CAP is reformed, the EU's problems are likely to get worse. The Union is likely to be expanded in the near future to include 10 countries from East Europe. The farming community in these countries is, if anything, larger and poorer than their compatriots in the west. The burden on EU finances is, therefore, likely to increase further as the EU would have to bear thedifference between the intervention price and world prices for this lot also.

The EU might have to expand export subsidies to get rid of this surplus. Since India does not give any subsidies on exports, the way ahead on this issue at least is clear. India will push for a complete elimination of export subsidies. We might, though, find it worthwhile to try to negotiate an exemption on export marketing subsidies. This is because we have not yet started a substantial export programme, so our products lack recognition. As in any other competitive market, it should be recognized that newcomers would need to spend more on advertising and marketing. And since most exporters from India lack the means to carry out an effective marketing campaign in OECD economies, Government assistance might be crucial to take advantage of the multilateral nature of trade negotiations. It might be good strategy to identify a coalition of interests similar to ours.

One might expect a developing countries group as a likelycoalition. That would be a mistake though, because developing country interests will not always be similar. In the next round of talks, we should expect developing country support to be split down the middle, dividing the group into farm product exporters and importers. The food importing countries will side with the EU on the supports and export subsidy issue, since taking away this subsidy might increase their farm import bills by as much as 15 per cent. India's interests would be better served by aligning itself with a strong coalition of exporting country interests such as the Cairns group of exporters.