Question

Debate on Trade Practices The agriculture sector provides the bulk of employment and a significant portion of the GDP in India. Compare this to a developed country such as the US with the share of agriculture in GDP at 1% and its share in total employment a tiny 0.5%! And yet this very small percentage of people who are engaged in agriculture in the US receive massive sums of money from the US government for production and for exports to other countries. Due to this massive money that they receive, US farmers can sell the farm products at abnormally low prices. The surplus farm products are sold in other country markets at low prices, adversely affecting farmers in these countries. Developing countries are, therefore, asking the developed country governments, “We have reduced trade barriers as per WTO rules. But you have ignored the rules of WTO and have continued to pay your farmers vast sums of money. You have asked our governments to stop supporting our farmers, but you are doing so yourselves. Is this free and fair trade?”

In the above example, we saw that the US government gives massive sums of money to farmers for production. At times, governments also give support to promote the production of certain types of goods, such as those which are environmentally friendly. Discuss whether these are fair or not.

Answer 1

Supporting the production of environmentally friendly commodities, such as renewable energy technologies or eco-friendly items, can have a positive impact on environmental sustainability. From an environmental aspect, these measures are critical for supporting sustainable behaviours and lowering carbon footprint. Encouraging greener alternatives benefits society as a whole by reducing climate change and conserving resources. However, government backing for environmentally friendly items can have an impact on international trade. Subsidies and incentives that are deemed to distort markets or provide unfair advantages are not fair practices. These behaviours need to be addressed and corrected through trade agreements.