Which of the subsidies is considered illegal?

The Ministry of Trade recently submitted to the National Assembly’s External Relations Committee a brief report on the results of Vietnam’s WTO entry negotiations. It says that Vietnam is committed not to applying subsidies for export agricultural products as from the moment of joining the WTO. However, the country still maintains the right to enjoy some WTO regulations exclusively designed for the developing countries in this field.

For subsidies to be removed as required by the WTO, Vietnam will try to keep a level of less than 10 percent of output value while persisting with the protection of other subsidy levels of approximately VND4,000 billion/ year.

In the next few years, the State budget will not be financially strong enough to support the agricultural sector which can receive unlimited subsidies for encouraging agricultural expansion and serving agricultural development under WTO commitments.

Judging from the report, MA Nguyen Hai Yen from the Department for Multi-lateral Trade Policy under the Trade Ministry says that “Only subsidies for export and locally-made products violate WTO rules. Therefore, no one can prevent Vietnam from replacing subsidies with other forms of support which are not against WTO rules and regulations.”

Previously, Vietnam had subsidised seven key products as export rewards including rice, coffee, tea, fruits and vegetables, pork and pepper. However, such subsidies along with non-tariff protection measures were gradually abolished in the 2004-2005 period.

There is no limit to the quantity of most products controlled under technical standards. Therefore, Vietnamese subsidies have been re-adjusted in line with WTO regulations. Economic experts have recently raised questions about whether farmers are those receiving direct export subsidies contrary to WTO rules? In fact, never before have farmers enjoyed export subsidies which were previously applied for enterprises only.

There are only fears about having no money to support farmers

According to Dr. Tran Du Lich, Head of the Institute of Economics in HCM City, Vietnam’s agricultural subsidies are much lower than other countries in the world, particularly in comparison with the US and the EU.

France, for instance, has only 6 percent of its population involved in agriculture; its agricultural sector receives an annual subsidy of US$22 billion. And there are no violations of WTO rules as French subsidies only focus on developing infrastructure facilities and helping farmers apply advanced technology into production.

What about US subsidies? This year, as the world’s demand for corn is predicted at a certain level, the US has asked farmers not to grow maize in low-yield areas and they will be supported by subsidies from the State. These are not direct subsidies so their products will not be banned on the market so long as such subsidies are legally applied.

There are only fears about having no money to support farmers, not about having a ban on subsidies, Mr Lich stressed.

Many other economic experts think most of subsidies are in line with WTO rules but the crux of the matter is how to apply them in order to boost production and increase the efficiency and competitiveness of the agricultural sector and the national economy as well. No one will stop Vietnam from investing in agriculture promotion, irrigation development, rural transport, post-harvest technology and building of warehouses for farmers to stock goods as a precaution against fluctuation in prices.