One of the major breakthroughs attributed to the incumbent Modi government is to have come closer to realize India’s long standing demand in the WTO negotiations on Food security.
Leading from the front, Prime Minister Narendra Modi himself established the framework during his visit to the US. But the essential ‘behind the scenes’ contours, which withstood series of diplomatic efforts, leading to the announcement of “resolving” of differences and securing the US support to the “Peace Clause” were firmly stitched by the Minister of Commerce Nirmala Sitharaman.
This “understanding” shall now allow India to table up a revised proposal to G-33 nations when the General Council of the WTO meets this month to forward a firm operational plan until a permanent solution for norms of calculating agriculture subsidies are qualified.
Ever since the Doha development round, the pressure has been on India to curtail the round of its agriculture subsidies and bring it on parity with other “developed” countries. The other contentious aspect is related to the Trade Facilitation Agreement (TFA) resulting in lowering trade anomalies through rationalization (read reforms) on concomitant customs duties and tariffs easing trade restrictions, a protocol which India refused to adopt during successive trade block discussions and development negotiations since Cancun rounds of 2003.
The “failure to reach compromise” and “Impasse” on underlying alignment of trade talks has been continuously referred to every directed effort of India seeking genuine redressal of its food security concerns notwithstanding the fact that the WTO Agreement on Agriculture (AoA), which came into effect in 1995, has seen significant changes in world pattern on food production and distribution. Controlled by Global behemoths the agribusiness rules have changed considerably and the resultant thrust has been more in securing global markets for agri-related trade interventions driven purely for profit than securing hunger, farm livelihoods dependent on agriculture and sustainable food security support for the poorest of the poor, perpetually relying on government subsidies.
It is not a hidden fact that speculation in commodity prices worldwide are controlled by less than five trans-national organizations creating an ever perpetual interplay on volatility in commodity prices, effectively managing both ends of the spectrums of demand and supply. This is ever in peril to countries which are either acutely dependent on agri-produce exports – losing out any advantage of food surplus production – or the countries, which rely on imports to sustain their food security needs, with each taking a direct brunt on their trading economies.
Further, the Agreement of Measurement (AMS) support is twisted so frivolously under the WTO agreement’s three classifications procedure that it self-grants the wealthy nations to heavily subsidize the agro businesses affording protection under “Non distorting” trade mechanisms (Green Box) short changing the “developing countries” which are bound so as not to breach the measures on 10% cap on agri produce and support (Amber Box) limiting them to support genuine agri subsidies calling it a distortion of trade.
Leading the duplicity and leader of the pack of Indirect (read Non Distorted) subsidies is the US itself which has increased the farm outlay on Year-on-Year (YoY) basis and spends roughly around USD 25 billion per year citing “Farm Income Stabilization”, mandated under the Farm Bill (2007). Roughly around 37% is allocated as beneficiary grant to farmers against loss of crop or Income and equally includes identified crops which guarantee beyond the floor price payments with Corn emerging as the top crop for subsidy payments with as much as 48% planned outlay. Further in addition to the Federal subsidy, the state subsidies are equally payable across select pool of farming regions and US has sternly refused thus far to bring it to a level where “competitive exports” of developing countries for non subsidized agri produce could compete with the subsidized in the International markets, as was clearly evident during the Doha round.
EU is not far behind in protecting itself in the “Green Box” doling out massive subsidies equally on YoY basis to the tune of Euro70 billion, which are obviously defined as Indirect and Non Trade Distorting support. India actually has not even yet breached the 10% cap ever and the pressure is solely been in anticipation of Right to Food becoming a reality in future!
Not surprising when India presented an alternative proposal seeking an institutional mechanism during the Ministerial talks in Bali in 2013 to compute the subsidy, which presently relies on a bizarre “administered price” using 1986-88 as a base year, the G-33 countries seeking dominant control of agri markets could see through the dilution in control of monopolizing the trade opportunities and have consistently ignored this demand, focusing instead on “Trade Facilitation Agreement”. India, on the other side, has been continuously losing out solely on the basis of this computation under “administered price” mechanism and thus scrutinized for its subsidies.
The “Peace Clause” itself needs to be further negotiated since it’s only the “understanding” which has been arrived at and is only applicable until the next ministerial meeting of 2017, pending the discussion on proposal and its further ratification by G-33 countries. There are stringent data compilation requirements on subsidies. Both the Centre as well as the States will have to supplement information across all levels of subsidies. These would include the programmes, crops covered, and provisions on procurement, disbursement, support prices of the targeted beneficiaries, which need to be listed and identified, something not done presently. Assuming for this to be followed, India shall expose itself completely on any future planned initiative without any potent safeguards.
With the Modi government firmly behind the “Right to Food” entitlement, further strongly committed to secure India’s food security and its provisions thus far, it will have to deal with this WTO duplicity playing an equal strong hand in the next round, despite the former appearing to be in favour.
The path forward for Modi government’s plan for Food Security solely rests on the tested principle adage of International Trade Diplomacy of “Nothing is agreed until everything is agreed” to be watched closely by G-All (Group All) including India..!!
Author is New Delhi based Policy Analyst.
