Uttam Gupta
In a brazen display of ‘might is right’ in the just concluded World Trade Organisation’s (WTO) 10th ministerial meeting at Nairobi, Kenya between 15th-19th December, the developed countries led by the US and the EU literally junked the Doha Development Agenda (DDA).
On the two issues of critical importance to developing countries viz., (i) public stock holding for food security and (ii) Special Safeguards Mechanism (SSM) in agriculture, they were merely handed out hollow assurances.
At the 9th ministerial in Bali (December, 2013), developed countries had agreed to a ‘peace clause’ under which, if a developing country gives agricultural subsidies in excess of 10 per cent of its agricultural GDP, no member will challenge this until 2017 when WTO would look for a permanent solution to address their food security concerns. This meant that while peace clause would go in 2017, there was no guarantee that permanent solution would be in place by then.
The peace clause came with a plethora of conditions viz., submission of data on food procurement, stockholding, distribution and subsidies (including their computation) etc. These also included establishing that subsidies are not ‘trade distorting’ which is nearly impossible to comply with. In other words, even in the interim, any member could challenge if conditions are not met.
The above decision gave no relief whatsoever. It meant that whereas from 2017, in any case, developing countries would be subject to penal action for exceeding the prescribed subsidy ceiling, even in the interim, they would be in a vulnerable zone, courtesy conditions appended to the clause. Already, the US has been asking India to supply all sorts of data which tantamount to virtual surveillance on our food security system.
In meeting of WTO-General Council (GC) in Geneva on 31st July, 2014, India initially insisted on a time bound action plan to find a permanent solution to be executed before the end of 2014 but subsequently allowed things to drift. WTO-GC in its meeting (10th-11th December, 2014], approved ‘extension of peace clause till such time a permanent solution is put in place.’ But, it gave only a ‘false’ sense of comfort as the Damocles Sword would still hang because conditions appended to the clause were not dropped.
Yet, it gave a handle to developed countries not to work for a permanent solution. This is precisely what they have done in the Nairobi ministerial. They have merely agreed that “negotiations on the subject shall be held in the Committee on Agriculture (CoA) in the Special Session, which will be distinct from ongoing agriculture negotiations under DDA”. This postpones the solution indefinitely.
What was India looking for? Under Agreement on Agriculture (AoA), developing countries can give agricultural subsidies or aggregate measurement support (AMS) up to 10 per cent of value of agricultural production.
AMS has two components viz., (i) ‘product-specific’: excess of price paid to farmers over international price or ERP (external reference price) multiplied by quantum of produce; (ii) ‘non-product specific’: money spent on schemes to supply inputs viz., fertilisers, seed, irrigation, electricity at subsidised rates.
For computing AMS, support on inputs to resource poor farmers was ‘excluded’ under AoA. The rationale for this was that such support does not have any ‘trade-distorting’ effect, whereas WTO disciplines target only those forms of support which produce such effect. The same logic applied to product-specific subsidies.
However, it was not explicitly incorporated in agreement as Minimum Support Price (MSP) given to farmers then was lower than ERP resulting in negative product-specific AMS. That was a mistake as equation could reverse any time (and, indeed, it did).
Our negotiators also allowed another flaw to creep in. For computing ‘product-specific’ support, they allowed ERP to be frozen at the level of 1986-88. With this, comparing current MSP with ERP of three decades before inevitably results in ‘artificially’ inflated subsidy.
For instance, at present, wheat MSP US$ 226 per tonne (corresponding to Rs 1,450 per quintal) is US$ 96 higher than ERP (1986-88) of US$ 130 per tonne. So, we are in a vulnerable zone just because there is a flaw in computation methodology.