Uttam Gupta
Roberto Azevedo, Director General of World Trade Organisation (WTO), who was recently in Delhi to explore and understand India’s perspective on issues for taking up in the 11th WTO ministerial scheduled for 11th to 14th December, 2017, stated that “one has to be patient for a permanent solution and asked not to undermine the efficacy of the peace clause”. Azevedo’s exhortation is unmindful of the vulnerabilities of developing countries inherent in the ‘peace clause’. When, the provision itself stands on a slippery foundation, there is impatience.
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 the WTO would look for a permanent solution to address food security concerns. This meant that, while the peace clause would go in 2017, there was no guarantee of a permanent solution being in place by then.
The peace clause came with a plethora of conditions – submission of data on food procurement, stockholding, distribution and subsidies (including their computation) etc. These also included establishing that subsidies are not ‘trade distorting’. In other words, even in the interim, a member could contest if conditions are not met.
In 2014, the Modi Government, insisted on finding a permanent solution within that year, and even made the signing of the Trade Facilitation Agreement (TFA) – a key issue of interest to developed countries – conditional on their agreeing to the solution. In its meeting held on December 10-11, the WTO General Council (GC) 2014 approved the TFA. But the permanent solution remained elusive.
However, in a slight modification of the decision at Bali, the GC approved extension of ‘peace clause’ till a permanent solution is found. This leeway was of no use as the conditions appended to it were not dropped, thereby making developing countries vulnerable to challenge. The decisions of the GC were reiterated at the 10th ministerial meeting at Nairobi (December, 2015). As regards finding a permanent solution to food security, it merely agreed that “negotiations on the subject shall be held in Committee on Agriculture (CoA) in the Special Session, which will be distinct from ongoing agriculture negotiations under the Doha Development Agenda (DDA)”.
The decisions to take the subject matter out of the DDA’s purview and throw in to the lap of the CoA (albeit in a special session) tantamount to postponing it indefinitely. In this backdrop, developing countries cannot afford to sit complacent. India should insist on its inclusion in the agenda for 11th WTO ministerial. What should it focus on?
Under the Agreement on Agriculture (AoA), developing countries can give subsidy on food for public stock holding operations – called aggregate measurement support (AMS) – up to 10 per cent of the value of agricultural production. The AMS includes ‘product-specific’ subsidies and ‘non-product specific’ subsidies on agricultural inputs.
The ‘product-specific’ subsidy is computed as excess of the minimum support price (MSP) paid to farmers over international price – or the external reference price (ERP) – multiplied by quantum of agriculture produce whereas ‘non-product specific’ subsidies is money spent by Government/State on schemes to supply agricultural inputs at subsidised rates. There are major flaws in the AoA.
First, for computing the AMS, whereas support on agri-inputs to resource poor farmers is ‘excluded’ (on the basis that such support is not ‘trade-distorting’), product-specific subsidies given to them are not. Second, for computing “product-specific’ support, the ERP is frozen at level of 1986-88. With this, comparing the current MSP with the ERP of three decades before, results in ‘artificially’ inflated subsidy. This inevitably results in the AMS exceeding the 10 per cent ceiling fixed under the agreement.
If only we insist on the correction of these two anomalies, Indian agricultural subsidies, even while continuing with extant dispensation, will be well within the 10 per cent ceiling. That indeed is the ‘permanent solution’ to the problem of food security.
India should engage proactively with the WTO to ensure that issues of concern to developing countries – permanent solution to food security, the SSM and agricultural subsidies – get prominent attention in the agenda of the upcoming ministerial at Buenos Aires in December 2017.
(The writer is a public policy analyst)