In the run up to the upcoming WTO ministerial in Buenos Aires [December, 2017], ex-commerce minister, Nirmala Sitharaman has once again reiterated India’s resolve to seek a permanent solution for public stockholding programs for food security besides taking up two other proposals viz. special safeguard mechanism [SSM] against sudden surge in imports of agricultural products and movement of short-term services providers.
But, India is up against heavy odds as during her recent visit to WTO, Geneva [July, 2017] , US, EU, Canada, Australia and Japan had rejected a proposal submitted by G-33 Group of developing countries in this regard. At the same time, developed countries wanted to bring to the table issues such as e-commerce and disciplines for micro, small, and medium enterprises [MSMEs]. In fact, they have already submitted proposals on July 14, 2017 for a new “holistic” work program on electronic commerce.
The issues raised by G-33 – being part of so called ‘unresolved’ issues under Doha Development Agenda [DDA] – are about two decades old. The 1998 work program required members to make recommendations based on the work conducted in four different WTO bodies—the goods council, the council for trade in services, TRIPS [trade-related intellectual properties] council, and development division. Yet, developed countries have managed to sideline these and bring-in new issues those were not in the original agenda.
For instance, ‘trade facilitation’ for goods was not a part of DDA. In 2004, this was included after developed countries promised to address developmental issues in agriculture, industrial goods, and services based on the principle of less-than-full reciprocity (LTFR). The LTFR principle mandated them to commit to sharp reduction commitments for reducing their trade-distorting farm subsidies as well as barriers in market access for agricultural and industrial products.
In the WTO – General Council [GC] meeting [December, 2014], the developed countries got away with an agreement on ‘trade facilitation’ whereas on the core issue of permanent solution for public stockholding programs for food security, the Council approved ‘extension of peace clause till such time a permanent solution is put in place.’ This was merely an attempt to hoodwink the developing countries. This is how they maneuvered things.
At the 9th ministerial in Bali [December, 2013], developed countries had agreed to a ‘peace clause’ under which, if a developing country gives aggregate measurement support [AMS] [WTO jargon for agricultural subsidies] in excess of 10% 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. In other words, even in the interim, any member could challenge if conditions are not met.
In WTO-GC meeting, Geneva [July 31, 2014], India had insisted on a time bound action plan to find a permanent solution to be executed before end of 2014 co-terminus with approval of agreement on TFA. Prime Minister, Modi had even raised this issue in his one-to-one meeting with then President Obama [September, 2014]. But, the disingenuous negotiators from developed countries even while getting away with TFA, dodged G-33 on the permanent solution.
The ‘peace clause’ being available till such time a permanent solution is put in place [GC decision] is of no use as the 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 did in Nairobi Ministerial [December, 2015]. The declaration merely stated that “negotiations on the subject shall be held in the Committee on Agriculture [CoA], which will be distinct from ongoing agriculture negotiations under DDA”.
With this, the importance of the subject matter stands hugely diminished as in the CoA, this gets clubbed with other subjects taken up in a routine manner. No wonder, developed countries had the audacity to reject India’s proposal in the July, 2017 at Geneva. There is also a problem in the way India/G-33 have presented their case.
AMS includes ‘product-specific’ subsidies and ‘non-product specific’ viz. subsidies on agricultural inputs viz., fertilizers, seed, irrigation, electricity etc. The ‘product-specific’ subsidy is computed as excess of MSP paid to farmers over international price – or external reference price [ERP] – multiplied by quantum of agriculture produce whereas ‘non-product specific’ subsidies is money spent by government on schemes to supply agricultural inputs at subsidized rates.
For computing ‘product-specific’ support, the ERP was frozen at the level of 1986-88. With this, comparing current MSP with ERP of 3 decades before inevitably results in ‘artificially’ inflated subsidy [it is bewildering as to how this was not noticed by Indian negotiators]. So, the 10% ceiling is bound to get crossed showing developing countries as violators, turning them into pleaders and being handed out lollipops [read ‘peace clause’]!
Now, instead of taking an aggressive stance that this fraud perpetrated over two decades back [WTO agreement was signed in 1995] must be undone which will automatically ensure that India never crosses the 10% ceiling, we are being overly defensive. Thus, the G-33 proposal called for ‘price support for public stockholding should be exempt from reduction commitments ….’
We need to get out of this mindset of a pleader. India should ask for removal of the flaw in the formula. Modi has the guts to do it; he demonstrated this in 2014 by insisting on ‘simultaneous decisions on TFA and permanent solution’; but it is a mystery as to why this was not carried forward. Now, with TFA already in the pocket of developed countries, it may be difficult but certainly doable.
In regard to SSM, at Nairobi ministerial, G-33 wanted an amendment to an existing provision in Article 5 of the Agreement on Agriculture [AoA] to provide them same benefit that developed countries derive from Special (Agricultural) Safeguards [SSG]. Here again, all that they agreed ‘developing countries will have the right to recourse to safeguards as envisaged under the Hong Kong Ministerial Declaration’. That’s merely playing to the gallery.
This too along with India’s proposal on ‘movement of short-term services providers’ – the third crucial item of concern in view of its huge stake in exports especially in the IT sector – should be taken up strongly by the team led by Suresh Prabhu [new commerce minister] at the 11th ministerial in Buenos Aires.