While it was advantage developed countries all the way, India was able to avoid more harm to its interests
At the World Trade Organization (WTO), even as all decisions are taken by consensus and every member country has equal voice, when it comes to actual confabulations, there are glaring inequalities. The developed countries—the US, the European Union, the UK, Australia, etc.—exercise disproportionately greater influence. They set the agenda of meetings, and get away with what they want even as developing countries are made to concur.
The outcome of the just concluded 12th Ministerial Conference (MC12) at the WTO headquarters in Geneva (June 12-17) is broadly in sync with this trend seen in the past.
For India, the most crucial area was ‘a permanent solution to the public stockholding (PSH) program for food security.’ Under this program, government agencies like Food Corporation of India (FCI) buy agri-produce such as wheat, rice/paddy, and coarse cereals from farmers at the minimum support price (MSP) and distribute it at a subsidised price of Rs 1/2/3 per kg to meet the needs of India’s poor and vulnerable population.
The excess of MSP plus handling, storage and distribution cost over the realisation from sale (that is, Rs 1/2/3 per kg) is paid as subsidy from the Union Budget. This includes (a) subsidy to the farmer, being the excess of MSP of, say, rice over its international price also known as External Reference Price (ERP) in WTO parlance and (b) subsidy to the food consumer, being the excess of ERP over the price paid (Rs 3 per kg rice).
The WTO is concerned with (a) branded as “product-specific” subsidies. It is also concerned with subsidies on agricultural inputs like fertilizers, seed, irrigation, power, etc., referred to as “non-product specific” subsidies.
Under the Agreement on Agriculture (AoA) of the WTO, the sum total of product and non-product specific subsidies or aggregate measurement support (AMS) is capped at 10 per cent of the value of agricultural production for a developing country. If a member country gives AMS in excess of 10 per cent, it is a violation.
At present, India enjoys protection under a “peace clause” which was sanctioned in the 9th MC held in Bali (2013). It said “if a developing country gives AMS in excess of 10 per cent, no member will challenge this until 2017, when the WTO would look for a permanent solution.”
In the General Council (GC) held in December 2014, this sanction was modified to say “the peace clause will stay till a permanent solution was found.”
However, the peace clause comes with several riders, such as submission of data on food procurement, stockholding, distribution and subsidies.
These also include establishing that subsidies are not “trade distorting.”
This makes India vulnerable which is evident from some countries insisting on ‘safeguards’ and ‘transparency’ obligations after it invoked the peace clause in 2018-19.
Against this backdrop, India was looking for a “permanent solution.” It had asked for “total exemption for support to PSH for food security.” Alternatively, it sought to rework the formula for computation of the AMS by removing flaws under the AoA. The flaws include (i) taking ERP for the year 1986-88; (ii) not excluding subsidies given to the resource-poor farmers; (iii) using the entire output instead of quantity procured for PSH.
These flaws “artificially” inflate the AMS thereby pushing Indian subsidy beyond the 10 per cent threshold, hence vulnerable to violation of its obligations under the WTO.
Despite its overwhelming importance to India and other developing countries, the issue was not even put on the table (it has been deferred to the next ministerial). Meanwhile, the MC-12 decided against any export restrictions on World Food Programme (WFP) purchases for food security in other countries. For India, the only saving grace is that it may restrict exports for “domestic food security.”
The second major issue was India’s demand of Trade-Related Aspects of Intellectual Property Rights (TRIPS) waivers for all Covid-related therapeutics and diagnostics, besides vaccines. Against this, the MC-12 has granted a patent waiver (albeit ‘temporary’ and ‘limited’) only for Covid-19 vaccines which will allow India to authorise production of patented vaccines without taking consent of the patent holder for domestic requirements and exports.
War against the Covid pandemic has to embrace all the three critical dimensions—testing, tracking, and treatment. Apart from the vaccine, diagnostics and therapeutics too need to be supplied at affordable rates.
To say “A decision on these would be taken in six months” is neither here nor there.
Even for the vaccines patent waiver, putting a time limit of five years is too restrictive considering that Covid- 19 is here to stay and a host of new variants popping up every now and then, and even the World Health Organization (WHO) cautioning people against occurrence of the pandemic every six months.
As for the third issue on fisheries subsidies, in sync with the principles of “polluter pays” and “common but differentiated responsibilities,” India had proposed that developed countries abolish their subsidies over the next 25 years even while exempting developing countries from over-fishing subsidy prohibition within these 25 years.
The MC-12 has decided that “no subsidies will be given for fishing in areas outside EEZ (exclusive economic zone) or RFMOs (regional fisheries management organization); these are inter-governmental organizations having competence to adopt legally binding conservation/management measures regarding fisheries especially in the high seas as set out in the 1982 UN Law of the Sea Convention and described further in the 1995 UN Fish Stocks Agreement).”
It has also agreed to check illegal, unreported and unregulated (IUU) fishing and mooted “very strict controls” on overfishing so that fish stocks are restored.
This is a path-breaking decision that should help in curbing fishing (rather over-fishing) by big players in the deep ocean. However, it would have been better if time lines were agreed upon for abolishing such subsidies and mechanisms laid down for its enforcement and monitoring.
These decisions don’t impact us, as the curbs are only on subsidies for IUU fishing and fishing outside EEZ or RFMOs, and India does not indulge in any such activities.
The fourth issue pertains to the moratorium on customs duty on e-commerce. The developed countries have been the prime beneficiaries of this arrangement in vogue since 1998. India was keen that it should go as developing countries are losing billions of dollars in duties foregone. Yet, it was decided to extend the moratorium till the next MC-13 or March 2024, whichever is earlier.
India could have used it as a bargaining chip to make developed countries agree to a ‘permanent solution to the PSH program for food security.’
Here, it may be worth recalling: In the WTO-General Council (GC) meeting in Geneva (July 31, 2014), India had insisted on a time bound action plan to find a permanent solution on food security to be executed before end of 2014 co-terminus with approval of Trade Facilitation Agreement (TFA)—an area of great interest to developed countries. But it let this opportunity go in December 2014. At the WTO, India has missed the bus yet again.
To conclude, at MC-12, it is advantage developed countries all the way, though India was able to avoid further harm to its interests, courtesy deft handling of the issues by the Indian team led by Commerce Minister Piyush Goyal.
The author is a policy analyst (www.uttamgupta.com)
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