At a recent meeting of agriculture committee of the WTO [World Trade Organization] held on March 28, 2017, developed countries lambasted India on its minimum support price [MSP] programs for wheat and other key commodities such as sugarcane and pulses.
While, Australia raised concerns over increase in India’s MSP for wheat since 2006, US and EU questioned subsidies on sugarcane, buffer stock of pulses and price support for both rabi and kharif crops. But, there was little movement on ‘permanent solution for legitimizing its food procurement subsidies’, an issue of great concern to India.
Ever since, World Trade Agreement [WTA] came into effect in 1995, developed countries have been obfuscating the issues concerning commitments of member countries. While, on one hand, they never allowed any discussion on subsidies given by them, developing countries have been ‘unfairly’ criticized for the support latter give to protect livelihood of their poor farmers.
Ironically, the WTA itself was crafted in a manner so as to favor developed countries. Under Agreement on Agriculture [AoA], developing countries can give subsidy on food for public stock holding operations – called aggregate measurement support [AMS] – up to 10% of value of agricultural production. The corresponding figure for developed countries is 5%.
Considering their advanced stage of agriculture, smaller number of farmers and much higher level of farm income, the 5% subsidy cap by itself is much too generous. Even this, they circumvented by putting most of their subsidies in ‘green box’ which enables them to secure exemption from reduction commitments. For developing countries, given their predominantly subsistence farmers and measly income, even the 10% ceiling is much too stringent.
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 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, ERP is frozen at the level of 1986-88. With this, comparing current MSP with ERP of 3 decades before results in ‘artificially’ inflated subsidy.
This juxtaposed with treatment of product-specific subsidies as ‘trade-distorting’ – even when these are to poor farmers – inevitably results in AMS exceeding the 10% ceiling fixed under the agreement. It is these inherent flaws in computation and treatment of subsidy that make developing countries potentially vulnerable to non-compliance with WTO commitments.
These flaws have remained submerged in the cacophony of charges/allegations made by developed countries in various meetings of WTO/ministerial/committees. Instead of getting to remove these [therein, lies a permanent solution], they have literally turned developing countries in to pleaders who end up either getting nothing or some sop whose relieving effect is transient at best.
At the 9th ministerial in Bali [2013], they got a ‘peace clause’ under which, no member will challenge violation [AMS exceeding 10%] until 2017 when WTO would look for a permanent solution. 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 2014, WTO-General Council [GC], in a slight modification of decision at Bali, GC approved extension of ‘peace clause’ till a permanent solution is found. But, this leeway was of no use as the conditions appended to it were not dropped thereby making developing countries vulnerable to challenge.
The decision of WTO-GC was reiterated at 10th ministerial at Nairobi [2015]. As regards, finding a permanent solution, it merely agreed that “negotiations on the subject shall be held in Committee on Agriculture [CoA] in a Special Session, which will be distinct from ongoing agriculture negotiations under Doha Development Agenda”. This meant postponing a solution indefinitely.
In other areas too, developed countries have merely offered platitudes to developing countries. An issue of fundamental interest to the latter is special safeguards mechanism [SSM] which allows members to temporarily raise tariffs to deal with surging imports.
At Nairobi ministerial, developing countries wanted an amendment to an existing provision in Article 5 of AoA to provide them same benefit that developed countries derive from Special (Agricultural) Safeguards [SSG]. Yet, the declaration only recognized that they will have the right to recourse to SSM as envisaged under the Hong Kong Ministerial Declaration. This was a hollow assurance!
With regard to agricultural export subsidies, developed countries got away with a commitment from developing countries for aggressive cut in their subsidy support to agriculture and allied activities. A tighter deadline to phase out these subsidies [possibly by 2023] is on cards. At the same time, they did not even let their own huge domestic subsidies to be put on the table for discussion.
The developed countries also managed a surreptitious entry of new issues like Government procurement, competition policy, link between trade and climate, TRIPs [trade related intellectual property rights] etc when the Nairobi declaration recognized that “some [in an obvious reference to developed countries] wish to identify and discuss other issues for negotiation, others do not”. Now, there are moves to expand this list by including e-commerce.
India should engage proactively with WTO to ensure that issues of concern to developing countries including permanent solution to food security get sorted out in the upcoming ministerial at Buenos Aires in December, 2017. At the same time, it must not allow ‘new issues’ to be brought to the table.