We have been losing out on the basis of computation under the ‘administered price’ mechanism in global trade talks. New Delhi been scrutinised for its subsidies. The ‘peace clause’ needs to be further negotiated
One among the major breakthroughs for the Modi Government is to have come closer to realising India’s long-standing demand in the World Trade Organisation negotiations on food security. This understanding with the US on the ‘peace clause’ shall now allow India to table-up a revised proposal to G33 nations when the General Council of WTO meets this month to forward a firm operational plan until a permanent solution for norms of calculating agriculture subsidies is qualified.
Ever since the Doha Development Round, India has been under pressure to bring down agriculture subsidies on par with ‘developed’ countries. The other contentious aspect is related to the Trade Facilitation Agreement, resulting in lowering trade anomalies through rationalisation (read reforms) on concomitant customs duties and tariffs easing trade restrictions, a protocol which India had refused to adopt during successive trade block discussions and development negotiations since Cancun rounds of 2003.
The failure to reach a compromise and the impasse on underlying alignment of trade talks has been continuously referred to every effort of India seeking genuine redressal of its food security concerns, notwithstanding the fact that the WTO agreement on agriculture, which came into effect in 1995, has seen significant changes in world pattern on food production and distribution.
Controlled by global behemoths, rules for agricultural business have changed considerably. The resultant thrust has been securing domination of global markets for agriculture related trade interventions that are driven purely for making profit rather than to secure hunger, farm livelihoods. Farmers are dependent on agriculture and sustainable food security support. They rely on Government subsidies.
Further, the agreement of measurement support is twisted so frivolously under the WTO agreement, that it self-grants the wealthy nations to heavily subsidise the ago-businesses affording protection under ‘non distorting’ trade mechanisms (Green Box) short changing the ‘developing countries’ which are bound not to breach the measures on 10 per cent cap on agricultural produce and support (Amber Box) limiting them calling any subsidy impetus as distortion of trade.
leading the duplicity of indirect subsidies is the US itself. The US has increased the farm out lay on year-on-year basis and spends roughly around $25 billion per year citing “farm income Stabilisation’, mandated under the farm bill (2007). Roughly, around 37 per cent is allocated as beneficiary grant to farmers against loss of crop or income and equally includes identified crops which guarantee beyond the floor price payments. Corn emerges as the top crop for subsidy payments, with as much as 48 per cent planned outlay.
Further, the state subsidies are equally payable across select pool of farming regions and the US has sternly refused thus far to bring it to a level where ‘competitive exports’ of developing countries for non subsidised agricultural produce could compete with the subsidised in the international markets, as was clearly evident during the Doha Round. The EU is not very far doling out massive subsidies equally on year-to-year basis to the tune of $70 billion supporting farm subsidies. India has not even yet breached the 10 per cent cap, and the pressure is solely been in anticipation of right to good becoming a reality in future!
Not surprising when India presented an alternative proposal seeking an institutional mechanism during the ministerial talks in Bali in 2013 to compute the subsidy which presently relies on a bizarre ‘administered price’ using 1986-88 as a base year, the G33 countries have chosen instead to focusing on ‘trade facilitation agreement’ which could open up the Indian markets for global agricultural produce with an estimated value of $300 billion.
India on the other side has been continuously losing out solely on the basis of this computation under “administered price” mechanism. It has been scrutinised for its subsidies. The ‘peace clause’ itself needs to be further negotiated since it’s only the understanding which has been arrived at and is only applicable until the next ministerial meeting of 2017, pending the discussion on proposal and its further ratification.
There are stringent data-compilation requirements on subsidies where both the Centre as well as the States have to supplement information across all levels of subsidies which would include the programmes, crops covered, and provisions on procurement, disbursement, support prices of the targeted beneficiaries which need to be listed and identified, something which is not there at present. Assuming this is followed, India shall expose itself completely on any future planned initiative without any potent safeguards. The path forward for Mr Modi’s plan for food security solely rests on the tested principle adage of international trade diplomacy: ‘Nothing is agreed until everything is agreed’.
(The writer is a New Delhi-based policy analyst)