The union minister of commerce and industry, Suresh Prabhu has stated that “he won’t take up the issue of finding a permanent solution for public stock-holding programs for food security at the upcoming WTO ministerial in Buenos Aires next month”.
This should be music to the ears of developed countries particularly USA, EU, Canada, Australia and Japan as this was a major item on the agenda of the Doha Development Round [DDR] – started in 2001- which they are hell bent on dumping. In fact, during a meeting at WTO, Geneva [July, 2017], they had rejected a proposal submitted by G-33 Group of developing countries [with India in the lead] on (i) public stock-holding for food security; (ii) special safeguard mechanism [SSM] against sudden surge in imports of agricultural products and (iii) movement of short-term services providers.
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 had already submitted proposals on July 14, 2017 for a new “holistic” work program on electronic commerce.
Recently, the US has opposed the very use of word ‘development’ in the initial draft declaration being discussed by member countries at WTO headquarters in Geneva. It will be too happy [so do other developed countries] to see India backtracking on the most contentious element of the development agenda. So, what has prompted this sudden dilution of interest?
Prabhu has opined that in view of developing countries having got ‘an interim relief [‘peace clause’ to use the WTO nomenclature] till permanent solution is found’, there is no need to pursue the latter. This requires careful scrutiny.
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, stock-holding, 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-General Council [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 Trade Facilitation Agreement [TFA]. Modi had even raised this issue in his one-to-one meeting with then President Obama [September, 2014]. In its meeting held in December, 2014, the Council approved ‘extension of peace clause till a permanent solution is put in place even as developed countries got away with TFA.
Thereafter, the then commerce minister, Nirmala Sitharaman continued to pursue India’s advocacy for permanent solution. Yet, the declaration at 10th WTO ministerial in Nairobi [December, 2015] 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 DDR”. With this, the importance of the subject matter stood hugely diminished as in the CoA, this got clubbed with other subjects taken up in a routine manner.
Despite the above disappointment, India had thus far reiterated its resolve to discuss this issue [along with other pending DDR issues] first in 11th ministerial and until resolved, not allow any other item to be even brought to the table. But, Prabhu has done a volte face saying that ‘our insistence on finding a permanent solution was a mistake’. This is based on the assumption that having already got what we wanted, there is no point in pursuing it.
The minister’s belief that the benefit of ‘peace clause’ will continue to be available even if permanent solution is not found is misplaced. This is subject to fulfillment of the conditions which were not dropped under the December, 2014 decision of WTO – GC. Those conditions require extensive documentation and more important, a demonstration that subsidy support given in this manner is not trade distorting. So, the Damocles sword hangs!
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 excess of minimum support price [MSP] paid to farmers over international price – or external reference price [ERP] – multiplied by quantum of agri-produce whereas ‘non-product specific’ subsidies is money spent by government on schemes to supply agricultural inputs at subsidized rates.
Under the Agreement on Agriculture [AoA], for computing ‘product-specific’ support, ERP was frozen at 1986-88 level. With this, comparing current MSP with ERP of 3 decades before inevitably results in ‘artificially’ inflated subsidy. So, the 10% ceiling is bound to get crossed showing developing countries as violators even when they are not if current ERP is used.
So, developed countries need to be persuaded to get this flaw in computation corrected besides exclusion of support to poor farmers from the AMS. This will automatically take care of our concerns instead of asking for blanket exemption of ‘price support for public stock-holding from reduction commitments’ [G-33 proposal] which would unnecessarily vitiate the environment.
Considering that ‘peace clause’ does not offer unconditional immunity and developing countries including India continue to be vulnerable under the existing provisions of the AoA, prime minister needs to intervene urgently and force a discussion on the subject during the ministerial at Buenos Aires.
Modi should prevail upon Mr Prabhu [being the commerce minister, he will lead the Indian delegation to the ministerial] to come out of the current state of complacency and prepare his team for proactive engagement and a successful outcome.