At a conceptual level, the World Trade Organisation (WTO) is seeking to stitch together a common global market that will allow unrestricted movement of goods and services across nations by dismantling fiscal and non-tariff barriers. For instance, one of the principal arguments in favour of free trade is that less protection in the form of subsidies and tariffs makes food cheaper. There are, however, two ways of deconstructing this line of thinking. The WTO’s official view is that when you protect your agriculture, food is artificially expensive. When protection is particularly high — as when market prices are naturally low — the impact can be huge. The other strand of thought, however, runs counter to this: It is imperative in many countries for the State to support poor and marginalised farmers (there are millions of them in India alone), lest ‘market forces’ throw them out of the system.
India’s bold stance at the WTO’s General Council meeting last week needs to be situated in this context. India made it clear that it will only back a worldwide reform of customs rules — the so-called trade facilitation agreement (TFA) — if its demands on rules for government-driven food procurement and welfare schemes are implemented in the same timeframe. At the Bali Ministerial meeting in December last year, the WTO member countries had consented to make trade easier, faster and cheaper by making systems transparent and reducing red tape by agreeing to adopt the TFA from July 31. New Delhi is of the view that without a permanent solution on food subsidies, India’s public stockholding programmes, such as a buffer stock of foodgrains, would be hampered by the present ceiling on subsidy to farmers. Existing rules cap the value of food subsidies at 10% of the value of production.
But, the way the support is calculated at prices of more than two decades earlier means many countries would find it difficult to stay within the limit potentially attracting strong penalties from the trade body. This will affect India’s food security programme and food grain procurement through the minimum support prices (MSP). The MSP policy acts as a means to keep farmers engaged in cultivation and if this comes into question, it will jeopardise the livelihood of half of India’s population.
India’s move to brazen it out even at the cost of getting isolated is driven by the fear that once developed countries get enhanced market access by adopting the TFA, they are unlikely to discuss issues relating to food subsidies. More than 90% of India’s farmers are resource-poor, who own less than 10 hectares of unirrigated land. The State owns a collective responsibility towards them. Their concerns and interests should be at the heart — not at the distant outskirts — of negotiations on global trade rules.