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Sunday, Aug 18, 2019

Contradictory positions can hurt India’s prospects at the next WTO ministerial

India should lead the charge for demanding a better deal on agricultural issues to counter rising protectionist tendencies in the West

analysis Updated: Dec 09, 2017 16:39 IST
Commerce minister Suresh Prabhu has downplayed the need for a permanent solution on public stockholding for food security as a peace clause already exists
Commerce minister Suresh Prabhu has downplayed the need for a permanent solution on public stockholding for food security as a peace clause already exists(Priyanka Parashar)

The 11th Ministerial Conference (henceforth ministerial) of the World Trade Organisation (WTO) begins on December 10 in Buenos Aires. Commerce minister Suresh Prabhu has downplayed the need for a permanent solution on public stockholding for food security as a peace clause already exists. He has even termed the demand a mistake . India’s WTO ambassador on the other hand is issuing warnings of a ‘spectacular failure’ in case a credible permanent solution does not happen. Such inconsistency in official stance is symptomatic of the larger confusion in India’s strategy to change the global trade regime to its advantage.

The current peace clause protects countries using publicly procured stocks for food security purposes beyond the stipulated threshold (10% of value of agricultural production) from disputes by other WTO members for an infinite period. This is a compromise solution in response to the demand by G-33 group of developing countries for amending WTO rules to allow greater sovereignty to countries in devising food security policies.

Prabhu’s argument that the permanent peace clause is as good as a permanent solution is based on weak logic. If the two were exactly the same, we would already have a permanent solution rather than a peace clause.

The peace clause is subject to the vague condition of food security programmes being non-trade distorting for other WTO members. This does not provide a blank cheque. For example, if India were to start procuring pulses for its food security programme tomorrow, its import requirement for pulses would come down. Countries such as Canada would stand to lose a large import market in India. This can lead to a potential dispute alleging trade distortion by India.

Most WTO disputes pertain to grey areas like these. It must also be kept in mind that developed countries have a natural advantage over Third World countries in WTO disputes given their bigger endowment of human/material resources uses in such processes.

It is not surprising that developed countries are pushing for even more conditionalities for a permanent solution on this issue.

Along with these technical matters, there is also a larger issue at hand. Demands such as more sovereignty in making food security policies to Third World countries were at the core of the Doha Development Round of the WTO. Developed countries have successfully stonewalled any progress on this agenda.

The underlying spirit behind the Doha Round was that Third World countries must get a better deal in the agriculture and development related issues in return for opening up their non-agricultural markets to developed countries. The latter is an important achievement of the WTO. Fair access to farm-markets in developed countries for Third World farmers was the promised quid-pro-quo in the early days of the WTO. These expectations have not materialised. This is because developed countries continue to provide very high subsidies to their agriculture sector.

According to WTO notifications, total farm subsidies in the US increased from 61 billion USD to 140 billion USD between 1995 and 2012. Another statistic can help us interpret the impact these subsidies have. Between 1995 and 2016, per acre gross value of corn produced in the US was less than total costs of cultivation for 13 years. For soybean this was the case for eight years between 1997 and 2016. Has anybody heard of American farmers growing corn/soybean committing suicides or falling into debt traps like their Indian counterparts?

The US is a world leader in exporting wheat and soybean. Without such subsidies, this dominance would be extremely fragile. Needless to say, these things deprive Third World farmers of potential income through exports as well as import-substitution opportunities in agriculture.

Historically, Third World countries which have used the export route to economic development have done so by accessing developed country markets in manufacturing goods and services. With protectionist politics gaining ground in developed countries, these opportunities are likely to grow at a slower pace. Shouldn’t India take a lead in devising a strategy for reforming the global agricultural trade regime to the advantage of Third World countries at such a juncture?

First Published: Dec 09, 2017 16:06 IST

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