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India’s ‘Victory’ At WTO : IS FOOD SECURITY ASSURED?, By Col (Dr) PK Vasudeva (Retd), 9 Dec, 2013 Print E-mail

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New Delhi, 9 December 2013

India’s ‘Victory’ At WTO


By Col (Dr) PK Vasudeva (Retd)

Will India’s jubilation find resonance with its farmer and people, is a question being debated after the World Trade Organisation’s Bali Ministerial conference. Though the meeting concluded a day later than scheduled, thanks to long and tough negotiations, at the end there was an agreement on a package of issues designed to streamline trade, allow developing countries more options for providing food security, boost least developed countries’ trade and help development more generally.

The WTO Director-General Roberto Azevêdo’s remark is all telling. He stated: “For the first time in our history: the WTO has truly delivered.” Echoing calls from many delegations, he said that members’ attention should now turn to rest of the round, known semi-officially as the Doha Development Agenda. “With the Bali package you have reiterated not just your commitment to the WTO — but also to the delivery of the Doha Development Agenda.”  

Importantly, the agreement on the agriculture part of the Bali Package required sorting out two issues. One, much of the focus was on shielding public stockholding programmes for food security in developing countries, so that they would not be challenged legally even if a country’s agreed limits for trade-distorting domestic support were breached.

Two, was about “tariff quota administration,” how a specific type of import quota (a “tariff quota” where volumes inside the quota have a lower duty) is to be handled when the quota is persistently under-filled. Members have agreed on a combination of consultations and providing information when quotas are under-filled. The one remaining issue to be settled was which countries would reserve the right not to apply the system after six years: these will be Barbados, Dominican Republic, El Salvador, Guatemala and the US.

India, however, was on the top. The UPA-II also heaved a sigh of relief and is all set to claim its major victory. The WTO agreed to allow countries to provide subsidy on staple food crops without any threat of punitive action. The concession not only salvaged the current round of world trade talks from the brink of failure, but also gives hope to New Delhi that its national Food Security Act will have no hindrance. This apart, India’s non-negotiable stance on food security that the 159-member WTO reached, which is being termed as “a historic agreement” is bound to give a boost to global trade by $1 trillion.

As per the deal, nations can now fix a Minimum Support Price (MSP) for farm produce and sell staple grains to the poor at subsidised rates. Additionally, countries have got the go-ahead to store foodgrains to meet their contingency requirements. An elated Minister of Commerce & Industry Anand Sharma had this to say: “It's a path-breaking decision...the first major one or agreement that has been reached ever since the WTO was established…The previous agreement based on the Uruguay round was inherently imbalanced and flawed…as it was against the developing nations and that is why support was mobilised and it became an imperative to launch a new round of negotiations, which is the Doha Development Agenda.”

At the end, India’s refusal to accept a four-year ‘peace clause’ for ostensibly breaching farm subsidy caps under the Agreement on Agriculture (AoA) of the WTO has been vindicated.  The germane issue here was not about the sovereign right to provide unlimited agricultural subsidies or to keep them insulated from global rules of trade. The problem lay in the AoA’s rules itself, which are hopelessly flawed and outdated. The most telling example is the method used for computation of subsidies. Say, a farmer, growing wheat in India is regarded as having received a subsidy if the official procurement price paid to him is higher than the world ‘reference’ price.

But the AoA fixes the latter at levels prevailing way back in 1986-88. Global wheat prices, which averaged $150-160 a tonne then, are now around $300. These ruled even higher at $400 a tonne, the landed cost at which India imported the grain in December 2007. The minimum support price of around $225 for this year’s crop translates into a ‘subsidy’ of $75 a tonne to the wheat farmer under the current AoA rules, which is being negatively subsidised to him. 

India was therefore right in demanding that the world prices used in determining farm subsidy caps be updated to reflect present reality. Moreover, there are provisions in the AoA that exempt subsidies if these are being availed by ‘low-income’ and ‘resource-poor’ producers or if these are handed out in countries suffering “excessive rates of inflation”. Such general clauses are vague and require much more clarity. 

The Bali Package has sometimes been described as the first major agreement among WTO members since it was formed in 1995 under agreements from the 1986-94 Uruguay Round negotiations. The most significant for global commerce is the trade facilitation part of the package, which is about cutting red tape and speeding up port clearances.

Much of the rest of the package focuses on various issues related to development, including food security in developing countries and cotton and a number of other provisions for least developed countries. It also includes a political commitment to reduce export subsidies in agriculture and keep these at low levels, and to reduce obstacles to trade when agricultural products are imported through quotas.

The trade facilitation decision is a multilateral deal to simplify customs procedures by reducing costs and improving their speed and efficiency. It will be a legally binding agreement and is one of the biggest reforms of the WTO since its establishment in 1995 — other agreements struck since then are on financial services and telecommunications, and among a subset of WTO members, and agreement on free trade in information technology products.

The objectives are: to speed up customs procedures; make trade easier, faster and cheaper; provide clarity, efficiency and transparency; reduce bureaucracy and corruption, and use technological advances. It also has provisions on goods in transit, an issue particularly of interest to landlocked countries seeking to trade through ports in neighbouring countries.

Part of the deal involves assistance for developing and least developed countries to update their infrastructure, train customs officials, or for any other cost associated with implementing the agreement.

The text adopted in Bali is not final, although the substance will not change. It will be checked and corrected to ensure the language is legally correct, aiming for the General Council to adopt it by 31 July 2014. However, for New Delhi as of now the focus is providing food security and with success on its sleeve, all energy will be devoted to achieve success at home.  --- INFA

(Copyright, India News and Feature Alliance)


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