An agreement by the WTO’s 160 members, including India, during the ninth ministerial conference in Bali last December saw the members committing to streamline the flow of goods across international borders. Key to the deal was a consensus on pushing through a “trade facilitation agreement” or TFA, which seeks to streamline border procedures, making it easier for merchandise goods to cross international borders. The new NDA government’s threat to veto the implementation of the TFA, in an effort to seek a negotiating space for public stockholding in food grain and food subsidies, has shaken up the WTO set-up.
What is the recent controversy all about?
The ongoing controversy has its roots in the Indian government threatening to veto the implementation of the deal struck in Bali, in an effort to seek a negotiating space for public stockholding in food grain and food subsidies. The current WTO norms limit the value of food subsidies at 10 per cent of the value of foodgrain production. However, the support is calculated at the prices that are over two decades old and not at the current prices.
If India blocks the global attempt to push through a “trade facilitation agreement”, it will be the only country in the entire WTO membership to stop the deal from getting implemented. The WTO’s agriculture committee, which is dealing with the food security issue, is due to meet later on Wednesday in what will only be its third meeting since the Bali ministerial last December. The agriculture committee meeting will be followed by a crucial meeting of the general council on Thursday.
Why is the TFA ratification so important?
The TFA faces its first implementation deadline on July 31 when WTO members, who make decisions by consensus, must approve a one-paragraph “accession protocol”. The deadline of July 31 is by when all the 160 WTO member countries have to sign the agreement into a protocol, marking implementation of the first phase of the deal. It was to come into force fully from 2015.
When the deal was struck in Bali in December, it was decided that as an interim measure, in respect of public stockholding for food security, developing countries would be protected from WTO disputes for non-compliance with the relevant provisions of the Agreement on Agriculture. This protection would be available till a permanent solution, the deadline for which was 2017.
What is the Indian position?
India wants the talks on public stockholding for food security to happen immediately, an issue that has domestic compulsions in India. For the government, the issue of livelihood of its marginal farmers is a deeply political one, especially in light of the stockpiling needs on account of requirements of the Right To Food Act.
Commerce minister Nirmala Sitharaman has indicated earlier this month that India would not back the TFA protocol because itwas unhappy with the progress of talks on food security that ministers also committed to in Bali. Those, she was quoted as saying, had been cast aside.
Soon after, commerce secretary Rajeev Kher issued a statement saying until India got an assurance that WTO members were ready to discuss a permanent solution on public stockholding, it would be difficult for it to sign the protocol on TFA.
Central to the Indian position is the government’s move to procure grains, largely by way of offering a minimum support price to farmers, and distributing them to BPL consumers through the public distribution system (PDS) at a subsidised price.
To treat such schemes under WTO rules remains an area of contention that ministers in Bali agreed to tackle by 2017. The government is demanding a reworking of the rules to ensure that developing countries do not breach the prescribed subsidy cap.
Is there support for India?
South Africa is said to be backing India, and other African members of the WTO have raised concerns over whether the financial aid they were promised to help revamp customs procedures will materialise. But broadly, India could be isolated. Domestic analysts say that India is perhaps not doing the right thing by going against the broader global coalition.
Critics have even hinted that India is doing this because it is not prepared to take on the requirements of TFA, with a relatively weak trade infrastructure.
Why is India opposed to TFA?
ReplyDeleteIndia's Food Security Act, which is binding on the government by law now, implies that the government will provide very cheap food to the most vulnerable part of the population at extremely low prices. Apart from providing subsidies to the consumers, through the public distribution system, it also provides subsidies to the producers of food grains. So it buys food grains from farmers at a minimum support price, and subsidises inputs like electricity and fertiliser.
The first problem is with the 10% cap on subsidies which will not be possible for India to achieve. Adding to the woes is the fact that the 10% cap is calculated based on 1986-88 prices when the prices of food grains were much lower. So the cap has to be updated taking into account the present prices of foodgrains.
The second problem is that even for providing subsidised food, India will have to open up its own stockpiling to international monitoring. It will not be able to add protein heavy grains like say, lentils, if it wants to, due to riders in the peace clause.
Third, it might seem unfair to developing countries to not crack down on farm subsidies that the United States provides to its farmers to the tune of more than $20 billion per year. While the WTO is binding the developing countries to protocols, the issue of subsidies by developed giants like US seems to be off the table.
What does India want?
India now wants a permanent solution to the issue of public stock holding of foodgrains. G33 members including China have supported India's stand on the ability to subsidise agricultural production and distribute it to the poor at low cost.
Why does WTO have a problem with high subsidies?
WTO argues that if the developing countries continue to give prices to farmers which are higher than the market prices, it might harm the poor farmers in other parts of the world. It also says the deal could add $1 trillion to global gross domestic product and 21 million jobs, by cutting down red tapes. Also according to media reports, the developed world wants the issue of food security to be delinked from the TFA, and could be discussed later.
What is the TFA?
ReplyDeleteThe TFA aims to fast track any movement of goods among countries by cutting down bureaucratic obligations. The problem with TFA runs in a clause that says farm subsidies cannot be more than 10 percent of the value of agricultural production. If the cap is breached, other members can challenge it and also go on to impose trade sanctions on the country.