Peace at the WTO

India must now move ahead to reduce food stocks

The deal between India and the United States that appears to have paved the way for reviving the World Trade Organization (WTO)’s Doha Round of negotiations is welcome. As this newspaper reports on Thursday, the WTO secretariat is preparing to hold a special general council on November 26 to discuss the stalled issues of a trade-facilitation agreement and norms for food stock holding by member countries. Prime Minister Narendra Modi and his government should be commended for eventually taking the long view and recognising that a permanent solution to complaints over the accounting of India’s subsidies to agricultural producers can wait; the agreement on trade facilitation must be signed first. The process of resolving the contentious issue of WTO-compliant farm subsidies can also begin as New Delhi has received an assurance that the United States won’t challenge its food procurement and stock holding policies at the WTO forums. However, it does not automatically deter other countries from doing so unless consensus-based new subsidy norms are incorporated in the WTO’s Agreement on Agriculture (AoA). But given the United States’ clout in the world organisation, it may now be easier to sort out this matter to the satisfaction of India, which currently runs the risk of breaching the current upper limit of such subsidies fixed at 10 per cent of the value of production.

India still faces charges levelled by several countries, including Canada, Australia, Japan and the European Union, of understating its food and agricultural subsidies. Such accusations and disputes can end only when the norms stipulated in the AoA for calculating these subsidies are rationalised and the ceiling on such expenses are revisited. The catch is that the subsidies are calculated on the basis of domestic 1986-88 prices, which were just a fraction of what they are today. India wants either that decades-old benchmark to be revised, or for the currently applicable ceiling on the total cost of subsidies and stockpiling – 10 per cent of the total production – to be permanently relaxed. Of course, the fact that India’s 1986-88 prices for wheat and rice are much lower than prices today is not unrelated to the continual increase in minimum support prices, or MSPs — precisely the behaviour that is arguably in violation of the WTO norms. Other countries are concerned that these subsidies incentivise the over-production of agricultural produce that could then be dumped on the world market and distort global prices.

A permanent solution to this dispute on stock piling and subsidies will continue to be worked towards. In the meantime, an assurance is to be obtained at the forthcoming special general council meeting of the WTO that countries will refrain indefinitely from challenging India’s violation of the 10 per cent limit. There is little doubt that the deal with the United States prior to the WTO meeting is a major breakthrough. However, the tasks before the Modi government are onerous and the opportunity even bigger. The government should use the excuse of a foreign treaty to work on rationalising and revamping its own food management regime to hive off needless costs. Some important steps have been taken in recent months to cut down food procurement and prune food inventories. But more flab must be shed to match food acquisition and stock  holding with genuine needs.