Cabinet Committee meet on WTO today

Meet assumes importance as India has agreed to 'peace clause'

The Cabinet Committee on WTO-related matters would meet today to take a call on India's stand at the upcoming Bali meeting. The meeting assumes importance since India has finally agreed to a four-year interim measure, or a ‘peace clause’, that will do away with the cap on food subsidies for farm support in developing countries.

The Cabinet committee will take a formal call on this issue today.

Then, a decision on this will be taken next week during the ninth Ministerial Conference (MC9) in Bali, Indonesia.

According to the final draft of the negotiating text circulated by WTO Director-General Roberto Azevêdo among trade ministers of the 159 member countries, a developing country like India can provide subsidies for farm support even if those exceed the permissible 10% cap.

However, the interim measure has become extremely controversial, especially in the wake of the government’s recently-announced National Food Security Act (FSA), 2013. Political parties, farmers and some sections of the civil society are vehemently opposing this and demanding a permanent solution.

To continue to give subsidies within their domestic constituencies in future as well, it is crucial for India and other developing countries to get the subsidy regime changed under the WTO Agreement on Agriculture (AoA).

In the draft text, the members have also agreed to seek a permanent solution, as demanded by India, before 2017, when the 11th Ministerial Conference takes place. But that has been accepted only as a post-Bali agenda.

However, despite WTO agreeing to a permanent solution, making all members agree and deliver on their commitments is going to be difficult. So, the prospects of amending the AoA on subsidies have been delayed further.

Also, the proposed ‘peace clause’ is not completely immune to challenges and can always be disputed under the Agreement on Subsidies and Countervailing Measures (ASCM).

In a letter to Shanta Kumar, chairperson, Standing Committee on Commerce, Pradeep Mehta of CUTS International, who also sits on a high-level panel at WTO, has said the commitments under FSA are enormous, but these cannot be considered ‘trade-distorting’ as defined by WTO.

At present, under AoA, subsidies given for domestic support measures and export of up to 10% of the value of the total agricultural production are exempt from any challenge. However, the base price for calculating subsidies is taken at the 1986-88 level. And, India has not been notifying its subsidies since 2004.

Developing countries like India, China and Brazil are already on the threshold of breaching the permissible level due to a rise in global food prices. As a result, the G-33 coalition of developing countries, which includes these nations, has been pushing WTO to change the AoA. Under FSA, a pet project of the United Progressive Alliance government, rice, wheat and millet are provided at subsidised rates.  The US spent $94 billion on its food aid programmes in 2010; this expenditure reached $100 billion in 2012. The European Union, on the other hand, offers subsidies worth $60 billion as direct farm subsidy annually.

Indian industry has also urged the government to revive the stalled Doha round of global trade talks, which started in the Qatari capital in 2001 to help poorer countries prosper through trade liberalisation. But the talks have failed to reach a consensus, even as the rich and developing countries continue to spar over agricultural subsidies and tariff reduction on industrial goods.