India can be dragged to WTO if 'peace clause' ratified

With elections approaching, government undecided

Owing to the impending elections, India might buckle under pressure from farmers and civil society groups that have warned negotiators against any trade-off on the controversial ‘peace clause’ under the World Trade Organization (WTO)’s food security agreement.

The clause will not guarantee any protection to India from being dragged into trade disputes by developed countries.

While the WTO is ready to offer this as an interim measure, there is a catch: While developing countries can provide WTO-prohibited subsidies to farmers without inviting any dispute under the Agreement on Agriculture, rich countries will have the right to drag these countries to the WTO Disputes Settlement Body, under the Agreement on Subsidies and Countervailing Measures. This would render the peace clause null-and-void, sources told Business Standard on condition of anonymity.

DIVIDED INTERESTS

• The WTO is ready to offer ‘peace clause’ in the food security agreement as an interim measure
• Under this deal, poor countries can offer their farmers subsidies that are currently prohibited under WTO rules
• However, the clause doesn’t provide immunity from trade disputes
• Rich countries countries can still drag developing countries to the WTO Disputes Settlement Body, under the Agreement on Subsidies and Countervailing Measures

The government seems to be divided over the issue. While  some senior officials want India to agree to the offer so as to not to be seen as spoiling the talks, others want India to put its foot down on the matter, as any such trade-off would impact the livelihood of 600 million farmers.

“Seeking a permanent solution to the problem at this stage will be foolish on our part and drag the Doha round further…It’s better we agree to what they offer now and keep pursuing them to amend the rules as we go on,” said a senior official, requesting anonymity.

Apparently, to silence developing countries and instill life into the stalled Doha round of global trade talks, WTO chief Roberto Azevedo has offered a so-called ‘peace or due restraint clause’, pegged as ‘take it or leave it’ by rich entities such as the US, European Union and Japan, for a period of four years. Through this, poorer countries can offer their farmers subsidies that are currently prohibited under WTO rules.

Regarding the matter, farmers from across the country have written to the prime minister, Commerce and Industry Minister Anand Sharma and Agriculture Minister Sharad Pawar. They have cautioned the government shouldn’t agree to the trade facilitation agreement that is linked with the G-33’s food security proposal. They said instead, India should bargain for a permanent deal on allowing the prohibited subsidies.

Currently, developing countries can provide subsidies up to 10 per cent of the production value. For China, it is eight per cent. Developing countries such as India, China and Brazil are already on the threshold of these levels.

“India cannot be allowed to mortgage its right to food and right to livelihoods of the poor and the needy, enshrined in the Constitution. Accepting the peace clause and the current text suggested by the director-general (Azevedo) would, therefore, be detrimental to India’s interests,” said a letter by farmers such as Rakesh Tikait of Bhartiya Kisan Union, Vijay Jawandia of Wardha and Pradeep Kumar of Haritha Sena (Kerala).

Now, the question is whether the peace clause will be a spoiler at the WTO ministerial conference in Bali, scheduled for December 3-6 or result in prolonging the talks (which started in 2001) further.

Experts don’t think so. On food security and the peace clause, Abhijit Das, head, Centre for WTO Studies (IIFT), feels  many different aspects will determine a successful outcome from India’s perspective.

“The outcome of Bali will not depend on the outcome of the peace clause alone. Other issues such as trade facilitation and development issues will be crucial in determining the overall outcome,” he said.

At a recent series of expert group meetings on the multilateral trading system organised by the South Centre last week, it was suggested the peace clause cover any dispute related to the Agreement on Agriculture, as well as the Agreement on Subsidies and Countervailing Measures.

According to a study, under the newly enacted Food Security Act, India will provide 60 kg of food grains a person; the US provides 385 kg of food a person through several programmes. In 2010, the US spent $94 billion on its food aid programmes; in 2012, the amount stood at $100 billion. Against this, India’s food subsidy bill is estimated at about $20 billion this financial year. However, this isn’t acceptable to the US and the EU.