India faces uphill task at WTO on grain stocks, special safeguards

As the country faces a tough fight on issues it considers dear at the WTO

India faces a tough fight on issues it considers dear at the World Trade Organization (WTO) in the run-up to a ministerial conference later this year in Argentina.

While the visit by WTO Director-General Roberto Azevedo to India focused on issues like e-commerce and a trade facilitation agreement (TFA) on goods, topics pushed by New Delhi in the multilateral platform did not attract much attention. These include a permanent solution to the issue of public stockholding of foodgrain and discussions on a special safeguard mechanism apart from a trade facilitation agreement on services.

On food procurement and permanent stockholding, the only proposal on the table is one from the G-33 group of developing nations. Azevedo said it was difficult to find a definitive solution to the issues until the proposal was comprehensively revised. India is now considering striking out on its own since the proposal does not represent its interest, according to a commerce ministry official.

Following India's agreement with the US on the issue in 2013, the Bali Ministerial Conference came up with the "peace clause" that permitted uninterrupted implementation of India's food security programme till a permanent solution was found. This allows India to procure and stock foodgrain for distribution to the poor without being penalised by WTO members even if it breaches the 10 per cent subsidy cap prescribed by the multilateral trade body.

For a permanent solution, India has proposed either amending the formula to calculate the food subsidy cap of 10 per cent, which is based on the reference price of 1986-88, or allowing such schemes outside the purview of subsidy caps.

The last ministerial conference at Nairobi in 2015 only recognised the rights of developing nations to have recourse to the special safeguard mechanism (SSM). While this is subject to further negotiation, hopes for a solution in the near future are tied to developed nations, which are against the move. “Most notably, France and the US continue to pose a serious challenge to the move,” said Sachin Chaturvedi, director-general of trade think-tank RIS.

A long-standing demand of developing nations, the SSM allows countries to temporarily raise tariffs to deal with surging imports and subsequent price falls. “We have not received positive feedback from these nations,” an official said.

India is also pushing for the inclusion of discussions on a TFA on services at Argentina. It aims to ease movement of skilled professionals across borders as well as reducing transaction costs. India’s services sector accounts for more than 60 per cent of its gross domestic product and 28 per cent of employment.

After submitting a concept note on the matter last September, Commerce Minister Nirmala Sitharaman said last week a legally vetted proposal would be submitted by India within the next few days. However, diplomats from developed nations that have opposed the move said negotiations could be hampered by another proposal submitted by China on investments, which had gained traction over the past few months.

Azevedo told the media the primary responsibility for pushing any proposal rested with the proponent and not the WTO. At the same time, however, he welcomed the inclusion of new issues such as e-commerce in the discussion agenda. The proposed global rules on e-commerce, which focus on easing restrictions, are being pushed by developed nations.

Azevedo said the issue was important to member nations with 11 proposals currently at various levels of implementation.

“In 2015, the internet penetration in the least-developed and low-income countries was about 12.6 per cent and 9.4 per cent, respectively. Even for low middle-income countries, the figure was well below the global average. These disparities in internet penetration make it clear who will be the likely beneficiaries from e-commerce rules,” said Biswajit Dhar, professor of economics at Jawaharlal Nehru University.

India has said it is not averse to discussing the new issues but it supports their inclusion into any discussion agenda only after consensus among WTO members.