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India, developing nations threaten veto on trade facilitation pact

Say no nod to likely agreement without concession on farmer subsidies; US unlikely to agree

Nayanima Basu  |  New Delhi 

The government has decided to go along with an agreement on trade facilitation at the World Trade Organisation talks later this year in Bali, Indonesia, only if there is an accord on subsidies to poor farmers.

There is considerable progress on the said agreement but India, China, Philippines and Indonesia are among the developing countries which have demanded a "balanced outcome". This is important, as the ministerial meet in Bali during December 3-6 is seen by many as a turning point in the global trade talks.

An agreement on trade facilitation basically means a reduction in red tape and an enhancing of customs cooperation. For the first time since the talks began in 2001, there is likely to be an agreement. According to WTO director general Pascal Lamy, there is "considerable progress" happening and a deal on this might result in a $1 trillion boost to the world economy.

However, India has said it would not give its consent on the agreement unless the developed countries, especially the US, give their consent on the food security proposal that was part of the December 2008 text on agriculture-based trade. Talks on this have been on since then.

"We have made it very clear that this proposal (on food security) is very important for us and without some satisfaction on this, we will not be in a position to give anything on trade facilitation, though we are fully in agreement with some parts (of the latter) and we want to do it but we also want to see a balance…If we do not link the two, then the trade facilitation agreement will go through and this crucial issue on food security will lose importance and relevance," a senior official, involved in the negotiations told Business Standard.

Hence, India and other developing countries have demanded those subsidies given as part of the procurement done for public stockholding from poor and marginal farmers should not be regarded as a 'prohibited subsidy' or 'amber box' subsidy by the WTO. In WTO terminology, agricultural subsidies have been categorised as green box (allowed without any cap and are least trade-distorting), amber box (subsidies to be reduced with a stipulated period) and blue box (given as part of special schemes).

This proposal was originally mooted by the G33 group of emerging nations and was included in the December 2008 text. "So, this is not a new proposal. We have simply picked up the proposal which was already there in the December 2008 text and brought it to the forefront for an early harvest. This was agreed as a single undertaking and to include it with the trade facilitation agreement and the LDC (least developed countries) package," the official said.

The December 2008 text states: "Acquisition of stocks of foodstuffs by developing country members with the objective of supporting low-income or resource-poor producers shall not be required to be accounted for in the AMS (Aggregate Measurement of Support)."

While the US is completely against such a proposal, European countries are ready to discuss the issue and find a solution, officials said. The US feels any agreement on this issue will give unprecedented flexibilities to China, which gives much more subsidies as compared to India in numbers; their procurement levels are also much higher.

An agreement on this proposal is "extremely crucial" for India, as 99 per cent of its farmers fall under the 'low-income or resource-poor' category. Then government is also concerned that its procurement it is soon going to overshoot the threshold or the De Minimis level beyond which subsidies cannot be given under the global trading rules. The current threshold is 10 per cent of the total value of output in agriculture. The calculation is on two sides, input and output. Input subsidies have been rising sharply and the domestic price of India's farm produce is much closer now to international rates. Hence, the agriculture ministry is concerned that the threshold could be breached in the near future.

Any farmer holding less than 10 acres was considered small and marginal at the WTO but this was lately brought down to less than four acres.

(With inputs from Sanjeeb Mukherjee)

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First Published: Tue, April 09 2013. 00:50 IST