WTO May Torpedo India’s Massive Cheap Food Program

By bringing in an Ordinance on the food security bill, the UPA-II has certainly bypassed the need for a cumbersome and noisy parliamentary debate. But there still hangs a bigger hurdle that needs to be crossed to make the dream programme a reality. With the United States hardening its position on the G-33 proposal to exempt public stockholding programmes and is unwilling to extend the subsidy limit for addressing the nutrition needs of the hungry and malnourished, the National Food Security bill could run into serious problems.

India has introduced a legally-binding cheap food distribution programme that will cover 67 per cent of the population, providing each eligible poor with five kg of wheat/rice/millets every month.

While Commerce Minister Anand Sharma has gone on record saying there can be no compromise on feeding the poor and hungry, the US WTO Ambassador Michael Punke has launched a blistering attack on the developing countries proposal, singling out India as “creating a massive new loophole for potentially unlimited trade-distorting subsidies.” Calling it a step backward, he said “The new loophole, moreover, will be available only to a few emerging economies with the cash to use it. Other developing countries will accrue no benefit – and in fact will pay for the consequences.”

The controversial proposal moved by G-33 countries, which is a group of countries including China, India, Indonesia, Pakistan and others that came together to protect food security, livelihoods and rural development in the Doha Development Agenda, seeks amendments in the revised Doha draft modalities for agriculture. Knowing that the procurement of wheat and rice under the National Food Security bill will rise manifold, India wants the enhanced subsidy outgo for food procurement from small farmers not to be seen as a trade-distorting subsidy support. These subsidies, required to meet the food security needs of the hungry population, should be outside the maximum limit of ‘Aggregate Measurement of Support’ (AMS) that each country has to adhere to. The food the developing countries buy at a minimum support price from ‘low-income, resource poor farmers’ should not be computed in the AMS limit. At the same time, India wants the ‘de-minimis’ requirement for public stockholding – which at present stands at 10 per cent of the total production of wheat and rice that can be procured for meeting the nutritional needs of the food insecure population – be also suitably amended.

In other words, G-33 countries want to incorporate provisions in the ongoing negotiations that ensure “food security exists for all its people, at all times.”

Despite Anand Sharma’s behind the scene discussions with the outgoing WTO Chief Pascal Lamy and the new Director General-designate Roberto Carvalho de Azevedo of Brazil, the US continues to harden its stand. It has warned that if India’s new proposals on the table are not rejected “it will hurtle the WTO talks to irrelevance”.

Interestingly, India’s proposals are closely linked with the developed country’s proposal for an agreement on trade facilitation. Trade facilitation actually means setting up the required infrastructure at the ports, and making available appropriate transport and communication facilities that would make it easier for the trade and business to operate. In other words, the developed countries are actually pushing the developing countries to invest on facilitating the trade interests of its corporations and agribusiness giants. This agreement, which has some 600 contentious clauses or what is called as brackets in WTO language, will have serious implications for the domestic agriculture sector in developing countries. Unfortunately, Anand Sharma is willing to go by the trade facilitation agreement without even assessing the negative fallout it will have by acerbating the prevailing agrarian crisis and food security requirements.

Nevertheless, it is important to understand why the G-33 proposal that calls for appropriate measures to ensure food and nutritional security for the poor and needy, is so important. First, let us be very clear that the AMS calculations were done keeping the prevailing prices in 1986-88. Since then, and especially after the 2007 global food crisis, the farm commodity prices have seen a quantum jump. The 1986-88 reference prices, which was a period when prices were very low, no longer holds true and have lost all its relevance. Secondly, the trade distorting subsidies that the US/EU has been providing all these years have not been done away with. In fact, the developed countries have expressed jubilation over the fact that the massive agricultural subsidies that OECD provides for agriculture, with 80 per cent going to big corporations and rich farmers, are not on the negotiating table at the forthcoming Bali Ministerial in December 2013. 

On the other hand, in an analysis presented by Jacques Berthelot of France, the angry outburst of the US Ambassador to WTO appears completely unjustified. Accordingly, the average food aid that in 2010 that India gave to its 475 million people (65 million families below poverty line plus 10 million above poverty line) to meet their food security needs was to the tune of 58 kg/per person. Comparatively, the US provides 385kg/person to its 65 million people, who received food aid under several programmes like the food coupons, child nutrition programme etc.

Moreover, the procurement of wheat and rice from resource poor farmers by India does not mean the grains are being dumped in the international market thereby distorting trade. In reality, Jacques Berthelot has computed that the low global prices of wheat and rice in 1986-88 – the reference period – were because of massive dumping by both US/EU. Given that 53.2 per cent of the global exports of wheat came from US/EU, the role dumping played in depressing the global prices becomes quite obvious. The reference period of 1986-88 against which the administered prices of 2012-13 are being evaluated therefore becomes meaningless and absurd.

But still, at the WTO negotiations, it is the might of the developed countries that have so far controlled the directions and the outcome of the negotiations. If the US/EU continues to oppose the proposal floated by India through the G-33 countries, India will find it difficult to implement the National Food Security bill. And let us not forget, India has no provisions of introducing an Ordinance this time to bypass the WTO. # 

Devinder Sharma blogs at Ground Reality. 

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