The December 10-13 (WTO’s) Ministerial Conference in Buenos Aires, Argentina
What has happened?
At next month’s meeting of the World Trade Organisation’s (WTO) highest decision-making body, India will not compromise on its interests including ensuring food security as well as protecting its resource-poor and low-income farmers and fisher-folk, according to commerce minister Suresh Prabhu
- Against inclusion of new issues: India will hold firm on its positionagainst the inclusion of new issues such as ‘e-commerce’ and ‘investment facilitation’ into the ongoing round of multilateral trade negotiations, without first resolving the outstanding ones including food security
- Doha Development Agenda (DDA): India will make sure that the ‘development agenda’ (to improve the developing countries’ trading prospects) of the talks, which began in Doha in 2001, is not subverted
- Permanent solution to public stockholding issue: The highest priority for India was to ensure that a ‘permanent solution’, much better than a peace clause, on the issue of public stockholding for food security purposes is a part of the Buenos Aires meeting outcomes
Why India wants a permanent solution when peace clause already exists?
Since a country that wants to invoke the Peace Clause has to comply with several stringent conditions (on notification and transparency and commitment on prohibition of exports from public stockholding), India is keen that a ‘permanent solution’ does not have onerous riders
- Protection to fisherfolk: On talks to eliminate ‘harmful’ fisheries subsidies, the minister said “India will protect its small and subsistence fisherfolk, and we want sustainable fishing. We want subsidies for small fisherfolk to continue
- Trade Facilitation in Services: India will also “very aggressively” push its proposal for Trade Facilitation in Services (which, among other things, aims to ease norms on movement of skilled workers/professionals across borders for short-term work)
What is public stockholding?
- Public stockholding is a policy tool used by governments to procure, stockpile and distribute food when needed. Ex: MSP scheme
- Governments purchasing at prices higher than market prices are considered to be subsidising their farmers, under WTO rules. This subsidy is not without limits.
- ‘The limit’ has been setupat 10% of the value of production of the particular grain being procured. The methodology for subsidy calculation is based on a price index of 1986-88, and that does not account for inflation
What is considered as trade-distorting under WTO rules and how Peace clause will give immunity?
- If food grains for the public stocks are procured through an administered price/minimum support price and if this minimum support price is higher than the archaic fixed reference price (calculated on base period 1986-88), then it is considered as trade-distorting agriculture support
- Such trade-distorting support should be within ‘the limit’, which is 10% of the value of production of the particular grain being procured. This is also called as Peace clause.
- One of the first things that this government did in 2014 was to intensely engage with the WTO to obtain a ‘peace clause’ so that even if we did breach ‘the limit’, no one shall challenge our programme till such a time a permanent solution is found, agreed on, and adopted by the WTO membership
Issue of subsidy is covered under AoA
Agreement on Agriculture (AoA)
The Agreement on Agriculture (AoA) was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO on January 1, 1995
- It aims at reforming trade in agriculture, envisaging a fair and market-oriented system, which improves predictability and stability for both importing and exporting countries
- The Agreement allows governments to support their rural economies, but preferably through policies that cause less trade “distortions”.
- The Agreement on Agriculture applies not only basic agricultural products (such as wheat and live animals), but also the products derived from them (such as flour and meat), as well as most processed agricultural products (e.g. chocolate and sausages). The coverage of the Agreement also includes wines, spirits and tobacco products, as well as fibres (such as cotton)
- 3 pillars of AoA
- Market Access
- Domestic support (Subsidies)
- Export competition
Types of subsidies under AoA
There are 3 types of subsidies under AoA, Green, Blue and Amber box subsidies, which are discussed below:
- Green Box Subsidies: Green box subsidies are those subsidies which cause no, or at most minimal, trade distorting effects or effects on production. These include the amounts spent on Government services such as research, disease control, and infrastructure and food security
- This also includes the subsidies given to the farmers that directly don’t affect international trade badly
- Since they are permitted in WTO regime, the most developed countries have kept providing subsidies to their farmers
- The Green Box contains fixed payments to producers for environmental programs, so long as the payments are “decoupled” from current production levels.
Blue Box Subsidies
Blue Box contains direct payment subsidies which can be increased without limit, so long as payments are linked to production-limiting programs
Amber Box Subsidies
All domestic support measures considered to distort production and trade (with some exceptions) fall into the amber box
- Limits: The provisions accept 5% of agricultural production for developed countries, 10% for developing countries
- De–Minimus level: Amber box subsidies are intended to be limited at De-Minimus level. De Minimus is the Minimal amounts of Amber box subsides permitted by WTO, even though they distort trade. De-Minimus limits are calculated on the agriculture production of the given member state in 1986-88ie they do not consider inflation. So, if India is to limit its food subsidy to 1986 production levels it would not be able to procure at MSP or feed its poor
- Amber box subsidies in the Blue box: The Amber box subsidies with conditions designed to reduce distortion are placed in Blue Box. They include the direct payment to the farmers to reduce production. Apart from the above, there are Article 6.2 subsidies for Development Programmes
What is Doha Development Agenda (DDA)?
At the Fourth Ministerial Conference in Doha, Qatar, in November 2001 WTO member governments agreed to launch new negotiations. They also agreed to work on other issues, in particular the implementation of the present agreements. The entire package is called the Doha Development Agenda (DDA)