Context: WTO rulebook must evolve to support food security and rural livelihoods in developing countries.
What are the existing issues related to India?
- Whether the current farm subsidy rules provide enough room for developing countries to buy food at government-set minimum support prices as part of their public stockholding programmes.
- To negotiate a permanent solution.
- India’s farm subsidy notification this year to the WTO’s committee on agriculture brought the topic of procurement under public stockholding programmes.
- It indicated that India had breached its agreed ceiling on product-specific support to rice during marketing year 2018-19.
- For example, India’s wheat support was close to breaching product-specific support ceilings, with administered prices at $263.15/tonne.
What are the underlying issues with WTO?
- Delays: many countries pursuing improved market access and closer economic integration through bilateral and regional talks.
- Paralysed dispute settlement function: Donald Trump administration’s decision to veto new appointments to the WTO’s appellate body leaving many to question the future of the rules-based multilateral trading system.
- Method of calculation: Market price support levels are calculated by taking the gap between applied administered prices and an external reference price or ERP, set at 1986-88 levels, and multiplying this by the volume of eligible production.
- Divergent views on benchmark: WTO members could usefully consider whether the fixed ERP of 1986-88 is still a relevant benchmark, especially in the wake of the global price hikes of 2007-08 and 2010-11.
- Current scenario: food security disruption caused by US-China trade tensions and the inconclusive outcome of the WTO’s 2018 ministerial conference in Buenos Aires.
How does Indian subsidies doesn’t distort market?
- India’s support turns out to be negative for the years since 2000-01, if domestic market prices are compared with international market prices using the Producer Support Estimate methodology applied by the Organisation for Economic Cooperation and Development (OECD).
- Even after accounting for input subsidies, which represent a significant share of India’s non-product-specific support using the WTO system for calculating farm support.
- Updating the reference prices to average 2014-16 or 2016-18 levels or using a rolling average instead flattening out volatility by excluding the highest and lowest years from a five-year period.
- Exempt support from counting towards maximum limits when administered prices are set below international market price levels.
- Members could also discount support consumed by subsistence farmers themselves from the calculation of the volume of eligible production or exempting procurement that only equates to a small share of domestic output.
- WTO members need to agree on a shared framework for action on farm subsidy reform and set a clear direction and a timeframe for reaching a rational conclusion.
- Minimise disruption in food supply chain.
- The December meeting of the General Council that is mulling over WFP food aid issues offers India (with G-20) an opportunity to demonstrate its commitment to WFP food aid and help rebuild confidence in WTO’s ability.
An agreement under WTO could also lay the groundwork for long-overdue progress on the wider trade and food security agenda at the WTO.