The cabinet committee on WTO-related matters on Thursday endorsed India acceding to a four-year ?peace clause? in the WTO’s 9th ministerial meet next week in Bali, whe-reby developed countries would exercise restraint in challenging India’s as well as other developing countries? ?trade-distorting? food subsidies even if they exceed the permissible limit of 10%.
This is even as the limitation of the peace clause, being temporary and not really immune to challenge, is causing concern in India, as it could undermine the country’s ability to push ahead with its food security law.
A solace for Indian policymakers is that the draft negotiating text for the ministerial released by WTO Director-General Roberto Azev?do on Tuesday talked about finding a permanent solution to developing countries’ concerns. Of course, for this, they would have to wait until 2017, when the 11th ministerial takes place.
The key question is that while the developed world can provide unlimited direct food aid to the sections of populations in need, a developing nation, with limited capacity to give such aid and instead acquire and hold stocks of food products and release the same at administered prices to the target population in need, is constrained by the WTO’s Agreement on Agriculture.
In case the acquisition price exceeds the external reference price (fixed on the basis of 1986-88 prices), the difference multiplied by the quantity acquired counts towards the domestic support in the amber box of trade-distorting subsidies.
Through India’s newly enacted food security law, the government commits to provide subsidised foodgrain to two-thirds of the country?s population, thus putting additional subsidy burden on the government.
The peace clause offers a respite for four years from attracting penalties when the agricultural subsidies cross 10% of total production.
Developed countries like the US and Canada have raised concerns over India’s food security legislation at the WTO. They have asked India to explain the effect of the law on global stocks and commodity prices, fearing they could be exported.
Achieving a deal in Bali is seen as a final effort to revive a broader 12-year effort to ease global trade rules.
