Expectations from the Bali Ministerial

Dec 04 2013, 03:08 IST
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SummaryIndia could help WTO's Doha Round conclude by supporting a workable Peace Clause on agri-subsidies

What issues is India taking to the ninth ministerial of the World Trade Organisation (WTO) in Bali?

In the ninth Ministerial of the WTO which began in Bali (Indonesia) on Tuesday and will last till Friday, the multilateral body's 159 member countries will discuss the five major issues of trade facilitation agreement (TFA), G33's (a group of developing countries) proposal regarding public stock-holding and food subsidies, tariff rate quota (TRF) administration, export competition and development issues of the least developed countries (LDCs).

The success of the talks in Bali is important for India as it recently rolled out the National Food Security Act, 2013 under which the government provides rice, wheat and millet at a subsidised rate to two-thirds of the Indian population, something that the WTO calls ‘trade distorting’ saying such subsidies are capped under the agreement on agriculture (AoA).

What, in WTO parlance, are ‘trade-distorting’ subsidies?

WTO slots subsidies in “boxes”: green (permitted), amber (slowing down needed or to be reduced) and red (forbidden). However, in agriculture, things are more complicated. The AoA has no red box, although domestic support exceeding the reduction commitment levels in the amber box is prohibited. There is also a blue box of subsidies concerning programmes that limit production. There are also exemptions for developing countries (SD box).

New Delhi contends that some the subsidies that are given as part of the procurement for public stock-holding from poor and marginal farmers should not be slotted in the amber box. The amber box includes measures to support prices or subsidies directly linked to production quantities.

Moreover, developing countries lament an “inherent asymmetry” in WTO’s AoA because it allows direct income support to farmers without limit while market price support is contained. The problem is, unlike the rich countries, developing ones—with limited financial means—are not able to give income support. The developed countries have in general moved out of market price support and adopted income support measures arguably decoupled from production levels and price (whether the decoupling is complete is disputed).

Developing countries are allowed to offer food subsidies (market price support) to a limit of 10% of the total agriculture produce. This is also called de minimis level.

Under the AoA, WTO members are committed to reduce domestic subsidies by 20% from the aggregate monetary levels that existed in 1986-88. India, with levels of subsidies lower than 10% of the value of production, undertook that the aggregate monetary

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