After month’s long standoff, the World Trade Organization signed the Trade Facilitation Agreement (TFA) at a ‘special’ meeting of the WTO General Council (GC), the highest decision-making body after ministerial conferences.
It agreed to ease custom norms after accepting India’s demand to remove constraints on food stockpiling till a permanent solution is found for its food stockpiling issue.
It was also decided that a “special session” on agriculture will negotiate the permanent solution and try to arrive at a solution by December 2015. If no permanent solution for the issue of public stock-holding is agreed and adopted by the 11th Ministerial Conference (2017), the mechanism shall continue to be in place until a permanent solution is agreed and adopted.
India’s food deal
India had forced the WTO into the deepest crisis in its 20 year history, this July after it had blocked an International agreement (Trade Facilitation Agreement) on easing trade regulations. Trade Facilitation Agreement (TFA) aims to fast track movement of goods among countries by cutting down bureaucratic obligations. The problem with TFA -there is a clause that says farm subsidies cannot be more than 10 percent of the value of agricultural production. If the cap is breached, other members can challenge it and also go on to impose trade sanctions on the country.
India Opposed TFA because
India’s Food Security Act, which is binding on the government by law now, implies that the government will provide very cheap food to the most vulnerable part of the population at extremely low prices. Apart from providing subsidies to the consumers, through the public distribution system, it also provides subsidies to the producers of food grains. So it buys food grains from farmers at a minimum support price, and subsidizes inputs like electricity and fertilizer.
- The first problem was with the 10% cap on subsidies which will not be possible for India to achieve.
- The second problem was that even for providing subsidized food, India will have to open up its own stockpiling to international monitoring.
- Third, it might seem unfair to developing countries to not crack down on farm subsidies that the United States provides to its farmers to the tune of more than $20 billion per year. While the is binding the developing countries to protocols, the issue of subsidies by developed giants like US seems to be off the table.
India felt that global trade should be linked to food security that would allow developing countries more freedom to subsidize and stockpile food.
India’s food security concerns taken on board
This breakthrough came after India and the US reached an understating where the Americans assured support to India’s demand for a permanent ‘peace clause’ and, in turn, India agreed to sign the TFA, which it had vetoed in July. Under the peace clause, a WTO member gets immunity against penalty for breaching the food subsidy cap. As per the WTO norms, a developing nation can provide food subsidy of up to 10 per cent of the total farm output
Thus, this agreement will enable India to continue procurement and stocking of food grain for distribution to poor under its food security programme without attracting any kind of action from WTO members even if it breaches the 10 per cent subsidy
The Trade Facilitation Agreement (FCA) is expected to infuse $1 trillion into the global economy and create 21 million jobs, and will now be open for ratification by all 160 member countries including India for coming into effect sometime next year.
Thus, the TFA is being pushed by the US and other developed world as they seek to bolster their sagging economies through unhindered international trade by way of a uniform and easy procedure at customs.
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