Story Of The Week

World Trade Organization 11th Conference: India on Food Security

“There are people in the world so hungry, that God cannot appear to them except in the form of bread”

Mahatma Gandhi

Introduction

The World Trade Organization is a global membership group that promotes and manages the free trade. It does this in three ways. First, it administers existing multilateral trade agreements. Every member receives MFN (Most Favoured Nation) Status. The motive of this status is to automatically receive lowered tariffs for their exports.

Second, it settles trade disputes. Most conflicts occur when one member accuses another of dumping. Third, it manages ongoing negotiations for new trade agreements. The biggest agreement was concluded at the Doha round in 2006. This agreement eased trade among all members. It emphasized expanding growth for developing countries.

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WTO History: Ministerial Conference

The WTO’s origins began with trade negotiations after World War II.

In 1948, the General Agreement on Tariffs and Trade focused on reducing tariffs, anti-dumping, and non-tariff measures. From 1986 – 1994 the Uruguay Round round of negotiations led to the formal creation of the WTO.

In 1997, the WTO brokered agreements promoting trade in telecommunications services among 69 countries. It also removed tariffs on information technology products between 40 members. It improved trade of banking, insurance, securities and financial information between 70 countries.

The Doha round began in 2000. It focused on improving trade in agriculture and services. It expanded to include emerging market countries at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001. Unfortunately, the Doha talks collapsed in Cancun, Mexico, in 2003. A second attempt also failed in 2008 at Geneva, Switzerland.

This year World Trade Organization (WTO) member countries converged in Buenos Aires, Argentina, on December 10th for a Ministerial Conference meeting.

Importance of permanent Public Stockholding(PSH) solution for India

Given the large-scale dependence of many on agriculture as a source of income, the stock holding of food products by the government (PSH) becomes extremely important for India. More than 70 percent of the country’s 1.3 billion population is dependent on agriculture. Thus, to maintain the stream of income for such huge population subsidies are given out by the government in the form of minimum support prices for the government’s public distribution scheme. However, such subsidies have been opposed by developed countries in the recent Conferences of the WTO on the grounds that these trade subsidies can to distort and manipulate international trade by entering into direct or indirect export, leading to unfair trade practices.

In contrast to opposition rationale to not provide a permanent solution to public stockholding programs for food security vital for millions of farmers and poor people in India and other developing countries, there are green box subsidy programs worth US$ 200 provided by United States, EU and other rich nation that actually distort the international trade.

As part of a temporary fix to the same issue, India had managed to negotiate a ‘Peace Clause’ at the last WTO meeting in 2013 at Bali. The ‘Peace Clause’, shields developing countries like India from being dragged by other countries to the WTO Dispute Settlement Mechanism for breaching the ceiling on product-specific domestic support. This clause is valid until the members of the WTO find a “permanent solution” to this problem.

It was specified in the 2013 peace clause that no action will be taken against India in case it gives PSH subsidies in excess of 10 percent of its agricultural GDP. However, this was subject to a number of clauses. One clause being that India had to submit a regular series of notifications and data clarifying the number of subsidies given by the government. The second one specified that only those food procurement programs enacted in the year of 2013 would fall under the peace clause and not any program conceptualized after 2013. India, along with other developing countries, expected a permanent solution on public stock-holding subsidies on food security.

Though the final decision to expedite work on the ‘permanent solution was taken up in 2015 at Nairobi Ministerial Conference. But, due to the prior presence of relievers like ‘Peace Clause’, that helped India in implementing its food security programmes, a permanent solution was again postponed to 2017 Ministerial Conference.

Disappointment Once Again

In an unlikely turn of events, the issue of public stockholding for food security purposes left developing countries, like India and China, deeply disappointed. As more than 100 developing countries demanded to implement their food security programmes without stringent conditions, U.S. flatly refused to accommodate the demands.

In a statement at the WTO Ministerial Conference (MC), India said, it was “surprised and deeply disappointed that despite an overwhelming majority of (the WTO) Members reiterating it (a Ministerial mandate for a permanent solution to the issue of public stockholding for food security purposes by the MC in 2017), a major member country (the U.S) has reneged on a commitment made two years ago to deliver a solution of critical importance for addressing hunger in some of the poorest countries of the world.” Though there was no direct mention of US, the concern was subtly put forward.

WTO classifies domestic support subsidies in three categories: Green Box (No restriction), Amber Box (spending has to be reduced in future) and Red Box (Strictly prohibited). Though US and EU collectively spend over $200 Billion for their Green Box programs, it is surprising that PSH spending which is deemed necessary in developing countries of Asia and Africa to ensure food security for their poor has been kept in the Amber box.

In another official statement released by India said, “This has posed a severe threat to a successful conclusion of the conference as there was a Ministerial mandate for a permanent solution by MC 11. This has the potential to irreversibly damage the credibility of the WTO as a Ministerial Decision of all countries present in Nairobi has not been honored.”

The US, on the other hand, has questioned India’s status as a developing country. US Trade Representative Robert Lighthizer said, “There is something wrong, in our view, when five of the six richest countries in the world presently claim developing country status.”

Conclusion

Argentina, the host nation, remained adamant to reach a decision at the end of the conference, whether or not the US votes. Although the decisions in WTO conferences are taken by a majority voting but never ever in WTO’s history has a decision been taken without the US voting. Whether or not any decision is taken now remains to be seen but most certainly the budding Indo-US romance of the recent past has taken a bad hit.

Reference

https://qrius.com/food-subsidy-issue-hits-roadblock/

http://www.firstpost.com/business/wto-food-security-row-us-refuses-to-engage-with-india-on-permanent-solution-to-public-stock-holding-issue-4255983.html

https://qrius.com/india-seeks-permanent-solution-subsidies/

http://www.thehindu.com/todays-paper/tp-business/wto-india-resolute-on-food-security/article21617079.ece

http://www.thehindu.com/business/Economy/wtos-buenos-aires-meet-staring-at-an-impasse/article21561759.ece

http://www.thehindu.com/business/wto-india-resolute-on-food-security/article21615762.ece

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