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India will be susceptible to trade disputes at the World Trade Organization (WTO) and face increased push back over food subsidies if it fails to achieve a permanent solution on public stockholding for food grains at the 13th ministerial conference in Abu Dhabi later this month, according to senior trade experts and former negotiators.
A permanent solution at WTO will give India and a coalition of developing countries the flexibility to give out higher farm support. This assumes special significance as farmers are holding yet again protests in the national capital seeking a law to guarantee minimum support price (MSP) for all crops. Several farmers groups have long held the opinion that India should walk out of WTO.
However, giving out higher farm support could land India into legal disputes at WTO on account of distorting global trade. India is already facing pushback from the Cairns Group — a group of agricultural exporting countries that include Australia, Brazil and Canada who claim that India’s public stockholding (PSH) programme is highly subsidised, especially for rice, and that this is affecting food security of other countries.
“The main reason why India is very keen on a permanent solution is that some of the provisions in the peace clause are ambiguous. So we don’t know how those provisions will be interpreted by a WTO panel. That creates uncertainty and unpredictability for us. Our invoking the peace clause from 2020 onwards has been subjected to detailed questioning by many countries. The objective is to make the peace clause more restrictive,” Abhijit Das, expert on international trade and former head, Centre for WTO Studies said.
India has invoked the ‘peace clause’ several times at the WTO for breaching the prescribed 10 per cent subsidy ceiling on rice procurement.
India’s subsidy on rice had exceeded the threshold on multiple occasions forcing it to invoke the ‘peace clause’ agreed during the Bali ministerial in 2013 which allows developing countries to breach the 10 per cent ceiling without invoking legal action by members.
“Cairns Group is also pushing all countries to cut agriculture support by 50 per cent by 2030 which will result in countries such as India making huge sacrifices compared to developed countries,” Das said.
He added if a scheme was not existing in 2013 then that can be implemented but the products benefiting for the scheme cannot exceed the 10 per cent subsidy ceiling. This means that for those products, the peace clause will not be applicable.
“The peace clause says that you are distorting trade due to your subsidies but nobody will sue you provided you meet certain conditions. The conditions include that a country should not hurt the food security of other countries or be trade distorting. These conditions are vague in nature and that is why India can be taken to dispute. This is the reason why India and other developing nations are pushing for a permanent solution,” Ranja Sengupta, Senior Researcher with the non-profit international research body Third World Network (TWN) said on Thursday.
Government officials had earlier said that India will not discuss any other issues on agriculture as long as the issue of permanent solution is not resolved.
Developed and developing nations continue to differ on the subject of domestic support for farmers so much so that the WTO Director-General, Ngozi Okonjo-Iweala in November last year said that ongoing agriculture negotiations have “failed to achieve” the progress WTO members have called for.
