Face off with the US

Face off with the US

The Narendra Modi government has told the World Trade Organisation (WTO) that it will not ratify the Trade Facilitation Agreement (TFA) at the WTO unless its concerns on food security are addressed.

India has made it clear to WTO that “To jeopardize the food security of millions at the altar of a mere anomaly in the rules is unacceptable.” This stand of the government has created a situation of a near face off between US and India.

To understand and appreciate government’s concern on the whole issue we will have to look at the history of the issue(s) in question. The whole issue of food security concerns in WTO occurred with the developed countries raising the issue of India exceeding the threshold limit of 10 percent of total value of food production, which could be given as subsidies.

Matter gained importance after passage of food security legislation by India, ensuring provision of food grains to nearly 67 per cent of population at a very low price of Rs 3 per kg for wheat and Rs 2 per kg for rice. Fact of the matter is that India has never ever exceeded the threshold limit of 10 per cent, nor it is expected to exceed this limit even after full implementation of Food Security Act.

Reason, why this issue has arisen is the fact that at the time of signing of WTO agreement, the base price has been pegged at prices of food grains prevailing in 1986-88. This would imply that if the government pays a support price of Rs 1400 per quintal today and between 1986 and 1988 the support price was Rs 380 per quintal then the subsidy part would be calculated as Rs 1020, which is highly inappropriate.

If the same rule continues then the threshold limit of 10 per cent of total production is bound to increase. What Indian side in WTO wants is this simple correction in the rule that this anomaly is rectified and the base year is revised.

Addressing a press conference on December 5, 2013 at Bali, Indonesia at the occasion of 9th Ministerial Conference of WTO, then commerce minister said, “I would like to make this absolutely clear that we have not come here as petitioners to beg for a peace clause... That it is binding on us to accept 1986 to 1988 prices and make ourselves vulnerable to disputes and calculations. The answer is a firm ‘No.’ This is a fundamental issue, we will never compromise.”

In WTO’s Ninth Ministerial Conference at Bali, Indonesia, the agreement, reached after extending the conference by one more day, states that, “In the interim, until a permanent solution is found, provided that the conditions set out below are met, members shall refrain from challenging through the WTO dispute settlement mechanism compliance of a developing member with its obligations under Articles 6.3 and 7.2(b) of the agreement of agriculture (AoA) in relation to support provided for traditional staple food crops in pursuance of public stockholding programmes for food security purposes existing as of the date of the decision.”

Food security programme

It is notable that developed countries were trying to pressure India to make further concessions in WTO negotiations by saying that India subsidies beyond the threshold limit by way of support for public food grain stockholding for food security, against which they can raise disputes.

It was imperative for the government not to buy that argument, as the whole food security programme under the food security act would have been in doldrums. This agreement was celebrated by the then government and was termed as a big victory for the government.

Now in WTO the Indian side wants that the agreement which was reached in Bali should be taken ahead and efforts are made towards finding a permanent solution in this regard. However, the developed countries want binding commitments from India with regard to Trade Facilitation Agreement (TFA), without really making any commitment towards finding a permanent solution regarding food security issue.

It is notable that TFA as pushed by the developed world could hold significant administrative and institutional burdens on LDCs and other developing countries. Meeting the obligations, as proposed, is likely to involve significant cost for the developing countries including India.

Apart from building huge infrastructure (both soft and hard) including airports, sea ports, dedicated corridors and roads, it would also involve automation of customs system. It is unfortunate that no cost assessment has been made by the government about implementing the provisions of trade facilitation.

This is a fact that meeting this cost would mean a huge diversion of resources from public services such as health care, food security and education to customs administration.

Insistence for long term solution to the issue of disputes on food security as a bargain for agreeing to TFA is also in no way unjustified. It is notable that the disputes being raised by the US against India with regard to so called ‘trade distorting subsidies’ is a clear attack on our sovereign right to protect food security of our poor.

We must understand that the agreement on agriculture signed earlier has been highly skewed in favour of rich nations, as we find that after this agreement developed countries have not only continued with huge subsidies to their agriculture, but have increased the same manifold, by simply renaming and reclassifying the same as green box subsidies.

We must understand that trade is like a war and trade negotiations are like war documents. Therefore hard selling is a part of trade negotiations. It is better to have no agreement than having a bad agreement.

Protecting national interests is the duty of the state and if the government is doing the same by linking trade facilitation with agreement on domestic food security, why should there be any objection to the same? In the name of globalisation, we cannot continue to bend or crawl.