The WTO is destroying Indian farming

If India is forced to limit the rice procurement price at 10% of the total production, and refrain from increasing the wheat procurement price in future, it will sound the death knell for agriculture.
US farm subsidies are unquestionable, while India’s hungry are being conveniently traded at the WTO.

Devinder Sharma October 21, 2013

The double standards are clear. In 2012, the US provided $100 billion for domestic food aid, up from the $95 billion it spent on feeding its 47 million undernourished population in 2010 including spending on food coupons and other supplementary nutrition programmes.

In India, the Food Bill is expected to cost $20 billion and will feed an estimated 850 million people. Against an average supply of 358kg/person of subsidised food aid (including cereals) in the US every year, India promises to make available 60 kg/person in food entitlement. And yet, while the World Trade Organisation (WTO) is quiet on the subsidy being doled out in America for feeding its poor, the US has launched an attack on India for “creating a massive new loophole for potentially unlimited trade-distorting subsidies.”

India’s subsidies for feeding its hungry are being blamed for distorting trade in agriculture while the US, which provides six times more subsidies than India for feeding its hungry, is seen as doing humanitarian service. The US subsidies are unquestionable, while India’s hungry are being conveniently traded at the WTO. Public posturing notwithstanding, India is believed to have given in to US pressure. Commerce minister Anand Sharma is believed to have assured the WTO director-general that India is committed to take the multilateral trading regime to its logical conclusion. That India is not willing to contest the unfair provisions, and has agreed to a compromise, becomes evident from what the WTO chief said: “What we have agreed in Geneva is we are going to be working on a Peace Clause.”

The US/EU is pushing for a Peace Clause lasting two-three years. India is willing to accept it since it allows the food security programme to continue without any hiccup till 2014. The Peace Clause is a temporary reprieve. Although it expired in 2003, it is being reinvented now to allow India to continue with its food subsidies for the specified period during which its subsidies cannot be challenged before the WTO dispute panel.

The main issue here is the increasing amount being spent on public stockholding of foodgrains and thereby the rise in administered prices for wheat and rice that is procured from small farmers. According to the WTO Agreement on Agriculture, the administered price cannot exceed the ‘de-minimis’ level of 10% of the total volume of production. This exemption is allowed under the Aggregate Measure of Support. India has already exceeded the limit in the case of rice where the procurement price has shot up to 24% from the base year 1986-88 that was agreed upon.

It is, therefore, not the food subsidy Bill that is under the radar, but the procurement price system in India which is now on the chopping block.

If India is forced to limit the rice procurement price at 10% of the total production, and refrain from increasing the wheat procurement price in future, it will sound the death knell for agriculture.

Agreeing to a Peace Clause only shows how India is trying to skirt the contentious issue and is ready to sacrifice the livelihood security of its 600 million farmers.

According to the US-based Environment Working Group, America had paid a quarter of a trillion dollars in subsidy support between 1995 and 2009. In the 2013 Farm Bill, these subsidies have been further increased. This results in the dumping of foodgrains, thereby dampening farm gate prices, and pushing farmers out of agriculture.

In India, wheat and rice growers have merely received $9.4 billion as procurement price in 2012. Forcing India to freeze procurement prices means that the WTO is being used to destroy Indian agriculture.

Peace Clause in WTO negotiations will only sacrifice millions of hungry Indians for an unjust trading regime. Let the WTO die a peaceful death instead.

WTO Chief Roberto Azevedo (right) with the Indian Commerce Minister Anand Sharma in New Delhi on Oct 7, 2013

Knowing that India’s defiance of the WTO rules on food stocking can derail the outcome of the forthcoming WTO Ministerial to be held at Bali in the first week of December, the visiting WTO Chief Roberto Azevedo asked India to consider ‘Peace Clause’ as an option to protect subsidies under the proposed National Food Security Act. “Food Security is a squarable circle. The line between price support and food security is very flimsy and not easily drawn. It is going to be a complex task,” he said in New Delhi on Oct 7.

Now it is the next sentence that is more worrisome: “What we have agreed in Geneva is we are going to be working on a Peace Clause .. which allows negotiators to find a more permanent solution for the long term. He was addressing the Confederation of Indian Industry (CII). The Indian Express (Oct 8, 2013) says: Negotiations for a deal at the Bali meet are struck over the tenure of an interim resolution on the demand by G-33 developing countries on food security. While the G-33 is demanding the tenure of the peace clause to be 10 years, developed countries such as US are ready to accept only a 2-3 year period. (See this report: WTO Chief seeks support for Bali ministerial meet.

The Peace Clause provided exemption for those countries who used export subsidies for agriculture beyond the permissible limit. These countries could not be challenged before the dispute panel during the ‘Peace Clause’ period. It expired in 2003.

The compromise that India is therefore willing to exercise to ensure that the Bali negotiations proceeds ahead without any hiccup will now bring millions of hungry on the chopping block. It also threatens the livelihood security of millions of small farmers who receive an assured minimum support price for their crop produce. Already, as per WTO calculations, growers in India are getting 24 per cent more minimum support price for paddy crop since the base period of 1986-88. As per the de-minimis criteria, Article 6.4 (b) of the Agreement on Agriculture provides for total support not to exceed 10 per cent of the total value of production for most developing members (except for China, where it is 8.5 per cent as part of its accession commitments).

There was a proposal to increase this to 15 per cent (In Rev 1 of the draft modalities as mentioned in TN/AG/W/4/Rev.1) but somehow this got removed in the next revision of the draft modalities. Indian negotiators are saying that an increase in de-minimis criteria from 10 to 15 per cent could be the possible solution. But India is under tremendous pressure from US/EU to either do away with the commitments of ensuring food security to 67 per cent of the population or agree to a Peace Clause that allows the issue to be deferred by another 2-3 years. By that time, US would have managed to push through an agreement on trade facilitation that primarily benefits its own industry.

The best solution would be to change the reference year from 1986-88 to somewhere more closer, especially after 2007 when the world witnessed a global food crisis that resulted in food riots in 37 countries. Considering that between 1986-88 and 2013, the price of rice and wheat have increased by more than 300 per cent, and prices of inputs like fertilisers has risen by 480 per cent in the same period (World Bank commodity price data), the base period of 1986088 certainly has become outdated. Now this is where India needs to exert pressure rather than accepting the Peace Clause as a solution simply because it gives the ruling UPA Government an easy walkover before the 2014 elections.

Deferring the contentious issue is not a solution. India must stand up and resist developed countries pressure. After all, it is India’s responsibility to feed its hungry population as well as the ensure livelihood security for its 600 million farmers. Even if Bali Ministerial fails, India cannot compromise the fate of 2/3rd of its population. The hungry in India cannot be traded at the altar of development.

Meanwhile, agricultural subsidies in the developed countries have risen from $ 350 billion in 1996 to $ 406 billion in 2011 (Read Martin Khor at No body is talking of reducing these monumental agricultural subsidies in the Western world. In fact, developed country farm subsidies are not even listed to be a topic of discussion in the negotiations at the Bali Ministerial.

India therefore need not worry about the future of WTO. Even economist Jagdish Bhagwati who has been a staunch supporter of a flawed trading regime, has finally acknowledged that “multilateral trading system is dead.” He was speaking at New York on Sept 27. “The Doha Lite deal being attempted in Bali, is like a decaf and light coffee and we are trying to save the Doha Round, which is similar to the steps taken to save the Cancun Round on climate change issues.”

Why should India therefore be making an effort to revive the dead horse by sacrificing its millions of hungry, including farmers and fishermen? Why can’t it make instead an effort to find a better burial ground for what I have always called as the Wrong Trade Organisation??