India Softens Stand on Food Subsidies at WTO

India has softened its stand at the World Trade Organisation (WTO) on the issue of food subsidies, brightening the prospects of some progress in the global trade talks, which had been stuck for over a decade, at the Bali ministerial next month.

The Doha Round of trade, which began in 2001, has made little progress over sharp differences between developing and developed countries on farm subsidies and tariff reduction.

India is leading the G-33, a grouping of 46 developing nations, which is seeking amendments to the WTO agreement on agriculture to allow government procurement from marginal and subsistence farmers or that procured to fight hunger should not be included under WTO-restricted subsidies.

The agreement allows so-called ‘market distorting subsidies’ up to a limit of 10% of total production.

India is apprehensive that its recently passed food security law, which promises ultra cheap food to nearly two thirds of the population, could push food subsidy beyond the 10% mark. Developed countries had, instead, offered a “peace clause” that will provide developing nations a relaxation of a few years before the provisions of this rule kick in.

Barely weeks ahead of the ninth WTO ministerial in Indonesia in the first week of December, India has accepted a compromise solution of the four-year ‘peace clause’ against 8-9 years sought by the G-33.

“As an interim measure, India has agreed to a four-year peace clause while working towards a permanent solution. It is an ongoing process; we are not putting curtains down,” a commerce department official told.

But we have agreed to it on the condition that that the WTO members would engage on the issue post-Bali ministerial to find a permanent solution, he added.

“Earlier, developed countries were not even recognising that there was a problem. So now accepting that there is an issue that needs to be addressed, itself is a major achievement. And recognising that there is a need to address this permanently is the second-biggest achievement,” the official added.

Till a few weeks ago, developing countries, including India, were averse to the four-year peace clause being offered and sought it for a minimum of 8-9 years. However, the latest development of developing countries agreeing to the four year peace clause will smoothen the prospects of a multilateral agreement being reached at Bali.

The WTO member-countries are trying to harvest low hanging fruits such as trade facilitation agreement even as larger trade talks remain stuck. This will be the first ministerial under new director-general Roberto Azevedo, who took over from Pascal Lamy in September.

During his India visit in October, Azevodo told that “the food security proposal would not form part of the Bali package as it was a complex issue and it was not possible However, some independent experts see this as a climb down by the G-33. “Developing countries were too hurried in going for a peace clause. They should have waited a bit longer to get a permanent solution to the issue,” said a former WTO negotiator, who did not want to get quoted.

India has also largely agreed to the trade facilitation deal, the developed countries agenda at WTO. Trade facilitation is aimed at smoothening crossborder trade by removing red tape, improving infrastructure and harmonising Customs procedures.

Meanwhile, farmer groups have written to Prime Minister Manmohan Singh to stand up against developed nations and reject any proposal that will impact agricultural subsidies and affect over 600 million farmers of the country. “India cannot dilute its position on the G-33 proposal and accept a peace clause, which makes a travesty of the poverty and hunger faced by millions of Indians every day,” 15 farmer groups, including Bhartiya Kisan Union (BKU), have said in a letter to the prime minister and commerce and industry minister Anand Sharma.