India Backs Off on Food Security on Fear of G20 Pressure

Arun Goyal at G20 Summit in Brisbane

13 Nov 2014, 20:14 (1/1)

There is celebration in the air at Brisbane with the Modi Government bowing to global pressure on holding the WTO Trade Facilitation Agreement to host on the issue of food subsidies. The local and foreign media has relayed the news prominently. Australia the host country is a leader of the Cairns group which fights agriculture subsidies. The other Third World countries at G20, namely, Argentina, Brazil, Mexico, Indonesia and South Africa are all exporting agro goods in a significant manner. They have fears of cheap Indian cereals from Government stocks entering the world market. Thus India could not expect support from them in the US onslaught on India backing off from the Bali commitment to sign the Trade Facilitation Agreement on grounds of lack of progress on indexing subsidy with current prices instead of the mid 1980s price.

The July 2014 move to go back on Bali isolated India and also brought WTO to a standstill with the fingers pointing towards Modi. Threats moving towards plurilateral agreement on trade facilitation worked, India sent an official to Geneva who hammered out a face saving formula. India may not face action on food subsidies exceeding the stipulated 10 percent at WTO under the peace clause provision. The deadline for a resolution of the issue before the next WTO Ministerial has been removed. This perpetuation of subsides will boost the US to continue subsidization.

With the backing off on agro subsidies, India is now a “good boy” in the eyes of the G20, the rich man’s club accounting for more than 80 percent of the world’s GDP. It can expect support from middle level powers who produce or consume coal in its quest for the easing of the curbs on carbon emission. Its thrust to carve a role for itself in world financial affairs through new development banks and reduction in dollar dependence will gain credibility. The monetary supply in the world market and arbitrary changes in interest rates create undesirable volatility in the world market. An arrangement to bring discipline in these is also a priority for India. Last, Australia’s moves to stop the big mining and agro companies from sending out profits to tax havens by transfer pricing has a ready audience in India. It wants tax havens like Switzerland to follow global rules on information sharing. This too will be a subject matter for Modi in the discussions.

Indian Prime Minister Modi is at the top among the Third World countries with Brazil, Modi’s love for selfies and fan following of 4 mn has made him a cult figure here. His name is among the top with Obama, Putin, Cameron, Xi and Abe. British Prime Minister Cameron is meeting Modi in a one on one setting to talk on improving relations. Australian Prime Minister Abbott is rolling out the red carpet for him with special arrangements for bilateral visit after the G20 meet which includes a special reception and address to Australian Parliament which has been called to hear the visiting Indian PM.

The G20 actually has 19 members with Nigeria being bumped off at the last minute with its GDP not reaching the right level. Spain is also at the margin in G20 membership and comes to Brisbane as ‘permanent invitee’ even though its GDP makes it more eligible than Argentina or South Africa. It is said that the US is miffed at Spain’s withdrawal of troops from Argentina hence Spain has to stay out of G20. India is in the club on its position as an emerging market and its potential to play an active role in world security. Saudi Arabia too is in G20 as a leader of the Arab world and the OPEC.

Academy of Business Studies