India wants WTO to address its concerns over a cap on subsidies which may derail food security programme.
India could put a landmark World Trade Organisation deal in jeopardy at hectic negotiations in Geneva after saying that it would withhold support for the agreement unless there was simultaneous progress on resolving a dispute over its food security programme.
India would like the WTO - which set itself a deadline of July 31 for the deal on the movement of goods across borders - to address its concerns over a cap on subsidies that could limit government stocks of grain that are part of its food programme.A meeting of the General Council, the WTO’s highest non-ministerial decision-making body, was suspended Thursday because of a lack of consensus. A group of 25 member states, including Australia, Canada, Norway, Switzerland and Thailand, issued a statement saying they were “dismayed” by the failure to reach an agreement. “A decision to step away would be in no one’s interest,” the statement said.
The European Union expressed a similar sentiment: “Without adoption of the Trade Facilitation Protocol by July 31, a great opportunity to mobilise trade as an instrument for growth and development would be lost, and the credibility of the WTO, which has during the financial crisis proven its value as a firewall against protectionism, would be further damaged.”
Under an established schedule, an agreement on the first phase must be completed by July 31, when all of the 160 member countries would sign the measure, creating a protocol. A veto from the Indian government would disrupt that process. The trade package, initially agreed on at a ministerial meeting in December in Bali, Indonesia, is the first comprehensive multilateral agreement reached by the organisation since its inception in 1995. The agreement, aimed at streamlining global trade, would create legally binding commitments for all member countries to decrease red tape, upgrade border infrastructure and simplify customs procedures to ensure the easier movement of goods across international borders.
Proponents of the measure say that it would lead to the infusion of $1 trillion into the global economy and add 21 million jobs. Critics point out that developing countries would have to make a substantial investment to modernise their ports and borders. To provide food to the millions of its citizens living below the poverty line, the Indian government buys grain from farmers and stockpiles it for a public distribution system, in which it is sold at government-run stores at subsidised prices.
Food Security Act
The National Food Security Act, introduced by the government last year, extended the subsidy to 75 per cent of India’s rural population and 50 per cent of the urban population. But WTO rules mandate that countries cannot subsidise more than 10 per cent of grain produced for food, because doing so would distort the market for trade. India wants to eliminate that ceiling to maintain its food security programme.
In the first week of July, India vetoed the trade agreement at a preparatory meeting in Geneva, saying that talks about finding a permanent solution to the subsidy issue were not progressing. India’s commerce secretary Rajeev Kher said in a statement that his country would find it difficult to sign the protocol until “we have an assurance and visible outcomes which convince developing countries that members will engage in negotiations with commitment to find a permanent solution on public stockholding.” WTO members, including India, agreed in Bali in December to a temporary solution where developing countries would not be penalised for breaching their subsidy levels until a permanent solution was found by 2017, but the Indian government now wants immediate talks.
“The trade facilitation agreement stands to benefit India as well if India becomes a signatory,” said Rajrishi Singhal, a senior geo-economics fellow at Gateway House, a foreign policy research group based in the Indian city of Mumbai. “But strategically speaking, India doesn’t want to delink the food security issue from the issue of trade because once the trade agreement is signed, India loses its leverage in its talks for getting a permanent solution to the food security issue.”
India’s food subsidy programme, on which the government spends about $19 billion each year, is riddled with inefficiency, experts say, and the country’s malnutrition crisis continues unabated. A recent study showed that the proportion of underweight children has remained unchanged over the last seven years.
Some analysts argue that food security is a domestic issue not to be decided by an international body. “Food security is universally recognised as something that is in the hands of a country’s government,” said Biswajit Dhar, professor of economics at Jawaharlal Nehru University in New Delhi.