India has managed to withstand pressure from the US to carve out a much-hyped ‘victory’ for itself at the Bali Ministerial meeting of the World Trade Organisation (WTO).
But all is not hunky-dory if one looks at the fine-print of the agreement that allows India interim protection from legal action if it breaches subsidy caps for public procurement of crops.
While the final pact does say, on the insistence of India, that the interim arrangement of not challenging the country’s subsidies will continue till a permanent solution is found to the problem of calculating trade distorting subsidies, some of the conditions to get the waiver are stiff.
A permanent solution would involve settling for a new reference price to calculate subsidies as the present reference price of 1986-88 leads to over-estimation of subsidies.
One caveat for the interim relief, which could turn into a problem in the future, is that it is only valid for public stockholding programmes for food security purposes existing as of date.
This could mean that if the Centre, or a State, decides to widen its procurement drive by including more crops, it would be out of the protection net.
The Agreement further says that protection against legal action for breaching subsidy limits would be given only if the stocks procured under such programmes do not distort trade or adversely affect the food security of other Members.
As Right to Food Campaign, a global NGO puts it, this leaves open to interpretation the validity of the country’s entire Minimum Support Price (MSP) mechanism.
“India can be dragged to the dispute settlement mechanism by the US alleging that the entire MSP mechanism distorts trade. So can Pakistan alleging that India's rice exports are distorting trade,” the NGO argues.
One practical problem that India is set to face from now on to gain security against penalties is in the area of submitting documents on its procurement programme to the WTO.
Not only the Centre, but States too have to submit data for five years running giving details on the food security programme and all related numbers.
Moreover, information on agencies running the programmes, crops covered, provisions relating to purchase of stock, determination of administered price, accumulation of stock, release of stock, determination of release prices and eligibility to receive procured stocks also have to be supplied.
“Giving so much data will be a big problem, especially at the State-level. Our entire public procurement programme will be under scrutiny now,” a Government official told Business Line .
As if this was not enough, any WTO member could seek consultations with India asking for more details on its procurement schemes.
One could argue that leaving things as they are might have been another option for India till a final solution was worked out.
In case its food security programme was challenged, it could have asked for immunity under Article 18.4 of the Agreement on Agriculture (AoA).
The article states that members shall give due consideration to the influence of excessive rates of inflation on the ability of any member to abide by its domestic support commitments.
The counter-argument put forward by the Commerce Department is that there is no certainty to the legal interpretation of the terms ‘due consideration’ and ‘excessive rates’ mentioned in the article.
Now that the Bali pact has been signed and sealed, the challenge for India would be to avoid getting bullied by other countries and yet not stray from the agreement.
It also has to ensure that it is not forced to give concessions in other negotiable areas of the ‘post-Bali agenda’ to reach a permanent solution to the problem of calculating subsidies.