The US agreeing to a full re-write of the controversial peace clause broke the impasse over the food security issue, paving the way for progress on the trade facilitation front at the World Trade Organisation (WTO).

A senior government official told BusinessLine that the US has agreed to India’s demand of making the peace clause perpetual, unambiguous, and enforceable so as to give adequate protection to a country against legal challenge in case its farm subsidies breach existing caps.

“The agreement reached with the US is that the entire peace clause of the Bali Agreement (of December 2013) will be re-worded,” said the official. The WTO Director-General has been kept posted about the talks between India and US on the issue.

The peace clause is a provision that gives immunity to a country against legal action by another member in case it (the former) breaches the agriculture subsidy cap fixed at 10 per cent of production, till a permanent solution to calculating subsidies is found.

The Bali Agreement had kept it open ended and was later interpreted by the WTO as a protection that would lapse in 2017.

“With the peace clause now being made permanent, we have a better chance of getting an acceptable permanent solution,” the official said.

Permanent solution WTO members will be working on a permanent solution and target it much earlier than 2017, the official added.

The WTO General Council, which will ratify the changes, is likely to meet on November 28-29, earlier than the scheduled December 11-12.

“We want to get the changes implemented as soon as possible,” the official said.

WTO Director-General Roberto Azevedo, in his address at the on-going G-20 Summit in Brisbane, also said that an agreement is likely to be in place in the next two weeks, following which negotiations in other areas of the Bali package can move forward.

India, as part of the G-33 group, has given three options for a permanent solution: food procurement subsidies should either be dropped from the list of trade-distorting subsidies, calculated on a more recent base year (as opposed to existing base year of 1986-88) or indexed to inflation.

The conditions attached to the use of the peace clause, including establishing that food procurement programmes being protected do not distort world trade and submission of numerous documents, will not be dropped.

“We believe that we can meet the condition of submitting documents by coordinating better with other Ministries and Departments,” the official said.

According to some trade experts, the fact that India has to establish that its food procurement programmes (once the caps are breached) are not distorting trade when challenged by another country, could prove to be a problem.

“Nobody will have a strong case against us on the ground of trade distortion. It has been observed that international prices have remained stable most of the times when we export foodgrain,” the official said.

WTO talks have been in limbo since July when India refused to support a pact on trade facilitation till its concerns on food security were addressed. On Thursday, India and the US reached an agreement on the issues of food security and trade facilitation.

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