Level playing field

The ‘G-33’ group that includes India, China, Indonesia and 30 other African and central American countries, has placed an important proposal before the WTO, as reported by this newspaper on Thursday. The proposal yet again urges the developed nations to find a permanent solution to the issue of public stockholding, instead of repeatedly asking untenable questions of major food producers such as India, Indonesia and China on their ‘trade-distorting’ agri subsidies. It is interesting that most of the G-33 countries lending support to the food producers’ proposal, are food importers. Given the context of raging food inflation (at 23 per cent globally, according to the FAO food index), these countries, battling hunger and malnutrition, would probably like to rule out supply glitches in the event of producer country subsidies being contested at the WTO. But what’s crucial is the apprehension that G2G deals out of publicly procured stocks may be called into question. While it is agreed that there can be no commercial export from public stocks which are managed at administered rates, the question is whether G2G deals should be viewed through the same lens. In fact, the Centre has rightly decided to make a case for G2G food exports from public stocks at the upcoming WTO Ministerial in Geneva. The G-33 grouping should push back on efforts to influence food production and trade patterns. India has secured an indefinite peace clause on food procurement in November 2014 (a year after the Bali Ministerial) pending a permanent solution to food procurement. There should be no let up here.

As India has argued in the WTO, the developed countries are wrong on several counts, when they contend that India’s price support and input subsidies are way above the WTO’s threshold. According to the WTO’s Agreement on Agriculture, subsidies to farm producers (with reference to an international benchmark) should not exceed 10 per cent of the value of a product. The trouble lies in the calculation of the global benchmark, and in the overestimation of product subsidy. As the G-33 proposal points out, the external reference price should be a three-year average price, based on the preceding five-year period excluding the highest and lowest price, rather than one based on 1986-88 prices as the base. As a result of underestimation of the international benchmark, the subsidies seem high. To that extent, India’s ‘aggregate measure of support’ even in the case of rice is likely to fall below 10 per cent of the value of the rice crop, whereas it is assumed that India breached the 10 per cent mark in the case of rice about two years back. Secondly, Article 6.2 of AoA exempts ‘low income’ and ‘resource-poor’ farmers, who account for most of India’s cultivators, from the subsidy calculations (price and input support).

As China and India have pointed out a few years back, the developed world deftly masks its own subsidies, while asking the rest to set their houses in order. None of that has changed. That said, India’s agri support regime requires overhaul — a shift away from input subsidy to income and extension support. While this could make its payouts WTO-compatible, it is a transition that India should make on its own terms.