New Method on Food Subsidies: WTO

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• Recently, the G33, African Group and the ACP (African, Caribbean and Pacific) group submitted a joint proposal to the WTO suggesting a permanent solution for public stockholding.

Background

• Peace Clause: As an interim measure to tackle the differences between nations on food subsidy, WTO members at the Bali ministerial meeting in 2013 put in place a mechanism called the Peace Clause.
  • Under this clause, developing nations could not be dragged to arbitration if they did breach the prescribed limit of 10 per cent on support to farmers.
  • The Peace Clause rules such disputes until a permanent solution is reached.

About the latest proposal 

• At least 60 countries including India, China, Pakistan, Egypt, Indonesia and South Africa have proposed a new method to calculate subsidies given to purchase, stockpile and distribute food to ensure food security for developing and poor nations.
• It should account for inflation and also be based on a recent reference price instead of an old one based on 1986-88 prices.

New methodology

• External Reference Price (ERP): Countries have suggested a new methodology to calculate the subsidies by either accounting for “excessive inflation” in the External Reference Price (ERP) or calculating the ERP based on the last five years excluding the highest and the lowest entry for that product.
  • ERP is the average price based on the base years 1986-88 and has not been revised for decades.
• Anti-circumvention clause: The grouping has also proposed to amend the anti-circumvention clause in the Bali Ministerial Declaration of 2013 as per which developing countries who procure food stocks for security “do not distort trade or adversely affect the food security of other Members”.
  • This is important as it would ensure certainty for exports of food stocks from the public stockholding to the needy countries.

Current practice

• De minimis level: At present, they have a peace clause which protects them from legal disputes if the subsidies breach the de minimis level (10% of the total value of production of the product) but is subject to conditions such as anti-circumvention.

Significance of this new methodology

• Food security: The proposal assumes significance in the wake of the developing and poor countries seeking a change in the WTO’s agriculture rules- a permanent solution- to ensure policy space for their food security programmes.
• Public stockholding: It is crucial as such a large number of countries have come together at a time when global food prices are rising and they need to ensure public stockholding of food.

Other reforms suggested

• Pandemic Response:
  • Even though demand for COVID-19 shots has tapered off, India, South Africa and some 100 other backers are seeking a potential waiver of intellectual property rights for vaccines and treatments.
  • However, WTO members remain divided over a draft deal for vaccines negotiated between the four main parties (India, South Africa, the European Union and the United States) that were forged to break an 18-month deadlock.
• Fishing:
  • Separate negotiations are aimed at removing subsidies that contribute to overfishing, a step that environmentalists say is important to help fish stocks recover.
• Food Security:
  • It aims for a response to the food crisis driven partly by export disruptions from major wheat exporters Ukraine and Russia.
• E-Commerce Moratorium:
  • A ban on import duties or so-called “electronic transmissions” worth hundreds of billions of dollars a year is up for renewal.
  • The moratorium has been in place since 1998 but South Africa and India have launched a separate proposal to lift it. They have opposed an extension in the past, citing lost customs revenues, but have not so far blocked it.
• Environment:
  • New Zealand submitted a fossil fuel phase-out proposal but most delegates see this as too ambitious.
  • If a deal on cutting fishing subsidies is agreed, that could give environmental efforts some momentum.

Challenges associated with India

• India has always faced pressure from developed nations, including the US, EU and Canada, to reduce the subsidy it gives to farmers.
• WTO rules deal strictly with product-specific support to producers (as given by India) but they do not discourage “green box” subsidies.
  • India has fought for dropping the distinction between green box and other subsidies.
• Peace Clause only includes the government programmes started before 2013 and the Indian government wants programmes started after 2013 to be included as well.

Importance of WTO for India

• India has visibly benefitted from the open market reforms that it embraced in the early 1990s. Through WTO India can ensure a rule-based global trade regime.
• The dispute settlement body of the WTO is important for India as India has appealed to it seeking exemptions from the import duties on steel and aluminium imposed by the US.
•  India harbours the ambition of becoming a superpower and therefore needs more and more platforms to take up leadership roles as it has been doing at WTO.

Way Forward

• Subsidies by developed countries: However, analysts say that the US and European countries also offer enormous subsidies to their farmers and that far outweighs India’s subsidies.
• A key difference between “our subsidy” and “their subsidy” is that developed nations invest in research, disease control and infrastructure building for agricultural support.

Source: ET