WTO 9th ministerial: victory or compromise deal for India?

The World Trade Organization (WTO) reached its first ever trade reform deal today after it buckled to the demand on food security that allows developing nations to stockpile grains for food security purposes.

The deal was struck with approval from about 160 ministers after Cuba, that had consistently been demanding the United States lift its economic embargo on the Caribbean island as part of the Bali agreement, did not veto the package of measures. This is the first significant global trade reform in more than two decades and comes at a time when the WTO seemed to have been losing relevance after a series of failures. India's demand for immunity from penalties for its food security programme has been addressed in the latest ministerial draft agreement. Members have agreed allow the G-33 nations—a coalition of developing countries—to put in place an “interim mechanism” till a final solution is found with regard to public stock holding for food security purposes.

According to the latest ministerial draft agreement, “members shall refrain from challenging through the WTO dispute settlement mechanism ...of the Agreement on Agriculture (AoA) in relation to support provided for traditional staple food crops in pursuance of public stock holding programme for food security purposes."

India had taken a rigid stand that there could be no compromise on its food security programme  to protect two-thirds of its population by giving subsidised grains. Developed countries such as the US and the EU had been asking India to accept a “peace clause”, which offered four years of immunity from penalties imposed for breaching the farm subsidy cap of 10 per cent under the AoA. But India and other developing nations wanted the peace clause until a permanent solution is found on the matter for smooth implementation of the food security programme. The final deal is seen as a major development on the farm sector since 1995.

WTO director general Roberto Azevedo had a crucial meeting with the three key players—India's commerce and industry minister Anand Sharma, US trade representative Michael Froman and Indonesian trade minister Gita Wirjawan. Azevedo also held a 90-minute separate meeting with Sharma to end the stand-off following the tough stand taken by India.

The deal would help the UPA government roll out its flagship National Food Security Act (NFSA), passed in September, which would otherwise have been severely constrained by current WTO rules that impose stiff conditions on agriculture subsidies. NFSA, launched in September, is the world’s biggest subsidized foodgrain programme, covering 67 per cent of the country’s population. The agreement was preceded by four days of intensive negotiations on the proposal pressing for flexibility for developing countries in agriculture—on food stockholding for food security—that was submitted in November 2012.

However, civil society groups claim that India has wilted under pressure from the US and agreed to accept conditions that were not part of the G-33 proposal.

Areas of ambiguity

According to Anuradha Talwar, adviser to the Supreme Court commissioners in right to food case, India's commerce minister had unambiguously stated that the "peace clause" should be in place till such time that a permanent solution is found. The word "interim" that he had used is in the text, but what is being described by the WTO secretariat as "constructive ambiguity", the US position that it should be only for four years also finds its place in the text by adding, "for adoption by the 11th ministerial conference". There is a WTO ministerial once every two years and Bali was the 9th ministerial.

However, some experts are interpreting it as being in India's favour since "interim" can be interpreted as holding on till a permanent settlement is found irrespective of the reference to the 11th ministerial.

While India in G-33 draft had demanded that no member country can drag a member state to the dispute settlement mechanism, till a permanent settlement is found under AoA and the Agreement on Subsisdies and Countervailing Measure (ASCM), only the AoA is mentioned in Para 2 of the draft. This means that member states can still drag India to the dispute settlement process under ASCM. The language has also been whittled down and instead of "shall not" replaced with "shall refrain from", which means this guarantee is not secure even under the AoA, Talwar explains.

Restrictions on MSP

Biraj Patnaik, principal adviser to the Supreme Court commissioners in the right to food case, says that most disturbingly, this agreement is only, "in pursuance of public stockholding programmes for food security purposes existing as of date". This implies that minimum support price (MSP) mechanism (price at which government procures foodgrains from farmers to support them) cannot be introduced for crops other than those already provided for. The quantity of foodgrains procured under the MSP cannot be increased beyond the procurement as of date which would threaten NFSA in the near future. He also says that pulses, cooking oil and other foods (other than rice, wheat or millets specified in the NFSA) can no longer be introduced in the PDS either by the Government of India or the state governments if they are not being provided now. Governments cannot increase the entitlements of foodgrains guaranteed under the NFSA which has been notified. For instance, Chhattisgarh, among other states, provides 35 kg per households but no other state which is now providing 20 kg or 25 kg can increase the quantity to 35 kg.

This may also be interpreted to mean that Government of India or the state governments cannot increase the price of the MSP from beyond what has been specified now for the next four years. India will now be subject to onerous data requirements that have been made mandatory in the agreed text. This was there in the US/ EU text but not in the G-33 proposal which means that India has accepted to provide details of all holdings in procurement by both states and Government of India.

'India's credibility eroded'

Para (4) of the draft, Patnaik claims, is one of the most problematic proposition for India, which has made its way from the US/ EU draft, "shall ensure that stocks procured under such programmes do not distort trade or adversely affect the food security of other members". Talwar and Patnaik who are in Nua Dua, Bali, say that the African Group, many members of the G-33 and LAC are very upset with India. Sharma had taken a strident note till last night, and raised the hopes of most developing countries that India would not buckle to pressure from the US and the EU. Today his credibility and that of India is severely eroded, they claim.

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