Public Stockholding, Food Security, WTO and India
Trade Should be for the People and Not of the People...!
Eleventh World Trade Organization (WTO) Ministerial
Conference (MC11) is scheduled in Buenos Aires, Argentina during 10-13th
December, 2017 and is critically important from India's perspective as it is
necessary to safeguard her interests in the field of agriculture, e-commerce
and investment. This post discusses the hot issue of public stockholdings, food security and position of India here in Buenos Aires.
Wide concerns are being raised about finding a permanent
legal solution to India's purchasing and public distribution of food grains at
reasonable prices and is a priority issue for the 11th WTO Ministerial
Conference.
Public Stockholding is a kind of policy instrument used by a
Government to procure, stock and distribute the food whenever the need arises.
Minimum Support Price (MSP) is one of the instruments of Public Stockholding.
Stockpiling and distributing food is permitted under WTO
Rules, however, purchasing of food at fixed prices or “administered” prices
which are higher than market is considered to be subsidized. This kind of
support for purchasing food at fixed price is counted towards the Country’s
overall ceiling on trade-distorting support under the WTO Rules[1].
Currently, there is cap of 10% (fixed subsidy) for
procurement of food from farmers in order to feed the needy and the poor. This
cap can constrain procurement of food grains and also implementation of food
aid programs in developing countries[2].
As per the Agreement on Agriculture (AoA) of WTO, purchase of farm produce at
higher prices than the market is considered as subsidizing the farmers. The
methodology that is used for subsidy calculation is based on price index of
1986-1988 and that does not take into consideration the inflation.
WTO has a provision that Member countries may give subsidy
in order to maintain the local market. For example, Agreement on Agriculture
(AoA) excludes certain policies from reduction commitments. Going by the WTO
terminology, Subsidies in general are identified by “boxes” which are given the
colors of traffic lights: Green (permitted), Amber (slow down — i.e. need to be
reduced), Blue (forbidden)[3].
Research, Pest & Disease Control, Training Services, Extension and Advisory
Services, Infrastructural Services etc. is included in Green Box and thus do
not have any reduction commitments[4].
Blue Box is like a Traffic Signal turned Red and thus is an exemption from the
general rule that all subsidies linked to production must be reduced. In case
of agriculture, all domestic support measures considered to distort production
and trade (nonetheless with some exceptions) fall into the Amber Box. The total
value of the Amber Box measures must be reduced.
Public Distribution programs of developing countries are
included in the trade distorting Amber box measures which requires reduction in
the commitments.
The developing countries are insisting that the subsidies that
are being given for the purchase of agricultural goods higher than the market
prices should be included in the Green Box subsidies i.e. these subsidies should
be exempted from reduction in the commitments as stipulated in the Agreement on
Agriculture of WTO.
With the launch of the Doha Round of Negotiations in 2001,
developing countries hoped for a positive stimulus in the continuous reform
process in agriculture, which is structured around the three pillars comprising
– market access, domestic support and export subsidies[5].
Public Stockholding is one of the major agricultural issues
selected out of the broader agenda of negotiations held during Doha Round in
2001.
The issue has come up because some developing countries fear
they could breach the limits they have agreed on trade-distorting domestic
support — i.e. support that influences prices and quantities[6].
The stockholding programs are considered to distort trade when they involve
purchases from farmers at prices fixed by the governments, known as “supported”
or “administered” prices and when these fixed prices are higher than the market
prices.
G33 Countries (a group of 47 nations) of which India is a
prominent member are demanding that the programs for food security measures
should be exempted from subsidy reduction commitment of WTO. These food
security measures, Public Stockholding programs should be removed from amber
box to green box subsidies which are exempted from reduction commitments.
However, there is strong opposition from US, EU and such
other developed countries to provide unrestrained or unlimited market price
support under the banner of Food Security Measures or Public Stockholding.
In 2013, at the ninth Ministerial Conference of WTO held at
Bali, Indonesia, an interim measure was adopted which is referred to as the
Peace Clause. Paragraph 2 of the Bali Ministerial Decision on this issue is as
quoted below:
“Members shall
refrain from challenging through the WTO Dispute Settlement Mechanism,
compliance of a developing Member with its obligations under Articles 6.3 and
7.2 (b) of the Agreement on Agriculture (AoA) in relation to support provided
for traditional staple food crops2 in pursuance of public stockholding
programmes for food security purposes existing as of the date of this Decision”
This Peace Clause was to remain to in force for four years
to be conclusively decided in the eleventh WTO Ministerial Conference in 2017.
However, recognizing the importance of public stockholding
for food security purposes for developing countries the General Council in
November 2014, decided that[7]
–
“If a permanent
solution for the issue of public stockholding for food security purposes is not
agreed and adopted by the 11th Ministerial Conference, the mechanism
referred to in paragraph 1 of the Bali Decision, as set out in paragraph 1 of
this Decision, shall continue to be in place until a permanent solution is
agreed and adopted.”
As the negotiations of WTO Ministerial Conference have
approached, developing countries are set to insist on special and differential
treatment on the issue of public stockholding.
What is the position of India..?
So far, no substantial progress has been made on the issue
of Public Stockholding since the tenth Ministerial Conference of WTO held in
2015 in Nairobi, Kenya.
While India and other developing nations have called for a
simple exemption of such programs from WTO restrictions, there is a striking
contrast in the developed countries position. Rather a typical hypocrisy on
their part. On one hand, the developed countries particularly US are themselves
dumping agricultural surpluses on global markets at prices below the costs of
production[8]
and on the other hand, these countries are demanding more restrictive measures
from developing countries. US Government which subsidizes wealthier farmers at
higher rates for less compelling reasons, calling out a far poorer country for
subsidizing its much poorer farmers for the purpose of feeding a large and
hungry population[9].
India has been repeatedly demanding permanent legal solution
to this problem. India has agreed to WTO's Trade Facilitation Agreement on a
promise that the public stockholding issue shall be resolved. There has to be a
workable solution to the issue of public stockholding issue which is better
than mere peace clause.
A proposal by India and China has called on developed
countries to eliminate their “amber box” support with an argument that this
type of support would remove one of the biggest imbalances in the current farm
trade rules by obliging the biggest subsidizers to reduce their special
entitlements[10].
India’s Public Stockholding Program under the National Food
Security Act (NFSA) is much more than a mere welfare program. India is being
accused of giving high price to the procurement as compared to the market
price. However, in fact, the procurement prices are not always higher than the
market prices. Farmers generally sell their produce to the Government because
of the stability of the prices.
No further compromises should be made by India unless a
permanent legal solution is offered on the issue of public stockholding.
Developing countries should not be constrained from subsidizing the agriculture.
Since the WTO’s establishment in 1995, we have not been able
to arrive at conclusive solution to this issue.
Concluding Remarks
Domestic support in agriculture remains the key priority for
the vast majority of WTO members. Despite excellent submissions made by many
countries and NGOs over a period of time, there has been no substantial development
on the issue of Public Stockholding which will lead towards a permanent
solution to the issue and there are still significant gaps in the positions of
members.
There is no sound logic and economic sense behind using the
reference price of 1986-88 in calculating the subsidies in the present time.
This is something just happens to be the case which has not been changed for
over decades despite so many negotiations and deliberations all over the world.
Food Security Programs in developing countries are meant for
much bigger things than mere welfare. It is a matter of survival for over
hundreds of millions of poor and needy farmers and people. There are huge gaps
between the subsidies given to the farmers in developing and developed
countries. The agricultural subsidies cannot be equal all over the world given
the fact of different economic and climatic conditions. Strategy has to be
devised to calculate the agricultural subsidy for the developing countries
keeping in mind all the factors that affect the prices and trade thereof. Trade
should be for the people and not of the people!
Given the enormous significance of Agriculture vis-a-vis the role played by it in the lives of farmers who account for more than half the population of a developing country, there must be a fruitful, meaningful and credible outcome from the negotiations taking place in the eleventh WTO Ministerial Conference.
Note: A Position Paper on this issue at the WTO Ministerial Conference has been submitted today morning and is being circulated.
Given the enormous significance of Agriculture vis-a-vis the role played by it in the lives of farmers who account for more than half the population of a developing country, there must be a fruitful, meaningful and credible outcome from the negotiations taking place in the eleventh WTO Ministerial Conference.
Note: A Position Paper on this issue at the WTO Ministerial Conference has been submitted today morning and is being circulated.
~ until next time ~
Stay tuned..
Stay tuned..
[2]
Information Bulletin, Lok Sabha Secretariat, Research and Information Division,
India’s Stand at the WTO: Trade Facilitation Agreement vs. Public Stockholding
For Food Security Purposes, December 2014.
[5]
Blandford et al., How Effective are WTO disciplines on Domestic Support and
Market Access for Agriculture, p. 1471.
[8]
According to a new research from the Institute for Agriculture and Trade Policy
(IATP) in 2015, the United States exported corn at 12% below what it cost to
produce it. “Dumping Margins” were significant for other crops as wel; - 10%
for Soybeans, 2% for Rice, 32% for Wheat, and 23% for Cotton.
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