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Facilitation and food

Posted by vikasjaiswal on August 5, 2014 at 4:00 PM

India is receiving a lot of flak for its stance at the just-concluded meeting of the World Trade Organisation’s (WTO) General Council in Geneva with epithets such as “deal-breaker” being hurled at it. The country is being accused of sabotaging the first real agreement forged by the trade body in 19 years on trade facilitation with its rigid stance on the issue of food subsidy. An agreement on trade facilitation (TFA), which is aimed at easing customs rules and simplifying procedures, was reached at the 9th Ministerial Round in Bali in December last year after the developed world agreed to find a permanent solution to the contentious issue of stockpiling of food grains by the developing countries by 2017. The Bali Declaration also provided for a “peace clause” whereby countries such as India could continue with their food subsidy programmes until then. India, which supports the TFA, has questioned the current limit of “trade distorting” subsidy which is 10 per cent of the value of food grains output in a year with the base year for prices set at 1986-88. Its position is that the limit does not account for inflation and currency depreciation and the base year needs to be reset to a later period. This is a fair argument as it concerns the critical issue of food security for a country that is home to a quarter of the world’s hungry.


The passage of the Food Security Act means that the subsidy bill will bloat in the coming years and the country cannot afford to be constricted by limits that are based on flawed calculations. Politically speaking, no government can afford to be seen as compromising either the interests of the 270 million people who live below the poverty line or its farmers, and Prime Minister Narendra Modi is also obviously conscious that he will be facing elections in two crucial States in the next few months. The main grouse India has is that there has been little forward movement on discussing the issue since the Bali meeting even as much vigour has been exhibited in finalising the TFA. India’s statement at Geneva clearly highlights that despite repeated requests, discussions on public stockholding of food grains never started. The strategy to use the TFA as a lever to get an agreement on the food subsidy issue was probably born out of the assessment that it would be difficult to get the developed world back to the negotiating table once the TFA was signed. Clearly, both sides are guilty of brinkmanship. Yet, all is not lost. India has signalled that it is willing to return to the table and has suggested a permanent “peace clause” until a final understanding on subsidy is reached. Extending the TFA deadline by another six months will not cause harm, especially if it leads to a final agreement on all issues.

Categories: Economics

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