Economics
Context: One of the cardinal demands of India in the World Trade Organization (WTO) — and rightly so — has been to find a permanent solution to the issue of public stockholding (PSH) of food to protect India’s food security (PSH policy).
What it is all about?
- India’s PSH policy is based on procuring food from farmers at an administered price (MSP), which is generally higher than the market price.
The PSH policy serves the twin objectives of
- Offering remunerative prices to farmers and
- Providing subsidised food to the underprivileged.
WTO law
- Such price support-based procurement from farmers is counted as a trade-distorting subsidy, and if given beyond the permissible limit, breaches WTO law.
- Currently, India has temporary relief due to a ‘peace clause’ which bars countries from bringing legal challenges against price support-based procurement for food security purposes.
- However, a permanent solution to this issue is still not in the offing.
Recent WTO ministerial meeting
- The WTO ministerial meeting in June at Geneva did precious little to address this issue.
- The declaration on food security adopted at the Geneva ministerial states that “we recognize that adequate food stocks can contribute to the realization of Members’ domestic food security objectives and encourage Members with available surplus stocks to release them on international markets consistently with WTO rules.”
- India’s concern is that it should have the policy space to hold public food stocks using the MSP, which is a price support instrument.
- However, there is no mention of price support in the Geneva declaration.
New dimension
- India’s demand for a permanent solution to the PSH policy has acquired a new dimension.
- India insists that it should also be allowed to export food, most notably wheat, from the pool of the foodgrain procured under the MSP.
- This demand was recently re-articulated by Finance Minister at the G20 meeting in Indonesia.
- The Russia-Ukraine war has unleashed a food crisis in many countries. India perhaps wishes to capitalise on this opportunity.
- However, WTO law proscribes countries from exporting foodgrain procured at subsidised prices.
- There is a sound economic rationale behind it.
- Allowing a country to export foodgrain procured at subsidised prices would give that country an unfair advantage in global agricultural trade.
- As per the WTO Agreement, waivers can be adopted only in “exceptional circumstances”.
- Thus, the possibility of it recognising an ongoing war between two nations as an “exceptional circumstance” to adopt a waiver for permitting wheat exports from public stocks is profoundly remote.
What the focus should be?
- India should revisit its stand on asking for a waiver for wheat exports from its public stockholding, which, in any case, was not a part of India’s PSH policy.
- The Government’s wheat procurement has been 57.5% less than the original target for this season. So, if the public procurement has been so low, there is no point in asking for a waiver to export wheat from the public stock.
- Spending scarce negotiating capital on this issue might dilute India’s core agenda of pushing for a permanent solution for its PSH programme to attain the goal of food security and providing remunerative prices to the farmers.
- The laudable objective of helping countries facing food crises can be accomplished by strengthening India’s commitment to the United Nations World Food Programme.
- If the domestic situation ameliorates, India can lift the ban imposed on private traders to export wheat.
Negotiations at the WTO require crystal clarity of the core objectives that should be relentlessly pursued. Adding newer objectives and shifting goalposts might result in falling between two stools.
Peace Clause
- Peace clause refers to article 13 of the Agreement on Agriculture of the World Trade Organisation.
- According to this clause, export subsidies and support measures, given by a WTO member to its producers, that are considered legal under the Agreement on Agriculture cannot be challenged as being illegal under other WTO agreements.
- The original peace clause expired in 2004. In the 2013 Bali Conference, another temporary clause of this kind was put in place.
Source: The Hindu
Previous Year Question
Q.1) Consider the following statements: (2017)
- India has ratified the Trade Facilitation Agreement (TFA) of WTO.
- TFA is a part of WTO’s Bali Ministerial Package of 2013.
- TFA came into force in January 2016.
Which of the statements given above is/are correct?
- 1 and 2 only
- 1 and 3 only
- 2 and 3 only
- 1, 2 and 3
