WTO rulebook

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Context: WTO rulebook must evolve to support food security and rural livelihoods in developing countries.

What are the existing issues related to India?

  • Whether the current farm subsidy rules provide enough room for developing countries to buy food at government-set minimum support prices as part of their public stockholding programmes.
  • To negotiate a permanent solution.
  • India’s farm subsidy notification this year to the WTO’s committee on agriculture brought the topic of procurement under public stockholding programmes.
  • It indicated that India had breached its agreed ceiling on product-specific support to rice during marketing year 2018-19.
  • For example, India’s wheat support was close to breaching product-specific support ceilings, with administered prices at $263.15/tonne.

What are the underlying issues with WTO?

  • Delays: many countries pursuing improved market access and closer economic integration through bilateral and regional talks.
  • Paralysed dispute settlement function: Donald Trump administration’s decision to veto new appointments to the WTO’s appellate body leaving many to question the future of the rules-based multilateral trading system.
  • Method of calculation: Market price support levels are calculated by taking the gap between applied administered prices and an external reference price or ERP, set at 1986-88 levels, and multiplying this by the volume of eligible production.
  • Divergent views on benchmark: WTO members could usefully consider whether the fixed ERP of 1986-88 is still a relevant benchmark, especially in the wake of the global price hikes of 2007-08 and 2010-11.
  • Current scenario: food security disruption caused by US-China trade tensions and the inconclusive outcome of the WTO’s 2018 ministerial conference in Buenos Aires.

How does Indian subsidies doesn’t distort market?

  • India’s support turns out to be negative for the years since 2000-01, if domestic market prices are compared with international market prices using the Producer Support Estimate methodology applied by the Organisation for Economic Cooperation and Development (OECD).
  • Even after accounting for input subsidies, which represent a significant share of India’s non-product-specific support using the WTO system for calculating farm support.

Way forward:

  • Updating the reference prices to average 2014-16 or 2016-18 levels or using a rolling average instead flattening out volatility by excluding the highest and lowest years from a five-year period.
  • Exempt support from counting towards maximum limits when administered prices are set below international market price levels.
  • Members could also discount support consumed by subsistence farmers themselves from the calculation of the volume of eligible production or exempting procurement that only equates to a small share of domestic output.
  • WTO members need to agree on a shared framework for action on farm subsidy reform and set a clear direction and a timeframe for reaching a rational conclusion.
  • Minimise disruption in food supply chain.
  • The December meeting of the General Council that is mulling over WFP food aid issues offers India (with G-20) an opportunity to demonstrate its commitment to WFP food aid and help rebuild confidence in WTO’s ability.

An agreement under WTO could also lay the groundwork for long-overdue progress on the wider trade and food security agenda at the WTO.

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