Placing hurdles
Source: By Devinder Sharma: Deccan Herald
What is being considered as a game changer for government – National Food Security Act —faces yet another hurdle at the World Trade Organisation (WTO).
The US WTO ambassador Michael Punke has launched a blistering attack blaming India for “creating a massive new loophole for potentially unlimited trade-distorting subsidies.” Calling it as a step backward, he said “The new loophole, moreover, will be available only to a few emerging economies with the cash to use it. Other developing countries will accrue no benefit – and in fact will pay for the consequences.”
I am talking of the controversial proposal moved by G-33 countries -- a group of countries including China, India, Indonesia, Pakistan and others -- that came together to protect food security, livelihoods and rural development thereby seeking amendments in the agriculture text. Knowing that procurement of wheat and rice under the National Food Security bill will raise manifold, India is wanting that the enhanced subsidy outgo for food procurement from small farmers is not seen as trade-distorting. These subsidies, required to meet the food security needs of the hungry population, should be kept outside the maximum limit of ‘Aggregate Measurement of Support’ (AMS) that each country has to adhere to.
Food purchased at a minimum support price from ‘low-income, resource poor farmers’ should not be computed in the AMS limit. At the same time, India wants the ‘de-minimis’ requirement for public stockholding – which at present stands at 10 per cent of the total production of wheat and rice that can be procured for meeting the nutritional needs of the food insecure population – be also suitably amended. In other words, G-33 countries want to incorporate provisions in the ongoing negotiations that ensure “food security exists for its entire people, at all times.”
In India, the procurement price at which rice is being purchased from farmers has risen by a whopping 24 per cent, much above the 10 per cent limit. Similarly, China, Indonesia, Thailand and Egypt have also crossed the threshold limit prescribed by WTO.
Despite Anand Sharma’s behind the scene discussions with the new director general Roberto Carvalho de Azevedo of Brazil, the US continues to harden its stand. It has warned that if India’s new proposal on the table are not rejected “it will hurtle the WTO talks to irrelevance.” India’s food security Act is on the top of the negotiating agenda for the forthcoming WTO ministerial conference slated to be held at Bali in Indonesia in December.
Trade facilitation
Interestingly, India’s proposals are closely linked with the developed country’s proposal for an agreement on trade facilitation. Trade facilitation actually means setting up the required infrastructure at the ports, and making available appropriate transport and communication facilities that would make it easier for the trade and business to operate.
In other words, the developed countries are actually pushing the developing countries to invest on facilitating the trade interests of its corporations and agribusiness giants. This agreement, which has some 600 contentious clauses or what is called as brackets in WTO language, will have serious implications for the domestic agriculture sector in developing countries.
Nevertheless, it is important to understand why the G-33 proposal that calls for appropriate measures to ensure food and nutritional security for the poor and needy, is so important. First, let us be very clear that the AMS calculations were done keeping the prevailing prices in 1986-88. Since then, and especially after the 2007 global food crisis, the farm commodity prices have seen a quantum jump. The 1986-88 reference prices, which was a period when prices were very low, no longer holds true and have lost all its relevance. Secondly, the trade distorting subsidies that the US/EU have been providing all these years have not been done away with.
On the other hand, in an analysis presented by Jacques Berthelot of France, the angry outburst of the US Ambassador to WTO appears completely unjustified. Accordingly, the average food aid in 2010 that India gave to its 475 million people (65 million families below poverty line plus 10 million above poverty line) to meet their food security needs was to the tune of 58 kg/per person. Comparatively, the US provides 385kg/person to its 65 million people, who received food aid under several programmes like the food coupons, child nutrition programme etc.
Moreover, the procurement of wheat and rice from resource poor farmers by India does not mean the grains are being dumped in the international market thereby distorting trade. In reality, Jacques Berthelot has computed that the low global prices of wheat and rice in 1986-88 – the reference period – were because of massive dumping by both US/EU. Given that 53.2 per cent of the global exports of wheat came from US/EU, the role the dumping played in depressing the global prices becomes quite obvious. The reference period of 1986-88 against which the administered prices of 2012-13 are being evaluated therefore becomes meaningless and absurd.
If the US/EU continue to oppose the proposal floated by India through the G-33 countries, India will find it difficult to implement the National Food Security Act.
What is being considered as a game changer for government – National Food Security Act —faces yet another hurdle at the World Trade Organisation (WTO).
The US WTO ambassador Michael Punke has launched a blistering attack blaming India for “creating a massive new loophole for potentially unlimited trade-distorting subsidies.” Calling it as a step backward, he said “The new loophole, moreover, will be available only to a few emerging economies with the cash to use it. Other developing countries will accrue no benefit – and in fact will pay for the consequences.”
I am talking of the controversial proposal moved by G-33 countries -- a group of countries including China, India, Indonesia, Pakistan and others -- that came together to protect food security, livelihoods and rural development thereby seeking amendments in the agriculture text. Knowing that procurement of wheat and rice under the National Food Security bill will raise manifold, India is wanting that the enhanced subsidy outgo for food procurement from small farmers is not seen as trade-distorting. These subsidies, required to meet the food security needs of the hungry population, should be kept outside the maximum limit of ‘Aggregate Measurement of Support’ (AMS) that each country has to adhere to.
Food purchased at a minimum support price from ‘low-income, resource poor farmers’ should not be computed in the AMS limit. At the same time, India wants the ‘de-minimis’ requirement for public stockholding – which at present stands at 10 per cent of the total production of wheat and rice that can be procured for meeting the nutritional needs of the food insecure population – be also suitably amended. In other words, G-33 countries want to incorporate provisions in the ongoing negotiations that ensure “food security exists for its entire people, at all times.”
In India, the procurement price at which rice is being purchased from farmers has risen by a whopping 24 per cent, much above the 10 per cent limit. Similarly, China, Indonesia, Thailand and Egypt have also crossed the threshold limit prescribed by WTO.
Despite Anand Sharma’s behind the scene discussions with the new director general Roberto Carvalho de Azevedo of Brazil, the US continues to harden its stand. It has warned that if India’s new proposal on the table are not rejected “it will hurtle the WTO talks to irrelevance.” India’s food security Act is on the top of the negotiating agenda for the forthcoming WTO ministerial conference slated to be held at Bali in Indonesia in December.
Trade facilitation
Interestingly, India’s proposals are closely linked with the developed country’s proposal for an agreement on trade facilitation. Trade facilitation actually means setting up the required infrastructure at the ports, and making available appropriate transport and communication facilities that would make it easier for the trade and business to operate.
In other words, the developed countries are actually pushing the developing countries to invest on facilitating the trade interests of its corporations and agribusiness giants. This agreement, which has some 600 contentious clauses or what is called as brackets in WTO language, will have serious implications for the domestic agriculture sector in developing countries.
Nevertheless, it is important to understand why the G-33 proposal that calls for appropriate measures to ensure food and nutritional security for the poor and needy, is so important. First, let us be very clear that the AMS calculations were done keeping the prevailing prices in 1986-88. Since then, and especially after the 2007 global food crisis, the farm commodity prices have seen a quantum jump. The 1986-88 reference prices, which was a period when prices were very low, no longer holds true and have lost all its relevance. Secondly, the trade distorting subsidies that the US/EU have been providing all these years have not been done away with.
On the other hand, in an analysis presented by Jacques Berthelot of France, the angry outburst of the US Ambassador to WTO appears completely unjustified. Accordingly, the average food aid in 2010 that India gave to its 475 million people (65 million families below poverty line plus 10 million above poverty line) to meet their food security needs was to the tune of 58 kg/per person. Comparatively, the US provides 385kg/person to its 65 million people, who received food aid under several programmes like the food coupons, child nutrition programme etc.
Moreover, the procurement of wheat and rice from resource poor farmers by India does not mean the grains are being dumped in the international market thereby distorting trade. In reality, Jacques Berthelot has computed that the low global prices of wheat and rice in 1986-88 – the reference period – were because of massive dumping by both US/EU. Given that 53.2 per cent of the global exports of wheat came from US/EU, the role the dumping played in depressing the global prices becomes quite obvious. The reference period of 1986-88 against which the administered prices of 2012-13 are being evaluated therefore becomes meaningless and absurd.
If the US/EU continue to oppose the proposal floated by India through the G-33 countries, India will find it difficult to implement the National Food Security Act.
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