Trading on hunger

Roberto Azevêdo’s observation that India’s food security law may violate its commitments to the World Trade Organization should not take New Delhi by surprise. If anything, the government should be thankful the Director-General — who seems apprised of India’s legitimate demand for ensuring food security — has recommended an interim solution until the WTO Ministerial Conference in December deliberates this issue. It was clear from the start that legislating such a mammoth undertaking would involve purchasing food grain from farmers at high prices and selling them through the Public Distribution System at subsidised rates. Not only should the needy be provided access to food but farmers too must be incentivised to produce more grain to reduce reliance on imports. Both actions, it has been argued, constitute a type of price support that the WTO classifies as “amber box measures” – “considered to distort production and trade.” More specifically, India has to comply with its commitments under the “Aggregate Measurement of Support,” which stipulates a ceiling on domestic subsidies. Mr. Azevêdo says the food security law will breach India’s AMS commitments. For now, the government has sought an “interim” concession from the WTO to ensure India is not subject to legal action from other members, especially the United States and the European Union.

But this is no sustainable solution, and the future of India’s food security law may well hinge on the outcome of the WTO ministerial meet in Bali in December. The G33 group of developing countries — with India as a prominent member — has proposed exempting price support measures aimed at furthering food security from the purview of their AMS commitments. This argument, however, has cut no ice at the WTO. In fact, the West has seized upon the G33’s vulnerability, tying its proposal to the larger, deadlocked discussion on “trade facilitation” under the Doha Development Round. At the Bali Conference, it is likely the U.S. and EU will push for a grand bargain: lesser import restrictions and open markets in developing countries for exemptions on procuring subsidised food grain. With no wiggle room to negotiate, Prime Minister Manmohan Singh signalled India’s readiness to strike this bargain during his recent visit to Washington. In an election year, with the Food Security Act touted as a jewel in its crown, the United Progressive Alliance cannot afford to be complacent. To protect its food security law — and the promise of adequate nutrition for the poor it is supposed to deliver — the government must go into a diplomatic overdrive. The aim is to secure an exemption from AMS limits without conceding too much ground to the West, which is more interested in penetrating the Indian market.