 "Clarity needed on peace clause: Experts")
The agreement in Bali means India may continue to breach the 10 per cent de minimis (minimal amount of domestic support allowed, though this distorts trade) subsidy clause, without the objection of other countries, till a permanent solution is reached. The solution is unlikely before the next ministerial, four years from now. “For a permanent solution, first and foremost, the world needs to revise the de minimis level which has become redundant, as it has been set at around the 1986 level and the external reference price has become irrelevant after the crisis of 2008,” said Ashok Gulati, Chairman, Commission for Agriculture Costs and Prices.
There are two parts to the de minimis subsidy level: The first is product-specific such as the minimum support price of wheat, rice, etc, while the second is non-product specific subsidy on fertiliser, seeds, electricity, etc. With India’s fertiliser subsidy already exceeding Rs 1,00,000 crore, the de minimis level has already been breached. But India gets an exemption, as WTO provides the subsidy given to small and low-income farmers is exempted from its purview. India claims farmers holding less than 10 hectares of land are low-income, while WTO says those with less than 2.5 hectares are classified as small farmers.
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Experts said clarity was needed on some sections under the Peace Clause, which could be settled through the Agreement on Agriculture, something India isn’t keen on. Also, India has to make a submission of its subsidy to the WTO secretariat every year, as part of the permanent solution, something it hasn’t done since 2003. So, the only option could be cash-for-cash subsidy, as WTO isn’t as harsh on income subsidies as on price subsidies.
“We can benefit from the Peace Clause, but it does not come free. We have not notified our procurement prices. Now we will have to do that. Overall, however, it takes away the threat of dragging us into dispute,” said Anwarul Hoda of Indian Council for Research on International Economic Relations.
Biraj Patnaik of the Right to Food Campaign expressed displeasure over the clause that said the pact was only in pursuance of public stockholding programmes for food security purposes existing as of date. This means the minimum support price cannot be introduced for crops other than those already provided for. The quantity of foodgrains procured under this price cannot be increased beyond the procurement as of date, which may threaten the National Food Security Act in the near future. Pulses, cooking oil and other foods (other than rice, wheat or millets specified in the Food Security Act) can no longer be introduced in the Public Distribution System if these are not being provided now.
Under the Peace Clause, India and other developing countries are allowed to have subsidies for an interim period, without being dragged to the dispute panel, till a permanent solution is found. “This is a plus for India. We have got a favourable outcome on food security. Earlier, they were giving us only four years; now, it is an interim solution. Of course, they are going to review it, but there are no number of years attached to this,” said trade expert Biswajit Dhar.
He added striking a deal after 18 years was vital for WTO because otherwise, there would be anarchy, as larger countries had powers to squeeze developing ones.
Hoda said there was a chance of WTO being brought back on track and the Doha round being resolved, and this would be particularly beneficial for India, as it was threatened by mega trade agreements. He added the trade facilitation agreement might lead to India putting systems in place to draw more foreign direct investment (FDI) in manufacturing.
“We were very much behind China and Thailand in attracting FDI in manufacturing. The agreement may give a boost to India to attract FDI in manufacturing, though India has been recording trade facilitation agreements of late. Risk management was initiated in exports last month,” Hoda added.
While industry chambers welcomed the deal, calling it a major victory for India, those under the Right to Food Campaign said the deal had many gaps and India had wilted under pressure from the US. It added member states could still drag India to the dispute settlement process, under the Agreement on Subsidies and Countervailing Measure.
The government can’t increase entitlements of the foodgrains guaranteed under the notified Food Security Act. For instance, Chhattisgarh, among other states, provides 35 kg a household. But no other state providing 20 kg or 25 kg can increase the quantity to 35 kg.
“We are not against WTO deals as such, but in its negotiations, India needs to redefine the amber-box subsidies. Also, the formula to determine international prices of farm products should be updated from the existing 1986-88 levels. WTO should come up with a new formula that will automatically revise itself, if not every year then at least in a gap of one year. I feel more than the peace clause entered into by India and other WTO countries, redefinition of amber-box subsidies is more important,” said Bharat Krishak Samaj Chairman Ajay Vir Jakhar.