New US complaint at WTO on India's farmer subsidy

The American government said on Wednesday it had notified the World Trade Organization (WTO) that Delhi under-reports its level of farm subsidies. This comes at a time when the government here is planning to raise the Minimum Support Price (MSP) for farm produce by 50 per cent over the cost of production. Delhi notified its food subsidy bill till 2015-16 to the WTO only a week before

Other nations fare much worse when it comes to notifying their subsidies, a top Indian trade diplomat said. Adding: “We do not know where the US got its figures from. During the last ministerial conference in Buenos Aires as well, only due to the strong position of the US against agricultural reform did a deadlock arise without any outcome on agriculture or even a work programme for the next two years.”

Ashok Gulati, former head of the Commission for Agricultural Costs and Prices, said the US objection had ‘no meaning’, having calculated the breach on 1986-88 reference prices in rupee terms. India gives its submission in dollar rates, which should be the norm. He also discounted any big impact of the US move on the government’s reported move to raise MSP to fulfill earlier poll promises. India, he said, would not be crossing the relevant limit. “WTO’s methodology of calculating the external reference price also should be updated in line with international practices," said Gulati. 

Subsidies provided to Indian producers of rice and wheat are vastly above the levels allowed under WTO rules, the office of the United States Trade Representative (USTR) said on Wednesday. In the first ever counter-notification filed to the WTO's committee on agriculture, the US said its data was based on ‘publicly available information’.

“India’s apparent MSP for wheat appears to have been over 60 per cent of the value of production in each of the past four years for which India has notified data. Its apparent MSP for rice appears to have been over 70 per cent,” said the USTR. Current rules limit food subsidies at 10 per cent of the total value of foodgrain production for a country in a year.  

However, the quantum of subsidy is computed after taking into consideration prices from the reference period of 1986-88. India has proposed either amending the formula to calculate the subsidy cap or allowing such schemes outside the latter's purview. Following India’s agreement with the US on the issue in 2013, the Bali Ministerial Conference of the WTO came up with the ‘peace clause’ that permitted uninterrupted implementation of India’s food security programme until a permanent solution was found. 

This allows India to procure and stock foodgrain for distribution to the poor without being penalised by WTO members even if this breaches the subsidy cap. However, to use the peace clause, India has to give information to WTO about the size of its food subsidy bill till the year before. “The latest US move is not a dispute and if in future any dispute arises, India has the option of invoking the Bali peace clause,” said Abhijit Das, head of the Centre for WTO Studies at the Indian Institute of Foreign Trade here. 

America and the European Union continue to be the largest providers of global agri subsidies, something developing countries have repeatedly pointed out, Das added.