Markets: Eerie calm

Markets: Eerie calm

it is not clear when market sentiment can change; as in the past, it can be quite sudden.
At a turn and yet not

At a turn and yet not

RBI could be tempted to cut policy rate to support growth at its bi-monthly review.

India, China on same page on food security

Feb 04 2013, 03:47 IST
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SummaryIndia and Brazil, the chief coordinators of the G20 formation in agriculture connected with the World Trade Organisation’s Doha Round negotiations, have secured China’s allegiance to a proposal to include “all” budgetary expenses on food security and rural livelihood & development in the list of “green box” subsidies, which are “non-trade distorting” and meant to be freely allowed.

Beijing accepts ‘green box’ proposals for Doha talks

India and Brazil, the chief coordinators of the G20 formation in agriculture connected with the World Trade Organisation’s (WTO) Doha Round negotiations, have secured China’s allegiance to a proposal to include “all” budgetary expenses on food security and rural livelihood & development in the list of “green box” subsidies, which are “non-trade distorting” and meant to be freely allowed.

The G20 move is in early preparations for the year-end’s WTO ministerial meeting at Bali in Indonesia and amid reports that the US and the EU are drifting towards reinforcing their trans-Atlantic trade relations under a new formal framework, at the expense of the moves to ease world trade further under a rules-based multilateral framework.

In WTO terminology, subsidies are identified by “boxes” that are given the colours of traffic lights: green (permitted), amber (slow down or to be reduced) and red (forbidden).

According to official sources, New Delhi making common cause with China on the green box items is a significant breakthrough, especially since an ambitious national food security law is in the offing. The new, strong consensus among the emerging economies would serve as a balance-tilting counterweight to the US-EU bloc, while cherry-picking the doable things on the WTO front.

The US and EU had proposed some definitional curbs on food security spending for their green box inclusion, accepting which would mean constraints on India in implementing its proposed food security law. For instance, the advanced economies have long said that (state) expenses on food security schemes — like the public distribution systems — can’t be treated as a green box item if food procured at market prices are not sold at market prices.

WTO chief Pascal Lamy recently urged the world to harvest “low-hanging fruit” (in terms of trade liberalisation) while it is clear during his tenure that the decade-old Doha Round talks are unlikely to be concluded. While developing countries insist that “any change on the Doha mandate should be a negotiated outcome,” The 9th ministerial in Bali from December 3-6 is a glimmer of hope.

As far as WTO talks on agriculture is concerned, there is a demand on emerging economies like India to reduce tariffs. Currently, the bound tariffs (the extent to which it can be raised) maintained by India is the highest in the case of oilseeds at 300% and the highest applied (real) tariff is 80% in case of wheat. Reduction of these tariffs is linked to subsidy reduction by the developed world.

In order to qualify, green box subsidies must not distort trade or at most cause minimal distortion. They have to be government-funded (not by charging consumers higher prices) and must not involve price support. Hence, green box subsidies are allowed without limits, provided they comply with the policy-specific criteria. The green box is defined in Annex 2 of the Agriculture Agreement.

At present, there is ambiguity on including India’s food subsidy programme in the green or amber box and the country is seeking legal certainty on the same.

“India is trying to draw the attention back to its core interest and this has been a part of the modalities on the negotiating table for almost five years. India's proposal is not out of the hat,” said Abhijit Das, head and professor, centre for WTO Studies, Indian Institute of Foreign Trade.

The National Food Security Bill, 2011, which makes the right to food a legal right, is currently pending in Parliament. It seeks to deliver food security by providing specific entitlements through the targeted public distribution system.

“If this is accepted, then the WTO rules will not put fetters around India. Besides, it is an attempt to see if there a consensus can be built on some issues before the Bali ministerial,” said an analyst requesting anonymity.

Some WTO members are looking at carving out pacts in select areas during the Bali ministerial conference.

Developed countries including the US want India and other emerging economies to be part of the four major sectoral pacts — trade facilitation (TF), IT, environmental goods and international services agreement. On these four matters, developed nations want to go plurilateral, that is, the trade benefits arising out of such an agreement will be shared only by signatories.

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