Prime Minister Narendra Modi won a major victory at the World Trade Organisation with the US agreeing to push for the changes India wanted in the food subsidy mechanism. The agreement with the US comes days ahead of the G20 summit in Brisbane where leaders of 20 major economies will, among other things, discuss ways to boost global trade by restoring confidence in the multilateral trading system and the WTO.
US President Barack Obama will attend the G20 summit along with Modi.
Addressing mediapersons after a last-minute phone call with top US officials, commerce minister Nirmala Sitharaman said India and the US had resolved their differences on the issue of public shareholdings by developed countries “in a manner that addresses our concerns”.
After the agreement, WTO director general Roberto Azevedo said the world trading system was now “back on track” and if all WTO members ratified the proposal, it would give a “major boost to the WTO”.
While India had not breached the WTO limits on food subsidies, India blocked the trade facilitation agreement (TFA) in July on the grounds that the WTO rules were archaic and hurt the interests of countries like India — WTO rules on food subsidies calculate these based on prices prevalent in 1986-88. Following this, developed countries had criticised India for playing spoilsport and ruining the first agreement reached by the WTO in two decades.
As per the current WTO rules, ‘trade distorting’ domestic support for agricultural products cannot be more than 10% of the value of production — that value of production, however, was fixed at 1986-88 prices.
It has been argued that, at the Bali ministerial, a peace clause had been agreed to, so India had till 2017 to sort out issues relating to its food subsidies. The government had, however, argued that its best chance for getting a change in the WTO rules was when there was a big deal at stake, like the TFA that, by easing global customs procedures, is expected to add $1 trillion to the global economy and, as a result, create 21 million jobs.
After Sitharaman’s statement, a statement from the US government said: “The US and India move WTO’s landmark trade facilitation agreement forward.”
The statement said, “The bilateral agreement makes clear that a mechanism under which WTO Members will not challenge such food security programs under WTO dispute settlement procedures will remain in place until a permanent solution regarding this issue has been agreed and adopted.” With this bilateral agreement in place, this will be put to the larger WTO General Council on December 11-12, but this is largely expected to be a formality now.
The agreement means that while the UPA government had won a four-year peace clause at Bali, the NDA has managed to get a permanent peace clause in place. Till there is a peace clause, no country can take India to the WTO’s Dispute Settlement Board and get it to reduce its subsidies to either farmers or to consumers getting foodgrains through the public distribution system.
Sitharaman had on many occasions denied India was indulging in political brinkmanship at the WTO when India’s stance meant the TFA was getting derailed. The Bali solution, she had said, was an imperfect agreement.
India holds back trade facilitation agreement in July
Said WTO farm subsidy clause needed fixing first
Countries like US criticised India for brinkmanship
US, India agree to a permanent peace clause
Indian farm subsidies will no longer be challenged at WTO
Will likely be ratified by WTO on Dec 12