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Economy Dec 8, 2013

Why we shouldn’t be happy with India’s gain at WTO

By G Pramod Kumar

After holding India responsible for a possible failure of the Bali ministerial meeting of the World Trade Organisation, the Indian media today is abuzz with the news of an unprecedented breakthrough; but the critical question many have failed to ask is have we ultimately benefitted after all the tough talk by Indian negotiators in Geneva and Commerce Minister Anand Sharma in Bali?

The biggest stumbling block for India was the opposition by the block of developed countries to the elements of the country's food security programme - what's described as public holding - essentially procurement and distribution that keep Indian farmers and majority of the Indians alive.

Notwithstanding their own massive subsidies, rich countries, through the WTO, didn't want it to cross 10 per cent of the overall production, failing which they want to take India (and countries in similar conditions) to "dispute settlement". And the maximum they were willing was to include a "peace clause" for four years during which they wouldn't mind India's food security spending.

Obviously, it would have derailed not only the implementation of the Food Security Act, but all other food security programmes, including by states, such as minimum support prices, government procurement, PDS and periodic market interventions (by states such as Tamil Nadu and Kerala) when prices of essential commodities rise. The commerce ministry, particularly because of a lot of bilateral conversations with influential quarters before and during the Bali meeting, mulled over it for a while, before realising the damage. Anand Sharma sensed his moment of glory and stuck to his stand - we will do nothing that will affect the people of India.

FOOD1

Representational image.

Therefore, the final Bali text is certainly a victory - now there is no peace clause and there is no immediate threat. But, will countries such as the US give up so easily? Is India really out of danger?

Unfortunately, the answer is a clear NO. This is only a temporary victory, if at all it qualifies to be one. The road ahead is tough with a lot of potholes and hairpin bends.

An initial analysis of the Bali text shows the following:

What it provides is an interim mechanism and the permission to continue to negotiate for a permanent solution. This is an gain compared to a Peace Clause that had a deadline of four years. This means, negotiations can drag on and the existing food programmes can continue.

However, it covers only the WTO's Agreement on Agriculture (AoA), which had stipulated the 10 per cent subsidy limit, and not ASCM (Agreement of Subsidies and Countervailing Measures). This might allow developed countries to allege that the food programmes are affecting export markets. As experts point out, leakage to export markets from a large programme such as that of India is possible and that will help the US and EU to build a case. In fact the Indian cabinet had decided that arrangement should include ASCM, but in the final text, it's missing.

The agreement covers "traditional staple food crops". What if we want to change the composition to improve the programme? Not possible during the interim period.

It only covers public stockholding for existing food security programmes. No new programmes, including elements that have already been put on paper, cannot be introduced. We are stuck with what we have. Want to add some more proteins? Not possible. It will also affect countries which haven't yet established any food security programmes.

The notification requirements according to the agreement (countries will have to periodically notify on the food programme to keep it "transparent"), for a big and diverse country such as India, will be complex. It will also unnecessarily open our programmes for external scrutiny. We are anyway not good with even with our basic reporting, now reporting for the scrutiny of hawks will be unpleasant and detrimental to our interests. It will be like a socio-economic drone above hour heads.

Therefore, the overall analysis is this: for public consumption, the country has gained in getting rid of the threat of the old Peace Clause through the interim mechanism that will work till a permanent solution. But on all other aspects, India has given in to pressure. For the implementation of the interim solution, there are more conditions than before.

Now is the time to be vigilant because there will be a lot of backdoor manoeuvres and bilateral conversations between big guns and the Indians. So far, Manmohan Singh, his peers and friends, and the planning commission haven't lived up to our trust. The only option we have is to be keep a constant watch.

Below is the draft text

by G Pramod Kumar

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