India susceptible to trade disputes without permanent solution for food security

Key Highlights

• India will be susceptible to trade disputes at the World Trade Organization (WTO if it fails to achieve a permanent solution on public stockholding for food grains
  • At the 13th ministerial conference in Abu Dhabi later this month.
• A permanent solution at WTO will give India and a coalition of developing countries the flexibility to give out higher farm support.
• This assumes special significance as farmers are holding yet again protests in the national capital seeking a law to guarantee minimum support price (MSP) for all crops.
• However, giving out higher farm support could land India into legal disputes at WTO on account of distorting global trade.
• India is already facing pushback from the Cairns Group.
  • A group of agricultural exporting countries that include Australia, Brazil and Canada
  • Who claim that India’s public stockholding (PSH) programme is highly subsidised, especially for rice, and that this is affecting food security of other countries.
• The main reason why India is very keen on a permanent solution is that some of the provisions in the peace clause are ambiguous.
• India has invoked the ‘peace clause’ several times at the WTO for breaching the prescribed 10 per cent subsidy ceiling on rice procurement.
• India’s subsidy on rice had exceeded the threshold on multiple occasions forcing it to invoke the ‘peace clause’ agreed during the Bali ministerial in 2013
  • Which allows developing countries to breach the 10 per cent ceiling without invoking legal action by members.
• “Cairns Group is also pushing all countries to cut agriculture support by 50 per cent by 2030
  • Which will result in countries such as India making huge sacrifices compared to developed countries.

The peace clause

• It says that you are distorting trade due to your subsidies but nobody will sue you provided you meet certain conditions.
• The conditions include that a country should not hurt the food security of other countries or be trade distorting.
• These conditions are vague in nature and that is why India can be taken to dispute.
• This is the reason why India and other developing nations are pushing for a permanent solution

Prelims takeaway

• WTO
• Bali ministerial