India’s struggle for permanent solution to MSP worries at WTO gains momentum

India’s fight for a permanent solution for public stock holding of foodgrains at the WTO to protect its right to continue expanding its MSP programmes has gathered steam with the G-33 group of developing countries and African nations finally coming together to submit a joint proposal on a solution.

This is significant as the crucial WTO Ministerial Conference (MC12) is to begin in Geneva in about 10 days and many countries, mostly developed, are attempting to put the important issue of permanent solution on the back burner.

“On Tuesday, a total of nearly 80 members from the G-33 group, the African Group and the ACP group put their act together and submitted a joint proposal at the WTO suggesting a permanent solution on public stock holding based on a fair way of calculating subsidies with a current external reference price instead of an ancient one. This solution should be acceptable to all as it is logical and will provide a level playing field to developing countries,” an official tracking the matter in Geneva told BusinessLine.

Rules under AoA

According to the present rules under the Agreement on Agriculture (AoA), subsidies given to the farmer, calculated as the excess of MSP over its international price, also known as External Reference Price (ERP), plus subsidy on inputs, are clubbed as aggregate measurement of support (AMS). Developing countries are required to keep AMS below 10 per cent of value of agriculture production. “One big problem is that the ERP is pegged to the base period of 1986–1988 without any adjustments for inflation which gives an inflated AMS,” the official explained.

The permanent solution proposal circulated by the G-33, ACP and African Group, proposes that domestic support provided by a developing country member for public stockholding programmes for food security purposes, shall be deemed to be compliant with the required articles of the AoA and not subject to reduction commitments. 

Where public stockholding programmes for food security purposes of a developing country include programmes under which stocks of foodstuffs are acquired and released at administered prices, then, the AMS shall be calculated based on the actual quantity of foodstuffs (as opposed to the entire eligible production) acquired at administered prices.

The ERP, instead of being pegged to 1986-88 prices, should either be the three-year average price based on the preceding five-year period excluding the highest and the lowest entry for that product or adjusted for excessive inflation as per the methodology, the proposal said.

“This is an extremely important proposal having the weight of the entire African Group, the ACP and the G-33 group and assumes even more importance in the light of the draft declaration on agriculture that pushes a permanent solution to MC13 (instead of MC12). They should now push hard to get a decision in MC12 and not agree to other decisions until that is agreed,” said Ranja Sengupta from Third World Network.

Peace clause

Although a peace clause negotiated by India at the Bali Ministerial in 2013 and later gives developing nations protection against legal action in case limits are breached, it is subject to a number of onerous conditions that makes it difficult to use. India has used the peace clause for rice as its MSP support has been exceeding the prescribed limits but several developed country members have  complained that it has not met notification requirements under the clause.

“It is very important for developing countries to get a permanent solution as there is no guarantee that the peace clause will continue to give enough protection against action by developed countries. That is why the G-33 is insistent that a permanent solution be delivered so that such conditionalities can be done away with,” another official explained.