Opinion

All you wanted to know about: Peace Clause

ARVIND JAYARAM | Updated on August 04, 2014 Published on August 04, 2014

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The term ‘peace clause’ has been a cause of disquiet ever since India dug in its heels on the issue of domestic food security in the recent World Trade Organisation (WTO) negotiations, leading to a deadlock. Should the WTO have a say in India’s policy of buying foodgrain at a fixed price from farmers and supplying it below cost to the poor? India thinks not, but developed nations disagree.

What is it?

After the developing and emerging nations clashed on the issue last year, they cobbled together a temporary ‘peace clause’ in Bali last December. The ‘peace clause’ said that no country would be legally barred from food security programmes even if the subsidy breached the limits specified in the WTO agreement on agriculture. This ‘peace clause’ was expected to be in force for four years until 2017, by which time the protagonists hoped to find a permanent solution to the problem.

India’s worry is that if the clause expires before a permanent solution is in place, food security programmes and policies to protect farmers, such as Minimum Support Prices, would come under siege.

The limited window offered by the Western powers for the peace clause was seen by India as insufficient assurance. The clause also requires full disclosure of MSPs and annual procurement for food security programmes, which the Government fears would leave India open to questioning by other countries on domestic matters.

Why is it important?

The right to food is a basic human right. Therefore, Western misgivings about a country like India − where a third of the 1.3 billion-population lives beneath the poverty line − providing food subsidies seems hypocritical. The developed nations see India as a huge market for foodgrains and other products, but their produce is rendered uncompetitive when the government is willing to subsidise farmers, purchase their produce for a minimum support price and then sell it at a loss through the public distribution system and other channels.

Accepting a temporary peace clause would be tantamount to admitting that the subsidy programmes in India and other developing nations violate global trade norms, leaving the nation a sitting duck if a complaint was to be raised in the WTO or other international forums later. This would also result in India losing its biggest bargaining chip in future WTO meetings.

Why should I care?

While India needed to get its point across to the WTO, there is a view that it went too far in not allowing the talks to proceed. It is estimated that the proposed trade facilitation agreement (TFA) would have given a $1 trillion boost to global trade by reducing transaction costs, streamlining international customs procedures and facilitating easier movement of goods.

But the Indian government’s refusal to back the TFA without negotiations on food security issues has upset the applecart.

The bottomline

Everyone knows that world trade negotiations are not really about ‘free markets’, but maximising profits for the world’s most powerful nations. Nevertheless, good negotiation skills are all about being accommodative and flexible, while ceding minimal ground on what is really important.

India has rightfully asserted its right to set its domestic policies. But derailing the TFA altogether and thus closing the door on further negotiation may not turn out to be the best ploy in the long run.

A weekly column that puts the fun into learning

Published on August 04, 2014
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