Editorial

Counterproductive rigidity

| Updated on August 01, 2014 Published on August 01, 2014

India should not mix food security concerns with the gains from a TFA

World Trade Organisation (WTO) members have failed to adopt a trade facilitation agreement (TFA) aimed at simplification of their customs procedures, thanks to India clubbing the signing of this deal with a ‘permanent solution’ addressing its concerns over farm subsidies and public stockholding of grain for food security purposes. India, no doubt, is justified in demanding a revision in the method for computation of subsidies under the WTO’s Agreement on Agriculture (AoA). A wheat farmer, for instance, is considered to receive a subsidy if the procurement price paid to him by the Government is above the world ‘reference price’. But the latter is fixed at 1986-87 levels, when global wheat prices were $130-140 a tonne, as against $300-310 now. The current minimum support price of ₹1,400/quintal or $233/tonne, thus, amounts to the Indian farmer getting a ‘subsidy’ of over $100, using the AoA formula. If today’s world prices are taken — which is how any subsidy computation should be — our farmers are actually subsidising the Government!

These concerns, however, were acknowledged at the WTO’s Ministerial Conference at Bali in December. The Bali ministerial had provided for a four-year ‘peace clause’, during which no country would be legally barred from implementing public stockholding programmes for food security even if the subsidy resulting from it (based on 1986-87 world ‘reference’ prices) breaches the AoA-imposed caps. Further, it was clearly stated that a ‘permanent solution’ to the food security issue — and, by extension, the farm subsidy computation formula — would be found during this interim period. That being the case, India’s insistence that this ‘permanent solution’ be in place at the same time as the TFA being inked — well ahead of the 2017 target set at Bali — seems somewhat unreasonable. True, in doing so, it has made a strong point about the need to overhaul the existing AoA rules on farm subsidies, besides signalling no compromise with regard to the interests of the country’s low-income consumers and resource-poor farmers. But in the process, the July 31 deadline for wrapping up the TFA has passed — which is most unfortunate.

Having made its point, India now needs to demonstrate that it is equally committed to an open, rules-based multilateral trading system under WTO’s auspices. Standardisation of customs rules, which will minimise documentation requirements and delays in clearance of goods at ports/border posts, is only part of this process of promoting global trade. The TFA would be the first big trade reform since the WTO’s establishment in 1995. We know how a twelve-fold increase in India’s exports and imports in the last 19 years has been beneficial for overall growth and incomes in the country. A TFA can only further the gains from trade – which is why packaging it with a ‘permanent’ deal on farm subsidies/food security can ultimately prove counterproductive.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on August 01, 2014
This article is closed for comments.
Please Email the Editor