Agriculture Economics

Assignment:










Battle of Bali Won... REALLY??











Submitted by: Amanjot Singh
Roll No. : A006







India, a country home to worlds one-third of poor people played a
hardball at Ninth WTO Ministerial held in Bali, Indonesia when it
tried to secure and protect the fundamental right of Food Security. A
lot of sweet coercion and arm twisting was seen during the meeting
of 159 nations. Before the meeting, World Trade Organization was
under the severe pressure to come up with multilateral trade deal
and give evidence to its member that it can actually finalize a global
trade pact rather just disputing. The quarrel over food security has
shown WTOs helplessness to restore its trustworthiness as a venue
for trade discussion, 12 years after the unveiling of Doha Round of
talks. Indias main aim was to protect the recently introduced
National Food Security programme, which provide subsidized food
grains to almost 700 million Indians.

So what is the problem??

The Food Security bill runs at a jeopardy of violating the chief
condition of the Agreement on Agriculture which states that the
aggregate support given by the government to its domestic farmers
or agriculture sector cannot exceed by 10% of the nominal value of
agriculture production. Under the programme, public procurement of
food grains is done at an administered price and the same is sold to
consumers at very subsidized and affordable price. India suspect it
may happens that India will be forced to procure more food grains to
meet the demand such that during the process it might have to
increase the Minimum Support Price (MSP) to procure more ,thus
violating the rules laid down by WTO. India wanted an exemption
from this obligatory cap as a Special & Differential (S&D) measure
obtainable to many countries under the WTO, mainly
underdeveloped economies, based on their specific contexts.
Also, along with the G-33 group of less developed countries, India
wanted to revise the out-of-date WTO guidelines that base
agriculture subsidy estimate on the external reference prices of
1986-88 as the international food prices have swelled manifold in
two and a half decade.

India faced a severe opposition from rich countries like U.S and other
developing nations like Pakistan and China which were reluctant to
give ground and were unwilling to lengthen the subsidy limit for
tackling the nutrition needs of the hungry and malnourished people.
They were of the view that stockpiling of food grains to ensure food
security will push the prices up in the short run and it will make
harder for the poorest countries to meet their own food demands. At
the same time, in long run it will create a huge grain surplus which
could be dumped on the market driving the prices down for the
farmers all around the world. Pakistan, a rival food exporters
opposed the proposal put forward by India and alleged India of
dumping rice in global market which were procured for food security
purpose. But according to International Centre for Trade and
Sustainable Development (ICTSD), this was not true and they issued
a statement that national prices in India were held low below
international prices despite procurement on MSP. But at the same
time it brought to the notice that in 2007-2008, India entered a deal
with Bangladesh to export 4 Lac tonnes of rice at $400 per tonnes
when the world price was more than $800.
It was said that Indian Governments tough stance on food security
was because it wants to make political points back home because
general election are due next year.

So what happened??

Fierce difference over this issue led to tangling up of talks, which
could have resulted in breakdown or collapse of WTO (according to
some critics of India) and India was mostly blamed for it and titled as
spoiler in the trade talks. India was under immense pressure of
developed nations. But unconcerned about the criticism, Indias
commerce Minister Anand Sharma made a heroic declaration that
there was no concession on the countrys Food Security and there
was no way that India was going to be crushed by developed nations.
This presented a dilemma for the other members as Indias support
was important in moving forward on the Trade Facilitation
Agreement (TFA), which is suppose to accelerate hassle-free
movement of goods across countries by simplifying custom
procedure for exporters. An operational TFA is projected to enhance
the world trade by more than US $1 trillion but India at that time
made it clear that it will not approve any agreement unless its own
demand about the food security are accepted.

The Ministerial concluded that under-developed nations including
India would be allowed the S&D treatment under which an interim
solution was proposed, which specified that India can give its
farmers subsidies for the following four years until a permanent and
stable solution is not found and the peace clause cannot be disputed
at WTO under this agreement. Agreeing to the new draft presented
by WTO, the earlier so-called peace clause constraint of four year
during which no country can challenge the less developed countries
if they break the food subsidy ceiling was scrapped. The peace clause
that now stands cannot be questioned until a permanent solution is
found. However all the member expect that the solution will be found
in next 4 years. By accepting the peace clause, India has achieved
two-short term objectives that are:
Sanctioning the National Food Security to continue without any
interruption and feed the stomachs of millions of people.
Obtaining time for coming up with effective solutions within
the WTO framework.

One of the problems with the peace clause is that while India has
insisted that no WTO member country can question the peace clause
until a stable solution is not found under the Agreement on
Agriculture (AoA) and The Agreement on Subsidies and
Countervailing Measures (ASCM). The signed peace clause only states
AoA, which means that the countries can still drag developing
countries to the dispute settlement in WTO under ASCM. It may have
happened that immediate priorities of the Indian government may
have prompted them to accept the peace clause. If you look it from a
political perspective, it is important for the UPA government to get it
sanctioned from WTO.

Whatever be the forthcoming amendments or the solution to this
controversy, I think in Bali. India ultimately softened its spot by a
sizeable extent. Indian Government may call it a victory and claims
that they forced the powerful WTO members to have bowed their
knees on its demands but on the same hand India too understood the
consequences of staying adamant. It was clear that unlike previous
Ministerial meetings where India was backed by large number of
members especially by developing nations and BRICS nations but this
time none of them supported India except South Africa and Kenya.

It was speculated that Indias relation with US would go bad. Initially
it looked like that only when US WTO Ambassador Michael Punke
made a bitter attack on India when he issued a statement saying that
developing nations are building a massive new escape for potentially
unlimited trade distorting subsides. He called it as a step backward.
US continued its rigid position and at one point of time they even
warned that if Indias proposal regarding food security was not
rejected by the ministerial, it will hurtle the WTO negotiation to
irrelevance. However later on , On 6
th
December, United States Trade
Representative Michael Froman gave a statement saying that they
celebrate the decision and there are no differences between India
and US. He said that the media reports are baseless.


Concluding the article, I would like to say that whatever be the
reason of the adamant behavior of Indian Government in Bali, they
achieved what they wanted. I applaud them for standing for the
fundamental right of Food Security and for adopting a concessionary
approach to look after the needs of the poor people living in
developing nations. Bali was a sure shoot victory for WTO but what
did 55 crore Indian farmers gained anything from all this? I WOULD
JUST SAY, WE DONT KNOW. Because a permanent solution is still
not there. Its just that the problem has been suspended for next 4
years and simply time will disclose what India gained from this
meeting.