Context:  This article is based on the news “No progress at WTO agri talks; stockholding issue eludes consensus” Which was published in the Indian Express. The mini-ministerial meeting on agriculture at the World Trade Organization (WTO) was held recently.

What are the key highlights of the mini ministerial meeting on agriculture at the World Trade Organization?

• • Divided Priorities: The meeting did not achieve any substantial outcome due to persistent divisions between developed and developing nations on issues like public stockholding for food security and domestic support for farmers. 
    • Cairns Group of farm-exporting countries, advocated for a comprehensive reform blueprint of agriculture based on Article 20 of the World Trade Organization’s Agreement on Agriculture (AoA). On the other hand, developing countries sought outcomes specifically on mandated issues like food security.
  • Offered Higher-level political guidance: The United Arab Emirates,  chair of the 13th Ministerial Conference (MC13) in February 2024, has called on ministers to offer political guidance to agriculture negotiators leading up to the conference to overcome the current deadlock.

• Challenges with Public Stockholding (PSH) Program: India’s PSH program faced challenges from major food grain exporters like the US and Canada. 

• • It has been argued that the program, particularly for rice, involves significant subsidies, leading to distortion in the global food grain market. 
• Public stockholding is a policy tool used by governments to purchase, stockpile, and distribute food when needed.

• Permanent solution for domestic food security: India and the G-33 coalition of developing nations and African countries advocate for a lasting resolution on domestic food security. 
  • The aim is to provide them with the flexibility to offer increased support to their farmers. 
• Questions on extended PMGKAY scheme: Canada has questioned India if its procurement under the extended PMGKAY will be conducted at the administered price, potentially impacting World Trade Organization domestic support commitments. 
• It has asked India to procure at prevailing market prices to mitigate trade distortions.

Also Read: Food Subsidy: What is It?, Its Components, Related Challenges and Concerns to the Delivery of Food Subsidy in India

What are the areas of concern for developing countries?

• Shrinking Policy Space for Product-Specific Support:  The Market Price Support (MPS) calculation under AoA does not consider inflation. 
  • This leads to an exaggerated calculation of the MPS and shrinkage of policy space for implementing MPS measures over time.
• Public stockholding (PSH) for food security purposes: According to World Trade Organization regulations, agricultural subsidies for developing countries should not surpass 10 percent of the value of their agricultural production with external reference price (ERP) of 1986-88 levels.
  • The ERP reflects a product’s export or import price during the base period and depends on a country’s status as a net exporter or a net importer of that product during the base period.
  • India has surpassed the prescribed threshold for rice subsidies several times, compelling it to utilize the ‘peace clause‘ established during the Bali ministerial in 2013. 
• Special Safeguard Mechanism (SSM): It is a tool to counter import surges that may put agricultural production in developing nations at risk. 
  • As per the current Agreement on Agriculture (AoA) design, only 39 members, predominantly developed countries, can use Special Safeguards (SSGs). 
  • The SSM aims to extend similar measures to developing countries.
• Trade distorting AMS: The entitlement under the Aggregate Measurement of Support (AMS) or ‘Amber Box’ support has enabled developed countries to offer trade-distorting support with a concentration on specific products. 
  • This has resulted in the overproduction of agricultural commodities and subsequently contributed to a decline in their global prices and a surge in cheap imports in the domestic markets of developing countries.
• Dilution of Special and Differential Treatment (S&DT): Developed countries aim to weaken S&DT provisions for developing countries by imposing caps on these flexibilities. 
  • The Development box (Article 6.2) of AoA allows developing countries to provide support without prescribed limits for certain measures such as investment subsidies, generally available to agriculture.

What challenges has India raised at the World Trade Organization Meetings?

• Decreasing farm subsidies: India has been pressurized by the developed nations to decrease the subsidies provided to farmers. 
  • Although, the subsidy provided by India is considerably lower than what the US and EU provide. The Indian government’s subsidy to farmers amounts to $300 per farmer as against the $40,000 per farmer in the US.
• Peace clause with numerous conditions: The peace clause includes conditions like several notification requirements, making its application challenging.
  • The clause mandates comprehensive disclosure of Minimum Support Prices (MSPs) and annual procurement for food security programs, raising apprehensions within the government about potential scrutiny by other countries on domestic matters.
• Expiry of Peace Clause: If the clause expires before a lasting solution is established, essential programs like food security and policies safeguarding farmers, such as MSP could face challenges.
  • India perceives the limited timeframe proposed by Western powers for the peace clause as inadequate reassurance. 

Way Forward: 

• Modification of formula to calculate food subsidy cap:  India suggested measures like amendments to calculate the food subsidy cap and inclusion of programmes implemented after 2013 under the ambit of the ‘Peace Clause.’
• Updation of the external reference price (ERP): India emphasizes on the need to update the external reference price (ERP) from 1986-88 levels to current market rates. 
• It should account for inflation when determining the MSP ceiling, which is currently set at 10% of the total value of crop production, as permitted under World Trade Organization rules. 
• Three-year average price of a crop:  Using the three-year average price of a crop based on the preceding five-year period excluding the highest and lowest entries for that product. 
• Subsidy calculations need to be based on actual procurement rather than encompassing all eligible production.
• Allowing PSH Programs: Public stockholding programs designed for food security objectives should be permitted and deemed compliant with World Trade Organization rules under certain conditions. These conditions include:
• Ensuring that stocks acquired through PSH do not distort trade or harm the food security interests of other World Trade Organization members. 
• Members should refrain from exporting stocks acquired, except for international food aid and non-commercial humanitarian purposes.
• Special Safeguard Mechanism: Countries should have the right to protect their domestic markets from dumping by other countries through the Special Safeguard Mechanism.
• Opposing Dilution of S&DT provision: Developing countries should oppose any attempt to dilute the existing S&DT provisions especially capping of the support under the Development box and the reduction in the de minimis limit.

Conclusion

The recent World Trade Organization meeting on agriculture didn’t make much progress due to disagreements between rich and poor countries. India faces challenges with its food security programs, and there’s a need for fair global trade rules that consider the concerns of developing nations.