Context

India has invoked the peace clause at the World Trade Organization (WTO) for the fifth consecutive time for the marketing year 2022-23 due to breaching the prescribed subsidy limit for rice offered to its farmers.

India Invokes Peace Clause at WTO for 5th time as Rice Subsidies Exceed Cap

• Subsidy for Rice Production in India: While India’s rice production value was $52.8 billion in 2022-23, a subsidy worth $6.39 billion was given to farmers during the year. 
• Breach of 10% Limit: Thus, the rice subsidy was 12 per cent of the value of production, thereby breaching the 10 per cent domestic support ceiling, which is in accordance with global trade rules.
• Invoking of Peace Clause: There is no immediate repercussion for the breach since India has invoked the “peace clause”, agreed upon at the Bali ministerial of WTO in 2013. 
  • This provides immunity to developing countries from challenges for breaching the ceiling for wheat and rice until a permanent solution is found.
• Concerns raised by India: India has been complaining that the 10 per cent subsidy ceiling is calculated on the basis of the reference price of 1986-88, which became outdated long ago.

What is the Peace Clause at WTO?

• About: It was established in 2013 under the Bali Agreement. It permits developing nations to exceed the 10 percent ceiling without facing legal action by other members temporarily. 
• Conditions for Government: Governments seeking the shelter of the peace clause have to:
• • avoid distorting trade or impacting other countries’ food security
  • provide information to show they are meeting those conditions.

Issues with the Peace Clause:

• Controversial: Some developed countries argue that it gives developing countries an unfair advantage, and it could lead to trade distortions. Others say it is crucial for developing countries to meet their food security.
• Flexibility in rules-based order: WTO is a rules based organisation, and the peace clause is seen as a departure from those rules. 
  • The flexibility provided by WTO in the peace clause is leading to conflict of interest between developed and developing nations.