Rich Nations Reject India Backed Proposal On Sorting Out Public Stock Holding Issue At WTO : Daily Current Affairs

Relevance: GS-3: Issues related to direct and indirect farm subsidies and minimum support prices.

Key Phrases: Permanent Solution to Public Stock Holding, Subsidy Ceilings, Aggregate Measurement of Support Subsidies, External Reference Prices, WTO Ministerial Conference, Uruguay Round of The WTO Agreement on Agriculture:

Why in News?

The US, the EU, the UK, and some food exporting nations have rejected the proposal on a permanent solution for public stock holding including re-calculating subsidy ceilings for MSP programmes put forward by India and other members of the G-33 group, Africa Group and the ACP (Africa, Caribbean, Pacific) group at the WTO,

Key Highlights of the Joint Proposal:

In a joint proposal submitted to the WTO’s Committee on Agriculture, the G-33, ACP and the African Group had insisted that a permanent solution to public stock holding should be reached at the forthcoming WTO Ministerial Conference (MC 12) starting in Geneva on June 11.
The joint proposal had suggested that domestic support provided by a developing country member for public stockholding programmes should be considered as compliant with WTO’s AoA rules and not subject to reduction commitments.
It added that where such programmes included acquisition and release of stocks of foodstuffs at administered prices, the AMS (agriculture subsidies) should be calculated based on the actual quantity of foodstuffs (as opposed to the entire eligible production) acquired at administered prices.
Moreover, the submission stated that ERP for calculating the subsidy element should not be pegged to 1986-88 prices as it leads to inflated subsidy calculation because existing international prices are much higher.
Instead, it should either be the three-year average price based on the preceding five-year period excluding the highest and the lowest entry for that product or adjusted for excessive inflation as per the methodology.

Do you know?

India has been a member of the WTO since January 1995 and also had been a member of the WTO’s forerunner General Agreement on Tariffs and Trade (GATT) since July 1948.
The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. Its main functions are to maintain smooth trade globally and resolve issues or disputes that can affect world trade.
The WTO has 164 members and 23 observer governments. Afghanistan became the 164th member in July 2016. In addition to states, the European Union, and each EU country in its own right is a member.
Agreement on Agriculture (AOA): This agreement deals with giving market access, reducing export subsidies and government subsidies on agricultural products.

Aggregate Measurement of Support (AMS)

Domestic support under the agreement on agriculture calls for a reduction in domestic subsidies that distorts free trade and fair price.
Under this provision, the Aggregate Measurement of Support (AMS) is to be reduced by 20% over a period of 6 years by developed countries and 13% over a period of 10 years by developing countries.
It includes 3 subsidy boxes depending on the consequences of production and trade negotiated in the Uruguay Round (1986–1994) of the WTO Agreement on Agriculture:
1. Green (minimal distortion):
  - They are government-funded and do not involve price support.
  - These are therefore allowed without limits, provided they comply with the policy-specific criteria.
2. Amber (most directly linked to production levels):
  - These include measures to support prices, or subsidies directly related to production quantities.
  - They are said to distort trade since they encourage excessive production and make products of the country cheaper than the products of the global market.
  - WTO members without these commitments are required to maintain their amber box supports to within five to 10 percent of their value of production.
3. Blue (production-limiting programmes that still distort trade)
  - Any support that would normally be in the amber box is placed in the blue box if the support also requires farmers to limit production.
  - At present, there are no limits on spending on blue box subsidies.

Do you know about Public stock holding programmes?

Some governments use these to purchase, stockpile and distribute food to people in need.
While food security is a legitimate policy objective, some stock holding programmes are considered to distort trade when they involve purchases from farmers at prices fixed by the governments, known as “supported” or “administered” prices.
At the 2013 Bali Ministerial Conference, ministers agreed that, on an interim basis, public stock holding programmes in developing countries would not be challenged legally even if a country’s agreed limits for trade-distorting domestic support were breached.
They also agreed to negotiate a permanent solution to this issue.
A decision on public stock holding taken at the 2015 Nairobi Ministerial Conference reaffirmed this commitment and encouraged WTO members to make all concerted efforts to agree on a permanent solution.

Reasons for Proposal Rejection:

Notification Requirements under the Peace Clause not met by India:
- New Delhi has invoked the peace clause once for its MSP support for rice, as its subsidies for rice have exceeded the WTO prescribed ceiling of 10 per cent of the value of rice production.
- But it is facing complaints from many developed nations for allegedly not fully meeting notification requirements specified under the clause.
Non Transparency in Stockpiling:
- The proposal would allow all developing members to stock up food grain without limits in a non-transparent manner with no legal consequences.
The proposal attempts to change the Aggregate Measurement of Support (AMS) subsidies and the External Reference Prices (ERP).
- The Members who have objected to the joint proposal on public stock holding, which includes the Cairns group comprising New Zealand, Canada, Australia, Paraguay, Uruguay, Costa Rica and Mexico, complained that the proposal was not restricted to public stock holding.
- It sought changes in AoA rules such as excluding certain measures from the calculation of Aggregate Measurement of Support (AMS) subsidies and also changing the External Reference Prices (ERP).
Late Submission of Proposal:
- Members also expressed disappointment that the proposal has been submitted late, leaving no time for them to go through all the technicalities and work out a consensus.

Conclusion:

It is important for India to negotiate a permanent solution as early as possible because although it negotiated a peace clause at the Bali Ministerial in 2013 and later, which gives developing nations protection against legal action in case limits are breached, it is subject to a number of onerous conditions that makes it difficult to use.
A work programme on public stock holding agreed to at MC12, would be a more realistic outcome.

Source: The Hindu BL

Mains Question:

Q. Discuss the issues related to a proposal of permanent solution to public stock holding raised by India and other countries at WTO.