India’s trouble deepens: The government seems to be caught between the devil and the deep blue sea. The persistent pressure from farmers to legalise minimum support price (MSP) and on the other hand Geneva headquartered WTO vouching for phasing out of MSP and food subsidy under agricultural subsidies, is seen as a colossal violation of WTO principles by the developed economies. 

Both ongoing battles are crucial. One is being fought within its own boundaries where farmers are asking for legalising MSP and the government trying to assuage the concern of farmers but without making any concrete promise. The second battle is outside the boundary of the nation, when 164 members will gather to deliberate issues under the 13th Ministerial Conference (MC13) between Feb. 26-29 in Abu Dhabi. 

It is not the first time that developed economies have upped the ante under the garb of providing a fair playground to all players. On July 1, 2022, many US congressmen penned a letter to President Joe Biden urging them to hold India accountable for its decades-long violation of commitments made to the World Trade Organisation (WTO). This long-standing and long-drawn issue is the subsidies granted to India’s rice and wheat farmers through the minimum support price system which is in contravention of WTO rules. 

“As rules, detailed in the Agreement on Agriculture (AoA), allow each crop to be subsidised by not more than 10 per cent of its value of production. The Congressmen claim that for years subsidies have consistently been “more than half of the value of production for rice and wheat,” Biswajit Dhar, Distinguished Professor, Council For Social Development told Republic Business. 

According to WTO, the overall subsidies granted by the government of developing nations should be below 10 per cent of the total value of the production. 

“In India, there are two types of subsidies, input subsidy, and food subsidy. Input subsidy is the subsidy provided by the government on fertiliser etc. And second is the total food subsidy given under the National Food Security Act to poor people,” Dhar quipped. 

As far as the case of India is concerned, even the food subsidy given by the government of India is being counted as a subsidy by advanced economies along with input subsidy. As per their assessment, India’s overall agricultural subsidies stand at 70 per cent of the value of production, against the ceiling of 10 per cent. 

“The calculation is wrong as the food subsidy given by the government to the poor is also taken in as an agricultural subsidy to which the government of India has raised its objection.  Our own calculation shows that India’s overall subsidy is just 15 per cent of the total production,” Dhar mentioned. 

“New Delhi is expected to take a tough stand in Abu Dhabi, with the ‘peace clause’ taking center stage,” one expert said claiming anonymity. 

The peace clause, which expired in 2004 but was again put in force in 2013 during the Bali Conference, states that no country will face legal impediments to implementing food security programs even if subsidies surpass the limits specified in the WTO Agreement on Agriculture.

There is going to be pressure on India to bring down subsidies and MSP and public distribution system (PDS) are likely to be affected.  India has been advocating for making the ‘peace clause’ a permanent provision.  But this has remained as a temporary provision. 

However, India has a stance that public stockholding limits should not be brought under discipline. India can provide food subsidies to the poor on humanitarian grounds. In the 13th Ministerial Conference, the solution has to be found.

“The US has refused to be a part of the resolution and WTO decisions are taken by consensus. So there would not be any solution as the US is stepping away,” Dhar clarified.

Fisheries Subsidy

Another issue that emerged at the 12th Ministerial Conference in Geneva talked about countries giving subsidies to the fisheries sector. They also talked about countries indulging in unsustainable fisheries practices that will lead to the depletion of fisheries stock. 

However, India has maintained a stance that the nation has a small fishing community they are not commercial fishermen, and they will not endanger stocks. “India has a stance that subsidies are given to small fishermen. If subsidies are taken away the livelihood will be endangered,” Dhar said.

E-Commerce and Investment Facilitation

“At WTO, advanced countries are saying that India and South Africa not allowing liberalisation of trade. Similarly, advanced economies are pushing for E-commerce and investment facilitation at WTO, to which India and South Africa are not agreeing,” he said. 

Another important issue is investment facilitation development. India has made its stance clear and objected to the efforts of certain countries to push for investment facilitation development in December 2023. India has objected to investment facilitation being discussed at the WTO forum. 

According to the government statement issued in December last year, Investment Facilitation for Development (IFD), which supposedly facilitated investment, did not pertain to multilateral trade relations. Investment per se is not trade.

Dhar explains that there are two types of negotiations one-multilateral negotiations which need consensus of all 164 countries. However, certain countries are deciding things outside the ambit of the WTO multilateral negotiation ambit and make up plurilateral negotiation which is inconsistent with the framework of WTO.

“WTO does not allow this kind of negotiations, if that becomes a small agreement then the character of WTO will take a strong beating,” Dhar said. 

The government has time and again added that certain members began an informal process that did not have any legal sanctity, and now, at the end of their informal process, they are back to consensus seeking the outcome of an informal process the foundation of which is devoid of consensus.

Meanwhile, India has clearly said that investment is purely a bilateral matter and it should not be discussed and deliberated in multilateral forums