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Friday, 25 July 2014 00:00
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Modi needs to look at the impact of our WTO stand

Though the UPA tried its best to make the Bali ministerial about the developing world’s right to food security, Prime Minister Narendra Modi needs to look at the larger consequences of the corner he is being pushed into. Of course, the WTO formula on calculating food subsidies is outdated and needs fixing. It calculates the food subsidy ceiling based on a 1986-88 reference price—if this is revised keeping in mind the hike in food prices since, India’s ability to dole out more food subsidies will rise dramatically. What is important to ask, even if India wants to squander money on subsidies that don’t reach the poor, is whether these rights are being impacted right away; and whether India has put forward acceptable solutions that have been rejected. Two, if the issue is as pressing as is being made out by his food-security-is-our-birthright colleagues, why is it that other big countries like China are not supporting India on this? As an aspiring global player, India needs to keep an eye on the larger picture.

The answers Modi will get will be revealing. The reason for the rush on the Trade Facilitation Agreement (TFA) is not just because the rich countries are self-centred, it is because a July 31 deadline to accept it had been fixed. In contrast, at Bali, a four-year window was got for coming up with a food subsidy solution, a window in which no country could take an India to the WTO dispute panel for having high subsidies. Linking India’s TFA approval to a settlement on food subsidies is rank opportunism. The talk of an Indian solution, let TFA go on, but kill it next year if there is no agreement on food subsidies—India’s informal position—is of a similar nature since a 4-year window was agreed to at Bali.

Apart from the fact that multilateral fora are fairer for developing countries like India, limiting food subsidies as per the existing WTO formula doesn’t hurt India if it does this right. Paying direct cash subsidies to the 360 million poor under the Food Security Act (FSA) will cost R45,000 crore per year versus around 4 times that amount per year in the first few years of the FSA. Indeed, the money saved can be used to give farmers per acre cash subsidies which are WTO-compliant—right now, apart from wasting money, the MSP-based system helps only better-off farmers in a handful of states where FCI procures wheat and rice. Equally important, Modi needs to find out if India has made alternate proposals at the WTO—one such could be to exempt MSP-based procurement if the price is below the import-parity price since this won’t distort global trade, which is all that the WTO is interested in. If Modi asks whether India has been informing the WTO of its domestic support programmes as it is obliged to do, he will find the answer to this will also be in the negative. Playing the tough guy is all very well, but India needs to do its homework, and also see where its interests lie.

 

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