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Updated: October 22, 2013 02:59 IST

A pound of flesh to feed the poor

Arun Mohan Sukumar
Comment (19)   ·   print   ·   T  T  

Realising that New Delhi needs to clear its food security legislation at the WTO in time for the election, the West has sought increased market access in return for temporary relief

A few months ago, the most optimistic observers of international politics were not willing to hedge their bets on the Doha Development Round at the World Trade Organisation. The Doha Round negotiations have been stalled for more than a decade now — the West would like developing countries to remove import barriers while India, Brazil and China want the United States and the European Union to reduce the massive subsidies they provide to rich farmers. Neither side has conceded ground on its claims. But at the Bali Ministerial Conference this December, the U.S. will use a trump card to have its way with India and other emerging markets: our food security legislation. On the pretext of “allowing” India’s food security law to exist alongside its commitments to the WTO, the U.S. has wrested an in-principle agreement from New Delhi on the issue of “trade facilitation.” In other words, India has agreed to greater market access for western companies in order to ensure the survival of the Food Security Act.

‘Import facilitation’

Late last year, India’s Permanent Representative to the WTO in Geneva went on record to say “trade facilitation […] is nothing but import facilitation.” The overall gain for developing countries from such additional trade will be “next to nothing,” said Ambassador Jayant Dasgupta. He also acknowledged that the West had fallen back on its promise to help improve the export capability of emerging markets. The whole mantra of trade facilitation, Mr. Dasgupta went on to observe, was “[…] please open up [your markets]. Don’t ask for anything in return. It’s good for you.”

Yet, last week, Union Trade Minister Anand Sharma suggested “there should not be any confusion on trade facilitation because we are in favour (of the same).” What changed in the course of a year? The United Progressive Alliance, desperate to ensure that the Food Security Act does not fall foul of India’s commitments under the WTO Agreement on Agriculture (AoA), has curried favour with the Obama administration. The U.S. — which runs one of the largest domestic food aid programmes in the world — has steadfastly opposed plans by developing countries to provide food security to their poor. Now it is using the AoA to push its objectives under the “trade facilitation” agenda at Bali. During his recent visit, Prime Minister Manmohan Singh sought to extract an assurance from President Barack Obama that the U.S. would not oppose India’s food security scheme. Mr. Sharma’s remarks themselves came after WTO Director-General Roberto Azevedo casually observed that the Food Security Act may run into trouble with our AoA commitments.

Room for concern

But the government’s piecemeal attempt to resolve this issue bilaterally (with the U.S.) leaves much room for concern. For starters, the Obama administration is driving a hard bargain: there is no reason why the UPA should trade food security for market access, because India has a legitimate case under the AoA. Second, without an amendment to the AoA, any ad hoc solution is subject to the whims of U.S. foreign policy. The UPA seems content to see the food security scheme just through to 2014, in time for the election. Third, abandoning the case of the developing world to shore up its own food security law will reflect poorly on Indian diplomacy.

The proposal to categorise higher-than-normal procurement prices — for the purpose of ensuring food security — as a permitted agri-subsidy was mooted by the G33 last year. The G33 proposal was based on a simple premise: food security schemes needed massive quantities of grain and farmers had to be offered attractive prices if they were to sell their produce to governments. But the WTO Agreement on Agriculture unfairly casts such procurement prices as “trade-distorting.” The WTO imposes a cap on the price support that countries can provide for an agricultural product, known as the “Aggregate Measurement of Support (AMS).” Mathematically, AMS is the difference between the procurement price and a “fixed, external reference price” for a product, say rice, multiplied by its total domestic production.

Unfair

The AMS rule is patently unfair because the “external reference price” is pegged to 1986-88 levels. There is abundant literature to conclude world food prices were low during the late 1980s on account of massive dumping of food grain by U.S. and European companies on foreign markets. It is farcical to expect developing countries — whose agricultural sectors were no doubt adversely affected by dumping — to base their support for farmers on such manipulated prices.

What’s more, market price support in itself is no effective marker of trade protectionism. Jacques Berthelot, a French agricultural economist, has highlighted how the U.S., the European Union and Japan simply slashed their procurement prices on paper during the 1990s without reducing any of the subsidies they grant to rich farmers. In defence, the West has facetiously argued that farm aid “decoupled” from production and instead contingent on a farmer’s maintaining her land in “good condition” is permitted under the AoA. India, on the other hand, has adhered to both the letter and spirit of the AoA, reducing its agri-tariffs progressively. In objecting to India’s food security legislation on account of higher procurement prices, the U.S. has made it clear needy citizens in the West are more equal than others.

Since the AMS rule has found its way to the AoA, however, there is no alternative for the G33 but to negotiate its amendment. For India and other developing countries, the de minimis AMS is capped at 10 per cent of the total value of production. For the most part of the last two decades, as economist Munisamy Gopinath observes, India’s support prices for farmers has been lower than the external reference price. But with the advent of the food security legislation and a general rise in food prices (after adjusting for inflation), there is little doubt that India will breach this ceiling in 2012-13.

‘Re-interpretation’ sought

To prevent this situation, our WTO representatives have sought a modest “re-interpretation” of the AoA annex to peg the “external reference price” from 1986-88 levels to current global prices. The other option, according to Ambassador Dasgupta, is “to have a deflator mechanism to compensate for excessive rates of inflation.” The G33’s original proposal still remains our best shot at ensuring food security. But the UPA government has instead opted for an “interim solution” —– an invocation of the AoA’s “Peace Clause” which entails requesting the West to desist from initiating legal proceedings against India. In other words, this politically tempered proposal is an admission that India’s food security law violates the WTO regulations.

It is unclear whether the ‘Peace Clause’ proposal is supported by all members of the G33. Since India has thrown its weight behind this rarely-invoked measure, the mood at the WTO, as one diplomat told Bridges Weekly, seems to be “that the only game in town for the G33 proposal is a peace clause.” New Delhi’s objective is clear: remove all hurdles that stand in the way of the Food Security Act for now. In its election rush, the government is sacrificing the sovereign right of India and the developing world to provide food to their needy on a sustainable basis. The U.S. has seized this vulnerability to extract concessions on the trade facilitation front. A Faustian bargain, if there ever was one.

arun.sukumar@thehindu.co.in

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It would definitely throwing our sovereignty at the mercy of developed nations if India (actually the Congress) looks for the short-term plan of "no hurdles" to Food Security Act just to win seats in the next general election.
India should fight out the unfair AMS at the forum legally. But, unfortunately for us (Indians), we are saddled with a Govt. looking for short-term gains without looking at the Long-Term pains it can cause us. While on the other hand US and other developing nations are waiting with baited breath to shoot down national interest.
It would be a grave mistake to give in to the unjust demands. India should not meekly give ups its rights.

from:  Rahul
Posted on: Oct 23, 2013 at 17:07 IST

What an insightful article. No other newspaper or news channel has reported this and in such a simple and lucid manner. Kudos to Mr.Sukumar and the editor for publishing this one. Looks like our sovereignty has been put up for sale by our current ruling dispensation.

from:  N. K. Shenoy
Posted on: Oct 23, 2013 at 11:22 IST

G-33 proposal of developing counties including india to preclude food subsidies from trade distorting practice has its merit, but developed countries would at the same time try to exploit the situation by pushing for TFA to garner more market space space for their companies.Developing countries will press for reviewing of the fixed external reference price and try to put it in consonance with the current global prices .There is a clause in AoAwhich accommodates inflation indexed prices rise, but the clause is silent on magnitude of inflation to be considered.If india can be press for full inflation price rise then there won't be tourble to India's FSO.The talk of peace clause by UPA
seems to have no authentic backing until now and I hope it remains a rumour.

from:  Shivraj Gurjar
Posted on: Oct 23, 2013 at 01:52 IST

<<The U.S. has seized this (UPA) vulnerability to extract concessions on the trade facilitation front>>

The most insidious concession USA seems to have got is the Food Security Act's Clause 46, especially 46.4, which gives the National Food Commission appointed by the Govt the power of a Civil Court that can try Criminal Cases. This clause seems to be a means by which our government has made provision in the Act (for, or in league with, the WTO) to threaten Indian farmers, and even destroy our farming, whenever WTO deems it fit. I hope the food and research analysts take a note of this clause, and warn the people of its repercussions.

from:  Rajiv Bhole
Posted on: Oct 22, 2013 at 23:58 IST

It is a common knowledge that poor are not poor by choice.
Poverty is thrust on nations and people.
It is easy to blame a defenceless, vulnerable community as creator of its own
problems. What is happening is human beings have become pests on this earth.
There was a time when man fought against nature to survive and keep the genetic
pool going. Now we want our own genes to flourish while keeping others under
control. One way of making it possible is to make life difficult for those who want to
grow.
China and India have a long history of culture that they shared with the rest of the
humanity willingly and whole heartedly. Technological advancement and the ability
to manipulate physical forces gave the westerners an advantage which they used to
undermine the confidence of the east and dominated their lives.
It is now our time to show the wrong direction that technology is taking us. Greed ,
selfishness and technological neo-colonialism have taken over the world

GOD SAVE THE WORLD.

from:  RK
Posted on: Oct 22, 2013 at 22:13 IST

As stated by many, the current ration system in Tamilnadu is
comparatively better and can be the default Food Security arrangement.
"In its election rush, the government is sacrificing the sovereign
right of India and the developing world to provide food to their needy
on a sustainable basis. The U.S. has seized this vulnerability to
extract concessions on the trade facilitation front. A Faustian
bargain (selling your soul, to the devil, in exchange for knowledge
and power) , if there ever True UPA wants do enough damage so that
even if it is not winning the election, the next party can not rule
this country with out problem "My enemy must loose at-least one eye,
even if I loose both" seems to be the moto.

from:  SPR
Posted on: Oct 22, 2013 at 20:23 IST

UPA in its election mode has compromised with national integrity and
sovereignty. Bifurcation of AP and surrender in front of USA to get away
with Food Security Act are few examples which clearly reflect that these
steps have been taken for electoral gain. Ignoring long term result of
these steps may cause economic as well as social havoc on Indian
society. These remedial medications would do nothing but aggravate the
disease.

from:  Kushagra
Posted on: Oct 22, 2013 at 19:45 IST

Lower Class Women & Children will suffer a lot with this Food Security
Scheme. Lower Class Man will buy Rice with Rs.30/-and will sell in the
restaurant with Rs.300/-and he will go in the bar and drink and with
balance money he will buy one day food for his family. For next 29 days,
Lower Class Indians will suffer with this Food Security Scheme. Also
Middle Class Indians will suffer with this Food Security Scheme by
paying for this Food Security Scheme in the form of Tax. Prices of Food,
Petrol, Light, Water, etc. will increase.

from:  Aam Aadmi
Posted on: Oct 22, 2013 at 19:08 IST

It's a weird situation about whether two or several wrongs make a
right. First, the idea of Food Security Bill itself is wrong and
unjust. Yet no amount of rational reasoning could stop it. And here we
are US trying to stop it using WTO. These are two wrongs.

The third is when the Congress/UPA accepts the US terms to let the FSB
go supposedly selling out some other interests.

Fourth is the basic assumptions notion about what constitutes a gain
or loss in WTO -- acceding to imports as taken a loss or a concession.

I don't know what to make of this.

from:  Ank
Posted on: Oct 22, 2013 at 17:35 IST

UPA in its election mode has compromised with national integrity and
sovereignty. Bifurcation of AP and surrender in front of USA to get away
with Food Security Act are few examples which clearly reflect that these
steps have been taken for electoral gain. Ignoring long term result of
these steps may cause economic as well as social havoc on Indian
society. These remedial medications would do nothing but aggravate the
disease.

from:  Kushagra
Posted on: Oct 22, 2013 at 15:08 IST

UPA in it's election mode has compromised with national integrity and
sovereignty.Bifurcation of AP and surrender in front of USA to get away
with Food Security Act are few examples which clearly reflect that these
steps has been taken for electoral gain.Ignoring long term result of
these steps may cause economic as well as social havoc on Indian
society.These remedial medication would do nothing but aggravate the
disease.

from:  Kushagra
Posted on: Oct 22, 2013 at 15:06 IST

For the first time, I understand how it is difficult to do good. The
food legislation was one of the cornerstones of mass hunger
alleviation. Even if its fraught with many irregularities a step was
taken. And now, external influences not limiting to our local
political hues, but international trade as well are trying to
undermine policy decisions that were done to safeguard our citizens.
The West always needs to be reminded that they can focus first on
repairing the holocausts they have propagated in war zones they had
opened up. We can't let them meddle in our internal affairs

from:  Dinesh
Posted on: Oct 22, 2013 at 13:24 IST

A very insightful article with clarity and conviction. It is stated that UPA India is poised to invoke the peace clause. It is also stated that it is not clear yet as to the G33's emphasis on which of the three proposals at the Bali meet, I.e. Government Stock holding, revision in the 'fixed external reference price' and peace clause. The other opinion expressed -Bridges Weekly - the only game in town for the G33 proposal is 'peace clause'. It is clear from the article that the US is arm twisting the developing Nations protecting their own rich farmers, resisting support prices to the G33 Nations. The motive for UPA India to surrender its sovereign rights and that of the interests of the G33 Nations to accept the 'trade facilitation' proposal of the US is UPA's selfish and myopic goal of securing its ambitious Food Security program ahead of the 2014 election. Where is such a need for the other members of G33? Will they not see thro' unless it is bilateral between India and US.

from:  M.R.Sampath
Posted on: Oct 22, 2013 at 10:42 IST

As a member of WTO, India must honor all its treaty obligations. It would be preposterous on the part of Indian government to trade market access to developed nations for Food Security Act. Such a trade off would prove detrimental to other developing nations. Besides, it would also be in contravention to the spirit of Article 51b and 51c of Indian Constitution. For a nation that aspires for a seat in UN Security Council, it is important that it rises above myopic issues spawned by political expediency and assert the legitimate concerns of developing nations.

from:  Mahesh Ashok Kulkarni
Posted on: Oct 22, 2013 at 10:21 IST

There is no doubt in people's mind that UPA government will bend over its knees to please US government as has been done several times in Nuclear deal, FDI etc. Otherwise Manmohan Singh will once again threaten to resign which he will not venture to do for the Coal and other scams which directly involved him.

from:  MVJRao
Posted on: Oct 22, 2013 at 09:05 IST

Thanks to the writer and the hindu for throwing insight on this issue of serious national
concern ! The government seems to be in a mode where it doesnt care about life after the
2014 elections. Even if the larger soverignity issue is not considered by these short-sighted
ministers, they should step back and think, what happens if UPA 3 is voted back to power
due to splitting of opposition votes ?? How much pain and effort will it take to undo all these
damage ? The WTO regulations that are inimical to India's interests need to be taken head-
on through appropriate mulitlateral mechanisms.. Backdoor diplomacy can come with a cost
that can seriously hurt us !!

from:  Gajamani G
Posted on: Oct 22, 2013 at 08:07 IST

India's FS law acknowledges that 65% of Indians are poor who can only
survive with subsidised grain. The West is saying, "Well, well, what
more proof is there that India is a weak nation? If you need that, there
are the scams by the dozen. Therefore, since beggars cannot be choosers,
do as we tell you, if you want our 'temporary relief'." Of course, they
also know that the UPA-II is passing this law in order to win the 'next
election'. Where is the element of surprise or disappointment in what
the West is asking India to do?

from:  Murthy
Posted on: Oct 22, 2013 at 07:25 IST

India is a country with 340 million people equivalent to Australia going to bed with
out a meal.But from this situation it has become self sufficient in food production
and even exporting specialty goods like Basmati rice abroad.FSA-2013 provides right to
food.It is not a wellfare measure.If Indians follow Gandhiji in boycotting foreign goods,the
developed exporting nations will have to bow before India.In an interdependent world mutual
understanding and sharing of resources are desirable.

from:  Dr K V Peter
Posted on: Oct 22, 2013 at 06:28 IST

If UPA is sincere in feeding the poor, they should not be in a hurry to accept the conditions from WTO. The trade adjustment would make us to import more and once again we would get into the difficulty of imbalance to balance of trade. Our value of rupee would still get devalued because of higher imports.
Between winning elections, occupying the chair and framing acts for the poor UPA should choose the later.Dr,Manmohan Singh should think here as an economist for India than a politician

from:  A S Narasimhan
Posted on: Oct 22, 2013 at 06:01 IST
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