India is on the verge of torpedoing another trade pact, and at issue yet again are the country’s massive government programs to help both farmers and the millions of poor households who buy the food they grow.
Those subsidies are already controversial within India: They weigh heavily on the government’s finances and have been blamed for keeping food inflation high. But why exactly do they have the Geneva-based World Trade Organization in such a tizzy?
To ensure that all Indians have reliable access to food, the government buys wheat and rice from farmers and distributes it to state-run shops across the country, where the grains and other staple goods are sold at cut-rate prices. At the beginning of July, the government’s total stockpile of wheat and rice was more than 61 million metric tons, more than double the recommended ”buffer level” of 27 million tons.
But it’s not the size of India’s stockpile per se that has gotten it in trouble with the WTO; it’s the way the government accumulates those stocks. By paying Indian farmers above-market prices for their harvests, government food procurement amounts, allegedly, to giving them an unfair advantage relative to foreign producers.
Specifically, WTO rules allow countries to keep food reserves as long as they don’t “have the effect of providing price support to producers.” And when the government sells those stocks, it can’t do so at below the domestic market price.
Unless these conditions are met, a country’s food-stockpiling measures count toward its total “aggregate measures of support,” or AMS, which is the dollar value of all of its price supports and subsidies.
Countries that rack up AMS are supposed to reduce the total value of this support on a fixed schedule—or face potential punitive sanctions.
There is a ceiling on agricultural subsidies, in short, but not a blanket prohibition. India and other developing countries want to do away with that ceiling.
At a WTO conference in Bali, Indonesia, last December, these countries proposed amending the rules so government food stockpiling would not count toward AMS as long as it is aimed at helping poor farmers—and even if it involves buying food at above-market prices.
After extensive diplomatic posturing and brinksmanship, the trade ministers decided to allow such programs for the time being, even if they still run afoul of WTO rules.
In other words, the WTO members merely agreed to disagree. That set the stage for the current tussle in Sydney.
There is ample debate among economists about how and whether the WTO’s goal of “fair and market-oriented” systems for agricultural trade conflicts with developing countries’ food-security needs.
In India’s case, you can always argue that buying farmers’ grain at above-market prices constitutes indirect trade manipulation because India would be importing more from abroad if government subsidies didn’t induce farmers to boost their production. But evidence of direct trade distortions is hard to find. The Indian government doesn’t dump its surplus wheat in the world market. Government wheat exports are on hold at the moment owing to the drier-than-usual growing season, but generally, when the government exports, it does so at market prices.
Even if the WTO does eventually allow India’s food-security programs, the enormous costs involved already raise eyebrows within India.
Creaky bureaucracy and crumbling transport networks mean much of the government’s grain stockpile ends up rotting in granaries or out in the open, under tarpaulins. Huge amounts are stolen in the distribution process. And it’s unclear whether India’s food-security efforts have succeeded in the most basic sense: Nationwide, hunger and malnutrition are still widespread.
All this suggests that India could, at least in theory, be helping its farmers and needy families just as effectively while spending a lot less—and therefore being a lot less in trouble with the WTO.
At a March 21 meeting of the WTO agriculture committee, the U.S. pointed out that the Indian government’s budget for food subsidies this year amounts to 1.15 trillion rupees, or $19 billion, while the latest survey of household spending finds that India’s total poverty gap is 550 billion rupees.
The annual cost of India’s food subsidies, in other words, is around twice the amount it would cost to provide all of the country’s poor households with enough cash to cross the poverty line.
“Besides limiting expenditures,” the U.S. asked at the meeting, “what steps is the government of India taking to more efficiently implement its current policies?”
That’s a question people could ask about too many of the Indian government’s programs, alas
Explainer: India’s Battle With the WTO - India Real Time - WSJ
@notsuperstitious @IndoCarib @ranjeet @pursuit of happiness @illusion8 @wolfschanzze @nair @acetophenol @Tshering22 and others
'Conflicting signals coming on India's stand on WTO Agreement'
Washington: Stating there were conflicting signals coming from India on the ratification of the World Trade Organisation trade facilitation agreement, a senior trade expert said any blocking of the global trade deal would undermine the confidence of the international trade community in the new Modi Government.
"I think, if India takes steps that undermines, the agreement, from my perspective that (would) seriously undermine the confidence the international business community has about the Modi Government," Jake Colvin, vice president, Global Trade Issues at the National Foreign Trade Council told PTI.
"The international trade community is watching the Modi government's decision very closely, which will send a clear signal one way or the other to investors, business owners, and policy makers," an official familiar with the negotiations said.
"Everyone is hopeful that the Modi Government will make good on the promises India has made and join the other countries that are already taking action to implement trade facilitation and food stock piling," said the official strictly on condition of anonymity.
It is learnt that the US had recently presented two separate papers to India.
However, sources familiar with the negotiations alleged that so far Indians have not engaged at all.
In fact, New Delhi rejected the second proposal without even reviewing it, informed sources said.
The first paper is believed was a national experience paper tabled in March, describing US approaches over the years to address concerns regarding food security.
The second, tabled last week, is understood to be a proposal for the work programme on food security.
For example, it is reported to suggest the Secretariat compile a literature review on approaches to food security.
"The US business community is alarmed by the conflicting signals that is being sent by India about the WTO agreement and about what they are going to do with the agreement.
"We think that the deal is generally good for business and also short of inclusiveness, makes its easier for small and medium size business to engage in the global market place," Colvin said.
The American business community, Colvin said, has the impression that the Modi Government is pro-business and hoped that its election would result in co-operation with the international business.
India not ratifying the trade facilitation agreement reached last year in Bali, would ?be a strong signal that would counter that," he said.
Hoping that all of the countries that agreed with the trade association agreement will implement it according to the provisions that were agreed to, Colvin said if India fails to do that, "it?s disappointing".
Such a move, he said, would be harmful to the pro- business image of the Modi Government, and also to the World Trade Organisation.
'Conflicting signals coming on India's stand on WTO Agreement'
Those subsidies are already controversial within India: They weigh heavily on the government’s finances and have been blamed for keeping food inflation high. But why exactly do they have the Geneva-based World Trade Organization in such a tizzy?
To ensure that all Indians have reliable access to food, the government buys wheat and rice from farmers and distributes it to state-run shops across the country, where the grains and other staple goods are sold at cut-rate prices. At the beginning of July, the government’s total stockpile of wheat and rice was more than 61 million metric tons, more than double the recommended ”buffer level” of 27 million tons.
But it’s not the size of India’s stockpile per se that has gotten it in trouble with the WTO; it’s the way the government accumulates those stocks. By paying Indian farmers above-market prices for their harvests, government food procurement amounts, allegedly, to giving them an unfair advantage relative to foreign producers.
Specifically, WTO rules allow countries to keep food reserves as long as they don’t “have the effect of providing price support to producers.” And when the government sells those stocks, it can’t do so at below the domestic market price.
Unless these conditions are met, a country’s food-stockpiling measures count toward its total “aggregate measures of support,” or AMS, which is the dollar value of all of its price supports and subsidies.
Countries that rack up AMS are supposed to reduce the total value of this support on a fixed schedule—or face potential punitive sanctions.
There is a ceiling on agricultural subsidies, in short, but not a blanket prohibition. India and other developing countries want to do away with that ceiling.
At a WTO conference in Bali, Indonesia, last December, these countries proposed amending the rules so government food stockpiling would not count toward AMS as long as it is aimed at helping poor farmers—and even if it involves buying food at above-market prices.
After extensive diplomatic posturing and brinksmanship, the trade ministers decided to allow such programs for the time being, even if they still run afoul of WTO rules.
In other words, the WTO members merely agreed to disagree. That set the stage for the current tussle in Sydney.
There is ample debate among economists about how and whether the WTO’s goal of “fair and market-oriented” systems for agricultural trade conflicts with developing countries’ food-security needs.
In India’s case, you can always argue that buying farmers’ grain at above-market prices constitutes indirect trade manipulation because India would be importing more from abroad if government subsidies didn’t induce farmers to boost their production. But evidence of direct trade distortions is hard to find. The Indian government doesn’t dump its surplus wheat in the world market. Government wheat exports are on hold at the moment owing to the drier-than-usual growing season, but generally, when the government exports, it does so at market prices.
Even if the WTO does eventually allow India’s food-security programs, the enormous costs involved already raise eyebrows within India.
Creaky bureaucracy and crumbling transport networks mean much of the government’s grain stockpile ends up rotting in granaries or out in the open, under tarpaulins. Huge amounts are stolen in the distribution process. And it’s unclear whether India’s food-security efforts have succeeded in the most basic sense: Nationwide, hunger and malnutrition are still widespread.
All this suggests that India could, at least in theory, be helping its farmers and needy families just as effectively while spending a lot less—and therefore being a lot less in trouble with the WTO.
At a March 21 meeting of the WTO agriculture committee, the U.S. pointed out that the Indian government’s budget for food subsidies this year amounts to 1.15 trillion rupees, or $19 billion, while the latest survey of household spending finds that India’s total poverty gap is 550 billion rupees.
The annual cost of India’s food subsidies, in other words, is around twice the amount it would cost to provide all of the country’s poor households with enough cash to cross the poverty line.
“Besides limiting expenditures,” the U.S. asked at the meeting, “what steps is the government of India taking to more efficiently implement its current policies?”
That’s a question people could ask about too many of the Indian government’s programs, alas
Explainer: India’s Battle With the WTO - India Real Time - WSJ
@notsuperstitious @IndoCarib @ranjeet @pursuit of happiness @illusion8 @wolfschanzze @nair @acetophenol @Tshering22 and others
'Conflicting signals coming on India's stand on WTO Agreement'
Washington: Stating there were conflicting signals coming from India on the ratification of the World Trade Organisation trade facilitation agreement, a senior trade expert said any blocking of the global trade deal would undermine the confidence of the international trade community in the new Modi Government.
"I think, if India takes steps that undermines, the agreement, from my perspective that (would) seriously undermine the confidence the international business community has about the Modi Government," Jake Colvin, vice president, Global Trade Issues at the National Foreign Trade Council told PTI.
"The international trade community is watching the Modi government's decision very closely, which will send a clear signal one way or the other to investors, business owners, and policy makers," an official familiar with the negotiations said.
"Everyone is hopeful that the Modi Government will make good on the promises India has made and join the other countries that are already taking action to implement trade facilitation and food stock piling," said the official strictly on condition of anonymity.
It is learnt that the US had recently presented two separate papers to India.
However, sources familiar with the negotiations alleged that so far Indians have not engaged at all.
In fact, New Delhi rejected the second proposal without even reviewing it, informed sources said.
The first paper is believed was a national experience paper tabled in March, describing US approaches over the years to address concerns regarding food security.
The second, tabled last week, is understood to be a proposal for the work programme on food security.
For example, it is reported to suggest the Secretariat compile a literature review on approaches to food security.
"The US business community is alarmed by the conflicting signals that is being sent by India about the WTO agreement and about what they are going to do with the agreement.
"We think that the deal is generally good for business and also short of inclusiveness, makes its easier for small and medium size business to engage in the global market place," Colvin said.
The American business community, Colvin said, has the impression that the Modi Government is pro-business and hoped that its election would result in co-operation with the international business.
India not ratifying the trade facilitation agreement reached last year in Bali, would ?be a strong signal that would counter that," he said.
Hoping that all of the countries that agreed with the trade association agreement will implement it according to the provisions that were agreed to, Colvin said if India fails to do that, "it?s disappointing".
Such a move, he said, would be harmful to the pro- business image of the Modi Government, and also to the World Trade Organisation.
'Conflicting signals coming on India's stand on WTO Agreement'
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