For years, India has been facing attacks at the 164-member WTO, on account of its public stockholding of foodgrains and minimum support price (MSP) programmes, particularly for rice. The US, Australia, Canada and the EU say that India’s “highly subsidised” public stock holding (PSH) programme breaches prescribed limits. Developed countries want subsidies limited to 10% of production and limits applied to public stockholding of foodgrains, which distorts markets. They also accuse India of violating the WTO Agreement on Agriculture (AOA) guidelines, by which it is required to report all public stockholding programmes.
India had invoked the ‘peace clause’, which allows developing countries to breach the 10% ceiling without invoking legal action by members, to provide excess support measures to rice farmers in order to meet the food security needs of its poor population. New Delhi further responded that it was not obligated to notify about public stockholding programmes other than for the crop where the subsidy limits were breached, adding that it does not export common paddy, which it procures under the MSP programme, but mainly exports premium quality rice.
Now, as part of an 80-country coalition that includes the G33 grouping and the Organisation of African, Caribbean and Pacific States (OACPS), India has proposed the adoption of a new method to calculate subsidies given to purchase, stockpile and distribute food to ensure food security for developing and poor nations. Reaching out to Arab countries and least developed nations to build pressure on the developed economies, the developing countries have proposed that the base year for calculation of subsidies should be more recent and must account for inflation. At present, it’s the external reference price (ERP) or the average price of base years 1986-88. The developing countries want subsidies to be calculated either accounting for “excessive inflation” or based on the last five years, excluding the highest and the lowest entry for a product. “Production of staples has been hit in many countries and they are now concerned about their food security. Our proposal is crucial for such producers especially at a time when global food prices are rising.”
During a special session of the WTO’s Committee on Agriculture on May 3-4 in Geneva, India reiterated that it is “the only way forward”. It has called for a permanent solution for public stock holding at the 13th Ministerial Conference (MC13) to be held in February 2024 in Abu Dhabi, UAE. India is joined by China, South Africa, Indonesia and Egypt in the call for initiating negotiations on stock holding. Negotiations on public stock holding and MSP ceilings are critical for finding a permanent solution on food security, and applies particularly to net food importing developing countries that face severe food security problems. But WTO Director General Ngozi Okonjo-Iweala feels that a breakthrough in food security and agriculture issues at MC13 would be “tough”.
In India, food inflation accounts for a sizeable 39% of the Consumer Price Index (CPI), and has been under considerable pressure. It has forced the government to adopt restrictions on rice exports, imposing stocking limits on wheat, and other market interventions like a 40% duty on onions to discourage exports and improve domestic supplies. Although figures indicate that food inflation in India fell to 9.94% in August 2023 from 11.51% in July, which was the highest since January 2020, the overall cost of a simple vegetarian meal has jumped by a third this year.
Globally, volatility and unpredictability in food prices marks the new normal. Unpredictable weather patterns are increasingly determining food output, as witnessed during the weak monsoon in some parts of India and floods in other areas, when the prices of vegetables and pulses shot up.
Developing countries are hit hardest by the alarming state of food insecurity ― 470 million smallholder farmers experience post-harvest food losses and earn up to 15% less. In July, the UN held the Food Systems Summit in Rome, to reflect on the often devastating environmental impact of agriculture and how to make food production more sustainable through progressive and inclusive interventions, including debt restructuring. Current food systems perpetuate inequalities and fail to address growing hunger and malnutrition. Wealthy countries refuse to make concessions and forces distorting food trade are not being adequately addressed.
The economist Jayati Ghosh wrote in The Guardian, “The WTO rules make a travesty of the first millennium development goal, to reduce hunger. If the world community is truly concerned about hunger, then it should not let unfair trade rules reduce developing countries’ ability to do something about it.”
Weather forecasters have warned of a multiyear period of exceptional heat driven by greenhouse gas emissions and the return of El Niño, which will worsen the food situation. In 2022, more than 700 million faced hunger and 2.4 billion lacked access to sufficient and nutritious food. With hunger and malnutrition more pronounced than ever, greater access to input subsidies for resource-poor smallholders can improve food security. Agricultural subsidies increase the purchasing power of large numbers of small farmers, lower food prices through higher production and affect the livelihoods and food security of more than half the world’s population.
Interlinked crises ― Covid, conflict and climate change ― have severely impacted the food security needs of emerging economies, and that makes a more compelling case for the wealthy, developed countries to reconsider their WTO stance on subsidies, which are intrinsically linked to food productivity, security, nutrition, and humanely, to food affordability.
Vaishali Basu Sharma is an analyst on strategic and economic affairs.
This article was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.