Failure to reach consensus on the WTO’s trade facilitation agreement is threatening to undermine the very rationale of the global trade body, and a potential return to bilateral and regional trade blocks. However, the reluctance of developing countries to facilitate WTO trade liberalisation efforts is understandable.
Besides fears that the potential gains from the existing form of the WTO negotiated trade agreement will mostly flow to rich countries and private sector traders, India and other developing countries are particularly upset due to the restrictive stipulations of the WTO’s Agreement on Agriculture (AoA), which categorise their efforts to subsidise and stockpile food crops to ensure food security as illegal agricultural subsidies.
The so-called Bali Package formulated by the WTO in Indonesia last year, which included trade facilitation and food security agreements, was saved when India accepted a ‘peace clause’ granting its public (food) stockpiling efforts a four-year grace period until a more permanent solution to the global dispute over food reserves was hammered out. However, the US and other developed countries have since raised objections to India’s recent expansion of its National Food Security Programme, terming it a trade-distorting agricultural subsidy.
India justifies state procurement of crops in order to feed its populace. A similar rationale is employed by other developing countries, including Pakistan, which regulates wheat procurement, for instance.
The so-called ‘G 33’ group of developing countries (which now comprises 46 nations) has been calling for a revision of the AoA to enable it to address their national food security concerns, but have not had much success. Frustrated, the WTO’s trade facilitation agreement has now been made provisional subject to progress on revision of the AoA.
Since the AoA took effect in 1995, most exorbitant subsidies that wealthy countries give their farmers and agribusinesses are classified as non-distorting measures, described as ‘green box’ subsidies. These include direct income support to farmers, as well as financial support for environmental protection and regional development. Conversely, a majority of indebted developing countries are simply unable to provide adequate subsidies to their farmers because of fiscal constraints on their governments. These countries are also under simultaneous pressure from multilateral lenders such as the IMF and the World Bank, which also call for the removal of all kinds of subsidies.
The G33 has rightly suggested broadening the definition of ‘green box’ subsidies to address specific developing countries concerns, including the provision of food security, land reforms, and other rural poverty alleviation initiatives. Yet there needs to be more cohesion between the G33 countries themselves before such ambitious reforms can be achieved. Countries such as Thailand, Pakistan, and Uruguay, which are major producers of rice like India, fear that selective subsidisation of Indian farmers would distort global trade and adversely affect their exports.
Nonetheless, food insecurity remains an overarching concern for developing countries as a whole. Developing countries are also facing dire malnutrition and growing food insecurity problems.
The WTO, therefore, must take a harder look at what constitutes fair and unfair subsidisation in agriculture. It must revise the AoA to prevent unproductive phenomenon such as grain dumping, and instead facilitate fairer trade across the world, to more equitably raise farmer incomes, bolster international food security, and lessen the visible problem of world hunger.
Published in The Express Tribune, September 5th, 2014.