#dnaEdit: Subsidies stay

Aday after China and the United States agreed on self-imposed curbs on carbon emissions outside of the United Nations Framework Convention on Climate Change (UNFCCC), Indian and the United States representatives from the respective commerce ministries had announced a breakthrough and an agreement — the details are not disclosed — on public stockholding for food security purposes. As this is a bilateral understanding, the member countries of the World Trade Organization (WTO) have to examine it before the Trade Facilitation Agreement (TFA), the main focus of what has come to be known as the Bali package, can be fully implemented. 
The BJP-led NDA government which came into office in May this year after the Lok Sabha elections refused to sign the TFA in July citing ambiguities on the sunset clause over food subsidies, which gave developing countries till 2017 to continue with the existing subsidy regimes before a permanent solution is found. Union commerce minister Nirmala Sitharaman had argued that if India did not take a stand now, the WTO led by developed countries would not heed the compulsions of the developing countries. 

Prime Minister Narendra Modi said that India cannot afford to let go of the subsidies meant for the farmers and for the poor. Sitharaman had also said that other developing countries in the WTO were with India on this issue. It was , however, made out that India was not fighting the good fight for others as well. Free market advocates in India as well those outside did not agree with the Indian government’s stance. 

The inference being drawn from the India-US breakthrough is that the 2017 deadline will be deferred permanently, and the new provision is that subsidies regime will stay until a permanent solution is found, whenever it will happen. This will be seen as a breather for India and the developing countries, and a long drawn out one at that. 

This leaves substantial and contentious issues unaddressed as before. One of the contentious points in the WTO system is that subsidies and protectionist barriers in one country distort fair trade conditions and practices in other countries. While the developing countries had been insisting on continued subsidies in agriculture, which is the prime sector, the developed countries want to maintain protectionist barriers in services as well as in the movement of skilled migrants. The developed countries want access to the markets of the developing countries in the agricultural domain because of the surplus agricultural production in their countries. Farmers are heavily subsidised in the US and in European Union (EU) countries. The developed and industrialised countries pushed for a strict intellectual property (IP) regime because of the advantages in industrial research and development these countries enjoyed, while violating with impunity intellectual property issues connected with natural products grown in developing countries. 

Ever since the WTO had come into existence in 1995, the tussle over the issues of access and subsidy regimes has been ongoing. The WTO is an attempt at creating a free market global utopia, but it is being thwarted because of the political compulsions in each country. India is now in a position to flex its political muscle, and that is what the Modi government had done. But the NDA government, like its UPA predecessor, recognises that subsidies are inefficient and development goals are achieved through economic growth. The economic philosophy of the Modi government as articulated by Union finance minister Arun Jaitley is to reduce and phase out subsidies, which are believed to be at the heart of a socialist, and not a free market, economy.