India and the US have reached a breakthrough agreement on stockpiling of food grains, clearing the way for passage of the biggest trade deal in the World Trade Organization's 19-year history. The two countries agreed that India will extend the world's biggest food subsidy programme until a permanent solution is reached. This will pave the way for quick ratification of streamlined customs rules known as the Trade Facilitation Agreement (TFA), which has been pending since July this year.
What's the deal?
Under the pact with the US, India will lift a veto on a global agreement on streamlining customs rules. In return US will give an open-ended commitment to protect India's food subsidy programme from legal challenges over exports of surplus grain stocks accumulated in government warehouses
What's the big WTO trade deal?
It is a global agreement on streamlining customs rules that also mandate curbs on food stockpiling. It will reduce the cost of trade by about 10% for developed countries and 14% for developing countries by removing delays at border crossings. The deal is estimated to add $1 trillion to the world economy as well as 21 million jobs, 18 million of them in developing countries.
What had India done?
India in July blocked part of the WTO deal, or the Bali package, because it was unclear if the programme could continue beyond a 2017 deadline. India saw the language in the present text as vague, arguing that it doesn't explicitly say an interim agreement on food stocks will continue beyond a 2017 deadline to reach a permanent solution. In particular, India wanted a comma replaced with "or" in a section dealing with food stock holdings, as well as a guarantee the interim agreement would continue
What was India's stand?
India had asked WTO to amend the norms for calculating agri subsidies so that the country could continue to procure food grains from farmers at minimum support price and sell them to poor at cheaper rates without violating the WTO norms. The current WTO norms limit the value of food subsidies at 10% of the total value of foodgrain production. However, the quantum of subsidy is computed after taking into consideration prices that prevailed two decades ago. There are apprehensions that once India would fully implement its food security programme it may breach the cap.
Now what?
The India-US compromise should now go before a December 11-12 meeting of the WTO's General Council, its highest decision-making body, for ratification. All WTO members needed to be consulted as quickly as possible.
How big is India's food programme?
In a recent disclosure to the WTO, India said its state food procurement cost $13.8 billion in 2010-11, part of the total of $56.1 billion it spends on farm support. Wheat stocks, at 30 million tonne, are more than double official target levels.
What is India's reaction?
Commerce minister Nirmala Seetharaman said, "We are extremely happy that India and the US have successfully resolved their differences relating to the issue of public stockholding for food security purposes in the WTO in a manner that addresses our concerns. This will end the impasse at the WTO and also open the way for implementation of the Trade Facilitation Agreement."
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