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WTO deadlock explained: India seeks permanent solution to food security issue, China wants investment debate

The 11th WTO ministerial conference meeting in Buenos Aires is on a brink of a collapse, various media report suggest. At the centre of the latest crisis is India and to an extent China, two of the world's fastest growing economies.

Both Asian neighbours have been nailed at the WTO conference on the contentious issue of public stockholding of food — as part of the food security initiatives of both countries.

According to sources, Assistant US Trade Representative Sharon Bomer Lauritsen, in a small group meeting, said that permanent solution to the food stockholding issue was not acceptable to America.

With talks on crucial food stockpile issue reaching a deadlock, the other issues like services, fisheries and e-commerce too will not make any headway.

What is the WTO rule

Under the global trade norms, a WTO member country's food subsidy bill should not breach the limit of 10 percent of the value of production based on the reference price of 1986-88.

India at WTO over food security

For the uninitiated, India brought a new law, National Food Security Act, 2013. The Act, "provides for food and nutritional security in human life cycle approach, by ensuring access to adequate quantity of quality food at affordable prices to people to live a life with dignity."

However, India believes that full implementation of food security programme may result in breach of the WTO cap. This is the reason why India has been opposed to such a cap and is demanding a permanent solution to circumvent the problem.

Since 2013, India has been maintaining that a permanent solution to food stockpile issue was a "must have" at the ongoing ministerial and failure to do so would impact the credibility of the strong multilateral trade institution.

Representational image. Reuters

Representational image. Reuters

Just two weeks before the meeting, India had reiterated its commitment to food security but added that countries needed to ensure that “stocks procured under public stockholding programmes do not distort trade or adversely affect the food security of other members”.

India has expressed “deep disappointment” over the decision of a “major member country”, presumably the United States, to renege on its commitment for a permanent solution to the public food stockholding issue.

Without naming the US, an official statement said, “India is surprised and deeply disappointed that despite an overwhelming majority of members reiterating it, a major member country has reneged on a commitment made two years ago to deliver a solution of critical importance for addressing hunger in some of the poorest countries of the world.”

India has also rejected the US criticism on seeking differential treatment at the WTO saying the country was the 'right candidate' and a legitimate demand for special dispensation as it has to take care of 600 million poor people.

2013 breather for developing countries

As an interim measure, the WTO members at the Bali ministerial meeting in December 2013 had agreed to put in place a mechanism popularly called the Peace Clause and committed to a permanent solution to negotiate an agreement at the 11th ministerial meeting at Buenos Aires.

Under the "peace clause", WTO members agreed to refrain from challenging any breach in prescribed ceiling by a developing nation at the dispute settlement forum of the WTO. This clause will be there till a permanent solution is found to the food stockpiling issue.

However, since the 2017 deadline is all but over, the fate of the food security law hangs in balance.

India opposes inclusion of other issues

India's demand for a permanent solution to the food security crisis has forced New Delhi to oppose the introduction of ‘new issues’ such as e-commerce, investment facilitation and matters relating to small firms in this year's discussion.

The Hindu reported that India has been stressing on resolving the food security conundrum.

India-China unity in WTO

However, unlike platforms like NSG and UNSC, where India and China have often been on the opposite end of the debate, WTO has been a major point of departure for both countries.

Since 2015, both countries have worked together on the issue of food security and farm waivers.

In November 2017, India, China and 31 other countries called for "legal certainty", which implied that the WTO Agreement on Agriculture has to be amended for a permanent solution.

India-China's collaboration was seen in 2015 too, when they came out with a joint paper to highlight the issues faced by developing countries, including matters related to food security.

On the issue of the farm subsidies, Beijing and New Delhi had submitted a joint proposal in August 2017, which called on developed countries to eliminate their “amber box” support.

"Amber box" is WTO term which refers to the domestic support measures, provided by national governments, which may affect trade and production. According to the apex trade body, such measures by developed countries needs to be reduced.

Both countries have argued that eliminating this type of support would remove one of the biggest imbalances in the current farm trade rules by obliging the biggest "subsidisers" to reduce their special entitlements.

China in the line of fire

The United States, European Union and Japan vowed on Tuesday to work together to fight market-distorting trade practices and policies that have fueled excess production capacity, naming several key features of China’s economic system.

Without taking the name of China, the joint declaration said, "they would work within the World Trade Organization and other multilateral groups to eliminate unfair competitive conditions caused by subsidies, state-owned enterprises, “forced” technology transfer and local content requirements."

China, meanwhile, appealed for members to “join hands” and uphold WTO rules to protect globalization in the face of rising protectionism. China's retort came after the United States and Japan criticised a lack of transparency in some WTO members’ trade practices, a thinly veiled swipe at Beijing.

However, as per a report in Economic Times, China is also making its presence felt in the global trade body as it has supported a global policy for investment facilitation. Friends of Investment Facilitation for Development, a China-backed group consisting of Argentina, Brazil, China, Colombia, Hong Kong , Mexico, Nigeria, and Pakistan have supported a forum to discuss measures to boost investment.

 With inputs from agencies

Published Date: Dec 13, 2017 11:48 AM | Updated Date: Dec 13, 2017 11:48 AM

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