What is being considered as a game changer for the UPA . the National Food Security Act - faces yet another hurdle at the World Trade Organisation (WTO). Linked to it closely is the future of Indian agriculture.

The US WTO Ambassador Michael Punke has launched a blistering attack blaming India for "creating a massive new loophole for potentially unlimited trade-distorting subsidies." Calling it a step backward, he said "The new loophole, moreover, will be available only to a few emerging economies with the cash to use it. Other developing countries will accrue no benefit . and in fact, will pay for the consequences."

I am talking of the proposal moved by G-33 countries - a group of countries including China, India, Indonesia, Pakistan and others - that came together to protect food security, livelihoods and rural development thereby seeking amendments in the agriculture text. Knowing that procurement of wheat and rice under the National Food Security bill will rise manifold, India does not want the enhanced subsidy outgo for food procurement from small farmers to be seen as trade-distorting. These subsidies, required to meet the food security needs of the hungry population, should be kept outside the maximum limit of 'Aggregate Measurement of Support' (AMS) that each country has to adhere to.

Food purchased at a minimum support price from 'low-income, resource poor farmers' should not be computed within the AMS limit. At the same time, India also wants the de-minimis requirement for public stockholding . which at present stands at 10 per cent of the total production of wheat and rice each that can be procured for meeting the nutritional needs of the food insecure population . to be suitably amended. In other words, G-33 countries want to incorporate provisions in the ongoing negotiations that ensure "food security exists for all its people, at all times."

Despite Anand Sharma's behind-the-scene discussions with the new Director General Roberto Carvalho de Azevedo of Brazil, the US continues to harden its stand. It has warned that if India's new proposal on the table is not rejected "it will hurtle the WTO talks to irrelevance". India's food security bill is on the top of the negotiating agenda for the forthcoming WTO Ministerial Conference slated to be held at Bali in Indonesia in December.

Knowing that India's defiance of the WTO rules on food stocking can derail the outcome of the forthcoming WTO Ministerial to be held at Bali in the first week of December, the visiting WTO Chief Roberto Azevedo asked India to consider a 'Peace Clause' as an option to protect subsidies under the proposed National Food Security Act. "Food Security is a squarable circle. The line between price support and food security is very flimsy and not easily drawn. It is going to be a complex task," he said in New Delhi.

Peace Clause

It is the Chief's next sentence that is more worrisome: "What we have agreed in Geneva is, we are going to be working on a Peace Clause, which allows negotiators to find a more permanent solution for the long term." He was addressing the Confederation of Indian Industry (CII). As Indian Express reports: Negotiations for a deal at the Bali meet are stuck over the tenure of an interim resolution on the demand by G-33 developing countries on food security. While the G-33 is demanding that the tenure of the peace clause be 10 years, developed countries such as the US are ready to accept only a 2-3 year period and that too with some riders.

The Peace Clause provided exemption for those countries that used export subsidies for agriculture beyond the permissible limit. These countries could not be challenged before the WTO dispute panel during the 'Peace Clause' period. It expired in 2003.

The compromise that India is therefore willing to exercise to ensure that the Bali negotiations proceed onwards without any hiccup will now bring millions of hungry people on to the chopping block. It also threatens the livelihood security of millions of small farmers who receive an assured minimum support price for their crop produce. Already, as per WTO calculations, farmers in India are getting 24 per cent more minimum support price for paddy since the base period of 1986-88. As per the WTO criteria, Article 6.4 (b) of the Agreement on Agriculture provides for total support not to exceed 10 per cent of the total value of production for most developing members (except for China, where it is 8.5 per cent as part of its accession commitments).

Interestingly, India's proposals are closely linked with the developed countries' proposal for an agreement on trade facilitation. Trade facilitation actually means setting up the required infrastructure at the ports, and making available appropriate transport and communication facilities that would make it easier for trade and business to operate. In other words, the developed countries are actually pushing the developing countries to invest in facilitating the trade interests of its corporations and agribusiness giants. This agreement, which has some 600 contentious clauses or what are known as brackets in WTO language, will have serious implications for the domestic agriculture sector in developing countries.

Nevertheless, it is important to understand why the G-33 proposal that calls for appropriate measures to ensure food and nutritional security for the poor and needy, is so important. First, let us be very clear that the AMS calculations were done keeping in mind the prevailing prices in 1986-88. Since then, and especially after the 2007 global food crisis, farm commodity prices have seen a quantum jump. 1986-88 was a period when prices were very low, and reference prices from then no longer hold true and have lost all relevance. Secondly, the trade distorting subsidies that the US/EU has been providing all these years have not been done away with.

The real picture

On the other hand, in an analysis presented by Jacques Berthelot of France, the angry outburst of the US Ambassador to WTO appears completely unjustified. Accordingly, the average food aid that India gave to its 475 million people in 2010 (65 million families below poverty line plus 10 million above poverty line) to meet their food security needs was to the tune of 58 kg/per person. Comparatively, the US provides 385kg/person (including cereals) to its 65 million people, who received food aid under several programmes like food coupons, child nutrition programme etc.

Moreover, the procurement of wheat and rice from resource poor farmers by India does not mean that grains are being dumped in the international market, thereby distorting trade. In reality, Jacques Berthelot has computed that the low global prices of wheat and rice in 1986-88 . the reference period . were because of massive dumping by both US/EU. Given that 53.2 per cent of the global exports of wheat came from US/EU, the role dumping played in depressing the global prices becomes quite obvious. The reference period of 1986-88 against which the administered prices of 2012-13 are being evaluated therefore becomes meaningless and absurd.

If the US/EU continues to oppose the proposal floated by India through the G-33 countries, India will find it difficult to implement the National Food Security bill. Still more worrisome is the limit it proposes on the minimum support prices to farmers. This will have serious repercussions for country's food self-sufficiency as well as food security.