8 December 2013

Bali: first agreement on agriculture since the creation of WTO - India will be able to implement its new food security law

At the time of the opening of the WTO ministerial meeting in Bali, few were the observers who believed that an agreement could be struck on agriculture: many were expecting another failure that would have followed a series of sterile meetings since the creation of the WTO in January 1995.

Indeed, the Group of 33, constituted by 46 members among which India, China and Indonesia, had, little before the meeting, made a proposal that would reopen talks on agricultural subsidies at the WTO. This proposal sought the authorisation for governments to purchase food from their farmers to distribute it to their poor consumers without the subsidies this may entail being accounted for in the calculation of the Aggregate Measure of Support (AMS) which has to be periodically reported under the WTO Agreement on Agriculture. This proposal was questioning a fundamental feature of the Marrakech agreement that is at the basis of the creation of the WTO. An agreement in Bali on this proposal was to lay the ground for the implementation of India’s new food security law aimed at improving food intake of more than 800 million Indians (75% of rural and 50% of urban population). [read]

The reaction of the US to this proposal was immediate by the mouth of their Ambassador at the WTO who declared that such an agreement would ‘’create a massive new loophole for potentially unlimited trade-distorting subsidies’’.

India informed, at the beginning of the meeting, that they were ready to use their veto (decisions at WTO have to be taken unanimously by the 159 Members) if an agreement could not be obtained that would allow them to implement their food security programme. Arguments in favour of the Indian proposal can be summed up simply: How could it be possible to forbid a country to subsidise its agriculture by $20 billion per year to assist 800 million people, when the US were supporting their 800 000 farmers with more than $100 billion, according to OECD estimates, while creating huge distortions on the world market for agricultural commodities ? India was not ready to accept a ‘‘peace clause’’ of 4 years that would have allowed them to implement their programme for that duration and then risk being sued at WTO and have to interrupt the programme (for memory, the ‘‘peace clause’’ signed between the US and the EU at the time of the creation of WTO lasted 9 years!).

Finally, and for the first time since the creation of the WTO, an agreement could be struck on agriculture, development assistance and reduction of bureaucracy at borders, and this despite a last minute objection presented by some Latin American countries on the US blockade against Cuba. It must be noted here, that once more, no real progress was made on the cotton issue which is a commodity of extreme importance for many African countries. The WTO estimates at $1000 billion and millions of jobs the impact this agreement will have, but many economists are rather skeptical when reading such estimates.

The agreement occurred with the adoption of a new ‘‘peace clause’’ that stipulates that ‘‘Members shall refrain from challenging through the WTO Dispute Settlement

Mechanism, compliance of a developing Member with its obligations under [...] the Agreement on Agriculture (AoA) in relation to support provided for traditional staple food

crops in pursuance of public stockholding programmes for food security purposes’’, pending a ‘‘permanent solution’’ of this issue that will have to be negotiated within ‘‘an interim mechanism’’ of negotiation that was agreed to be put in place. As a compensation, countries that would use this facility commit to ‘‘ensure that stocks procured under such programmes do not distort trade or adversely affect the food security of other Members’’ (i.e. not to export subsidised commodities). This last point leaves open the possibility of multiple controversies, particularly as it must be recalled here that India was in 2012 the first rice exporter in the world (a commodity that will certainly be part of the food security programme) and is also a major maize exporter.

India will now be in a position to implement it food security programme starting in 2014.

To know the details of the agreement, read the Draft Bali Ministerial Declaration

Last update:    December 2013

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