The Politics of Food Security and the World Trade Organization
December 18, 2014
Governments around the world work hard to manage their agricultural production and trade sectors to create an ideal balance of agricultural imports, exports, and food for domestic consumption so that their populations can have stable access to affordable and nutritious food. This often includes complex agricultural subsidies, as well as social safety net programs, such as the Supplemental Nutrition Assistance Program (SNAP) in the U.S. Food assistance programs. Most developed countries provide direct assistance to eligible recipients in the form of food stamps or debit cards to purchase food items, and therefore, these programs are not considered trade distorting under the WTO rules. In contrast, many developing countries procure food for the needy by subsidizing farmers, aggregating, stockholding, transporting and selling staple foods to the needy at subsidized prices through a public distribution system. The World Trade Organization (WTO) Agreement on Agriculture allows developing countries broad authority to provide price support and public stockholding for food security, if the stocks are acquired to support low income and resource poor producers. The WTO rules allow subsidization of these food security programs as long as total domestic agricultural subsidies by developing countries do not exceed 10% of the total agricultural output.
When countries are concerned about their ability to provide steady access to staple foods, they often stockpile theirsupplies rather than maintaining normal trade levels, which exacerbates shortages, leading to widespread panic and instability. In 2007-2008, shortages caused food riots in more than 30 countries. As a result, the issue of food security has drawn the attention of world leaders at the G-20, G-8, FAO and WTO.
India, both an agricultural powerhouse and a country that struggles to feed its own rapidly growing population, faces particularly complex challenges in achieving this balance. Recently it was believed that India and a handful of other developing countries were likely to exceed or had already exceeded the 10% subsidy threshold in 2013. Instead of reforming their food assistance programs, the G-33 group of developing countries under the leadership of India submitted a proposal in late 2012 to exempt developing countries’ food security programs from the 10% threshold enshrined in the WTO Agreement on Agriculture.
About the same time the G-33 proposal was being debated in Geneva in preparation for the WTO Ministerial meeting in Bali in December 2013, a political storm was developing in India. Many in India believed that the WTO and the developed countries were dictating India to curb its food security program for the poor. In anticipation of the coming general elections in India in mid-2014, the ruling coalition wanted to curry favor with millions of farmers and poor voters by rushing for the passage of the National Food Security Act through the Indian Parliament, and in September 2013 the new food security law passed, guaranteeing access to staple foods at subsidized rates to nearly two third of India’s population. This meant nearly doubling the size of its massive food acquisition and stockholding program at an annual cost of about $19 billion, potentially violating WTO commitments under the Uruguay Round. While the Indian Delegation to the WTO claimed that India did not need WTO’s permission to expand their food security program, it began pushing hard either to relax rules on subsidies to farmers in the WTO Agreement on Agriculture or for a permanent waiver of the 10% subsidy limit.
After a long and acrimonious debate in Geneva, the Indian delegation on behalf of the G-33 countries agreed to a compromise, for consideration at the WTO Ministerial meeting in December 2013, to exempt developing countries whose food stockholding programs had breached their WTO limit from legal challenges for the next four years, while a permanent solution to this issue was being negotiated in Geneva. When the word of this compromise reached New Delhi in late October 2013, the new Indian government, concerned with preserving the impression that policy was created based on the needs of the population rather than WTO regulations, distanced itself from the compromise. This intensified the negotiations, which continued at the WTO Ministerial meeting in Bali until December 2013.Finally, the Indian delegation agreed to a nuanced version of the October compromise with additional constructive ambiguity. It enabled New Delhi to claim that the exemption from any legal challenge would last until a permanent solution was found, whereas others WTO members believed that the exemption from a legal challenge was good until the WTO Ministerial meeting in 2017. Finally, diplomacy prevailed and the WTO Ministerial meeting concluded on a high note, which included among other market access and development related actions a historic Trade Facilitation Agreement, the first such agreement successfully negotiated since WTO’s inception in 1995.
Unfortunately, as protocol of ratifying the Trade Facilitation Agreement began in July 2014, India refused to support it unless the WTO member countries agreed to grant permanent waiver against legal challenges to developing countries’ food stockholding program by the end of this year. Once again, the WTO negotiations were held hostage to India’s expanding social safety net and food security policy. The United States was eventually able to work out an agreement that was satisfactory to the Indian Government.
As the world's largest producer of milk and second largest producer of rice and wheat, it is a cruel irony that nearly 200 million of the over 800 million undernourished people in the world live in India. Therefore, India has every right to expand its public food distribution system to address this massive domestic need. However, India needs to work with the WTO member countries to ensure it does it in non-trade distorting ways. The WTO is not meant to be the place to negotiate the fate of food security programs designed to feed millions of poor people. This controversy highlights the need for firewalls between staple food supplies that are procured for food security programs at subsidized prices and the other grain trade in domestic and international markets. Instead of weakening trade reforms and commitments from WTO member countries made in concluding the Uruguay Round in 1994, WTO members need to recommit to conclude the Doha Round of negotiations launched in 2001. If changes are needed in the WTO Agreement on Agriculture to level the playing field, they should be a part of an overall multilateral agreement, which includes all three pillars of the Agreement on Agriculture, i.e. domestic support (subsidies) to farmers, market access and export competition. We need to move forward to build on the Bali’s success and to reinforce WTO’s role as a global trade governance body.
Ambassador Islam A. Siddiqui is senior adviser with the Global Food Security Project at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
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