India, US again at loggerheads in Geneva over farm subsidies

Despite the bonhomie created by President Barak Obama to Delhi this week, disagreements again flared up between the US and India at the first informal meeting of the World Trade Organisation in Geneva on Wednesday over the stockpiling of grains for food security in developing countries.

The G-33 countries led by India and China want public stock-holding for food security purposes to come under the 'Green Box' – i.e. domestic support for agriculture that causes minimal or no trade distortion.

Under current WTO rules, developing countries are subject to only minimal discipline on agriculture subsidies. But developed countries, including the US and Australia, insist that price support is by definition market-distorting.

The US said that ''members cannot create a loophole in discipline'' and are disappointed that the G-33 - a group of developing countries that coordinate on trade and economic issues - re-submitted a proposal that was rejected.

India, on its part, argued that the proposal was never rejected. The EU said there are ''legitimate concerns'' both of food security and trade distorting impact''.

The main element of the G-33 proposal is that acquisition of stocks of foodstuffs by developing nations with the objective of supporting low-income producers should not be included in the calculation of Aggregate Measurement of Support (AMS), or the so-called trade distorting domestic support.

Even though developing countries are allowed agricultural subsidies, another major area of concern has been the calculation of the AMS - the difference between procurement prices and the external reference prices is treated as a subsidy to the farmer and included in the AMS.

The external reference price is still calculated at 1986-88 prices. Since food prices domestically and internationally have dramatically risen since the time, it effectively limits the government's capability to provide schemes for their small farmers.

India had caused much furore among developed nations last year when it blocked the Trade Facilitation Agreement for cutting down red tape in global trade so its food security programme will not be challenged under WTO rules.

India's Rs1,200-crore food security programme, which is binding by law, is a key welfare measure aimed at delivering millions out of poverty by providing subsidies to consumers through the PDS, and the producers of food grains and also through subsidising through inputs like electricity.

The logjam was broken by an interim peace clause in November 2014 that legally protected existing stock-holding programmes of developing countries if purchases at government- set prices take the countries' above the limits they have agreed for trade-distorting domestic support.