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India’s Struggle for Permanent Solution to MSP Raises Concerns at WTO

Subsidies given to farmers, calculated as the excess of MSP over its international price, also known as the External Reference Price (ERP), plus input subsidies, are aggregately measured as support under the current rules of the Agreement on Agriculture (AoA) (AMS).

Shivam Dwivedi
WTO OMC
WTO OMC

The G-33 group of developing countries and African nations has finally come together to submit a joint proposal on a solution to India's fight for a permanent solution for public stockholding of foodgrains at the WTO in order to protect its right to continue expanding its MSP programmes.

This is significant because the crucial World Trade Organization Ministerial Conference (MC12) begins in about 10 days in Geneva, and many countries, mostly developed, are attempting to put the important issue of a permanent solution on the back burner.

"On Tuesday, nearly 80 members of the G-33, African, and ACP groups banded together and submitted a joint proposal to the WTO proposing a permanent solution on public stockholding based on a fair way of calculating subsidies using a current external reference price rather than an ancient one." This solution should be acceptable to all because it is logical and will provide developing countries with a level playing field," said a Geneva official following the situation.

Subsidies given to farmers, calculated as the excess of MSP over its international price, also known as the External Reference Price (ERP), plus input subsidies, are aggregately measured as support under the current rules of the Agreement on Agriculture (AoA) (AMS). Developing countries are required to keep AMS below 10% of agricultural production value. "One major issue is that the ERP is tied to the base period of 1986–1988 without any inflation adjustments, resulting in an inflated AMS," the official explained.

Domestic support provided by a developing country member for public stockholding programmes for food security purposes is deemed to be compliant with the required articles of the AoA and is not subject to reduction commitments, according to the permanent solution proposal circulated by the G-33, ACP, and African Group.

Where a developing country's public stockholding programmes for food security purposes include programmes in which stocks of foodstuffs are acquired and released at administered prices, the AMS shall be calculated based on the actual quantity of foodstuffs acquired at administered prices (rather than the total eligible production).

Instead of being tied to 1986-88 prices, the ERP should be the three-year average price based on the preceding five-year period excluding the highest and lowest entry for that product or adjusted for excessive inflation according to the methodology, according to the proposal.

"This is an extremely important proposal that carries the weight of the entire African Group, the ACP, and the G-33 group, and it assumes even more importance in light of the draught agriculture declaration that pushes a permanent solution to MC13" (instead of MC12). "They should now push hard for a decision in MC12 and refuse to agree to other decisions until that is agreed," Third World Network's Ranja Sengupta said.

Although a peace clause negotiated by India at the Bali Ministerial in 2013 and later provides developing nations with legal protection if limits are violated, it is subject to a number of onerous conditions that make its use difficult. India has used the peace clause for rice because its MSP support has exceeded the prescribed limits, but several developed country members have complained that it has not met the clause's notification requirements.

"A permanent solution is critical for developing countries because there is no guarantee that the peace clause will continue to provide adequate protection against action by developed countries." That is why the G-33 is insisting on a permanent solution so that such conditions can be removed," another official explained.       

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