India’s ‘wheat waiver’ WTO demand is risky

One of India’s key demands at the World Trade Organization (WTO) – and rightly so – is to find a permanent solution to the issue of public stockholding of food (PSH) to protect India’s food security (PSH policy). India’s PSH policy is based on obtaining food from farmers at an administered price (minimum support price or MSP), which is generally higher than the market price. The PSH policy serves the twin objectives of providing remunerative prices to farmers and subsidized food to the underprivileged.

However, under WTO law, such price support-based purchases from farmers are counted as trade-distorting subsidies, and if given in excess of the permissible limit, are in violation of WTO law. Currently, India has temporary relief due to a ‘peace clause’ that prevents countries from bringing in legal challenges against price support-based purchases for food security purposes. But till now there is no permanent solution to this problem.

WTO ministerial meeting Little did precious work to resolve the issue in Geneva in June. Paragraph 10 of the Declaration on Food Security, adopted in the Geneva Ministerial states: “We believe that adequate food stocks can contribute to the attainment of members’ household food security objectives and that members with surplus stocks available to them should be kept in constant contact with the World Trade Organization.” encourage issuance in international markets. Rules”.

As I have argued, Prima facie This may show that India’s concerns regarding the PSH issue have been taken on board. However, for India, the real issue is not about maintaining adequate food stocks, which WTO rules do not prohibit, provided that non-trade, such as providing income support to farmers (cash transfer independent of crop production). Food is stocked by employing deformable equipment. India’s concern is that it should have a policy space to hold public food stocks using the MSP, which is a price support instrument. However, the Geneva declaration does not mention price support.

new dimension

Clearly, India’s demand for a permanent solution to the PSH policy has acquired a new dimension for the WTO ministerial meeting and subsequently. India insists that it should also be allowed to export food, especially wheat, from the pool of food grains procured under the MSP. This demand was recently re-expressed by Finance Minister Nirmala Sitharaman at G20 meeting in Indonesia. The Russo-Ukraine War has led to a food crisis in many countries. India probably wants to capitalize on this opportunity.

However, WTO law prohibits countries from exporting purchased food grains at subsidized prices. There is a solid economic logic behind this. Allowing a country to export purchased food grains at subsidized prices would give that country an unfair advantage in global agricultural trade. The country concerned will sell food grains at very low prices in the international market, which, in turn, can reduce global prices and adversely affect the agricultural trade of other countries. Accordingly, paragraph 4 of the 2013 WTO Decision on PSH for Food Security Purposes clearly states that countries procuring food for food security purposes shall ensure that such purchased food is “trade” Do not deform or prejudicially affect the food safety of other members”.

The same sentiment is reflected in paragraph 10 of the Geneva Ministerial Food Security Declaration, which states that countries may issue surplus food stocks to the international market in accordance with WTO law.

Controversially, the WTO may agree to a temporary exemption to allow the export of wheat from public stockholdings in some countries given the ongoing food crisis. In fact, before the WTO ministerial meeting, India had reportedly requested such an exemption. However, it is highly unlikely that such a request will be accepted.

The history of WTO exemptions is full of ups and downs. The recently adopted exemption on Intellectual Property (IP) for COVID-19 medical products is an example. The IP exemption is limited to COVID-19 vaccines only and does not cover diagnostics and therapeutics. The upheaval of IP weaver is further strengthened by the fact that it is limited to patents only and does not cover other IP rights.

Furthermore, in accordance with Article IX.3 of the WTO Agreement, exemptions may be adopted only in “extraordinary circumstances”. The WTO acknowledged a once-in-a-century pandemic like the COVID-19 for two years as an “extraordinary circumstance” for IP exemptions. Thus, the possibility of recognizing the ongoing war between the two countries as an “extraordinary circumstance” to adopt an exemption to allow export of wheat from the public stock is very remote.

what should be the focus

Developed countries have historically opposed India’s PSH program because they fear that India may divert some of its public stock to the international market, thus causing a fall in global prices. While this argument should be taken with a pinch of salt, India is actively pushing for the export of food from its official granaries, with new ammunition to stick to its guns to protest a permanent solution to the PSH issue. Gives ammo. Thus, India should reconsider its stand on apologizing for export of wheat from its public stockholdings, which, in any case, was not part of India’s PSH policy. Also, as reported, the government’s wheat procurement has been 57.5% less than the original target for this season. So, if public procurement is so low, then what is the point of seeking exemption to export wheat from public stock?

The scarcely negotiated capital spending on this issue could undermine India’s core agenda of pushing for a permanent solution to the PSH program to achieve the goal of food security and remunerative prices to farmers. The laudable purpose of helping countries facing food crisis can be accomplished by strengthening India’s commitment to the United Nations World Food Programme. Or, if the domestic situation improves, India may lift the ban imposed on private traders on wheat exports. Negotiations in the WTO require clear clarity of key objectives that must be pursued continuously. Adding new objectives and moving the goalposts can result in falling between two stools.

Prabhas Ranjan, Professor and Vice-Dean, Jindal Global Law School, OP Jindal Global University. Views expressed are personal