The Food Security Bargain

Context: Reforming the World Trade Organisations (WTO) rule book, so that they can better support food security, rural livelihoods and improved functioning of markets for food and agriculture in developing nations.

Issues with the WTO and its relations with India:

• Issues with the calculation of subsidies: Recently India had breached its agreed ceiling (de-minimus provisions) on product-specific support to rice during the marketing year 2018-19.
  • At present, market price support levels are calculated by taking the gap between applied administered prices and External Reference Price (ERP) 1986-88.
  • Due to the outdated ERP, India often breaches its agreed ceiling on product-specific support.
  • Strikingly, India’s support turns out to be negative for the years since 2000- 01, if domestic market prices are compared with international market prices using the Producer Support Estimate methodology applied by the Organisation for Economic Cooperation and Development (OECD).
• Lack of enough room for developing countries: to buy food at government-set minimum support prices.
• Growing tendency among the countries to pursue bilateral and plurilateral trade.
• Paralyzed dispute resolution mechanism: US’s decision to veto new appointments to the WTO’s appellate body has paralyzed its dispute settlement function.

Reforms required in WTO rules book

• Reform farm subsidy rules: This could help support incomes and livelihoods and spur economic recovery from the COVID-19 shock. 
  • WTO members should set a clear direction and a timeframe for reaching a rational conclusion.
  • Political leadership should rebuild trust among countries on trade and food security.
• Encourage trading through WTO: under the rules-based multilateral trading system.
• Replace the ERP of 1986-88: It is irrelevant due to global price hikes of 2007-08 and 2010-11:
  • Update the reference prices to average 2014-16 or 2016-18 levels or use a rolling average.
  • Exempt support from counting towards maximum limits when administered prices are set below international market price levels. 
  • Members can exclude discount support consumed by subsistence farmers and procurement that only equates to a small share of domestic output from the calculation of eligible production. 

Some positive efforts: Actions of G-20 countries:

• Minimized disruptions in food supply chains: by reaffirming the importance of the continued flow of food and other products across borders.
• Gave importance to food security concerns: by not imposing export restrictions or extraordinary taxes on food purchased for humanitarian purposes by the United Nations World Food Programme (WFP).

Conclusion: If global rules on trade are to support food security and rural livelihoods in India and around the world, the government’s leadership and engagement today will be essential.