WTO must review food subsidy rule, says Sitharaman
1 min read . Updated: 03 May 2023, 11:19 PM IST
PremiumUnder Peace Clause, WTO members agreed to refrain from challenging any breach in prescribed ceiling by a developing nation at the dispute settlement forum of the WTO. This clause will stay till a permanent solution is found to the food stockpiling issue.
Incheon: The World Trade Organization must revisit the prickly issue of food and fertilizer subsidies as both have become critical to developing economies but are not taken into account while deciding tariff and pricing rules, finance minister Nirmala Sitharaman said at the Asian Development Bank’s annual general meeting.
Sitharaman, who was speaking at bank seminar on ‘policies to support Asia’s rebound’, said the issue of food security had become even more critical owing to increasing uncertainties following the covid pandemic and the Russia-Ukraine war, which had made transit of goods difficult and led to rising commodity prices.
Therefore, the lopsided way in which agreements had been concluded without accounting for food and fertilizer subsidies needed a relook at the WTO.
“Since the time when WTO was founded, it has had these agreements that export of agricultural produce, and also generally the trade, (where) the voice of the South, or the emerging markets has not been heard at par with the voice of the developed countries. Subsidies for agriculture become critical for many of our economies, but those subsidies didn’t get counted at all," she said.
“Now, in the context of covid and the Russia-Ukraine war, and legitimately, all of us have been feeling very sensitive about food security, fertilizer-security. Fertilizer security is important because it feeds into food security. We will all have to talk again (about food and fertilizer security) at the WTO with an open mind," she said.
“The lopsided way in which trade agreements have come about and the WTO is trying to grapple with the situation... sooner the solution is found the better it is for the world," she added.
Under global trade rules, a WTO member country’s food subsidy bill should not breach the limit of 10% of the value of production based on the reference price of 1986-88.
As part of a permanent solution, India has asked for measures like amendments in the formula to calculate the food subsidy cap and inclusion of programmes implemented after 2013 under a ‘Peace Clause’.
As an interim measure, the WTO members at the Bali ministerial meeting in December 2013 had agreed to put in place a mechanism popularly called ‘Peace Clause’ and committed to negotiating an agreement for a permanent solution.
Under Peace Clause, WTO members agreed to refrain from challenging any breach in prescribed ceiling by a developing nation at the dispute settlement forum of the WTO. This clause will stay till a permanent solution is found to the food stockpiling issue.
In response to a question on the immediate interventions needed from a policy front to enhance growth, Sitharaman said that there was need for simpler cross border transfers which would make repatriation easier.
“There has to be digital globalisation. Unless countries and their systems talk with each other and the neighboring countries for instance, to start with, talk to each of those digital platforms. The benefits of technology making life easy for citizens, particularly common citizens, will never be achieved," she said.
She added that countries would have to make conscious efforts to move revenue to capital expenditure, widening the capex for creating assets, which in turn will benefit labor and those who are dependent on semi skills. She noted that every attempt will have to be made to widen the GDP with newer areas of activity, since the tertiary sector in the economy had become more than services sector, moreso since it now had a larger share of the younger population.
Talking about interventions needed for managing economy while aiming for boosting growth, countries will have to focus on building infrastructure, investments including from the private sector, innovation and inclusivity.
She said that infrastructure will create more jobs and will also trigger off the core industries, while long term investment to fund the infrastructure activity will be needed, for which private sector involvement will be needed. “Unless you have innovative thoughts to address your local problems, and then create your local youth to come up with solutions. You’re spreading yourself too thin in terms of being royalties being also solutions which may not fit your own economies," she said on innovation. She added that inclusivity was equally necessary which will help in societal conflicts.
She added that conditional cash transfers helped people during the pandemic since India put its force behind system reforms and created digital identities or Aadhaar that helped in people getting the benefits directly.
The reporter is in South Korea on the invitation of the Asian Development Bank.