Deo / National Food Security Act 2013 Test India’s Obligations Under the Agreement on Agriculture?
DOES THE NATIONAL FOOD SECURITY ACT 2013 TEST INDIA’S OBLIGATIONS UNDER THE AGREEMENT ON AGRICULTURE? Akhil Deo* ABSTRACT The Agreement on Agriculture, which is a product of the Uruguay rounds negotiations, sought to liberalize global agricultural trade. However due to both the complexity of its structure and the political delicacy of agriculture in several areas of the world it was seen as restrictive towards to food security polices of developing countries. Notably this was one of India’s prime concerns at the Bali Ministerial Conference held in December 2013, especially because of the new National Food Security Act. This Essay seeks to highlight the relevant provisions of the Agreement and the disciplines it imposes upon the Food Security Act and considers possible avenues for increasing the policy space to promote food security.
I.
INTRODUCTION
The Bali Ministerial Conference1 of the World Trade Organisation (WTO) represents the first of its kind in close to two decades,2 the failings of the several prior ministerial conferences led the WTO to choose issues which were largely already resolved in the earlier Doha rounds, therefore giving them the best chance to make progress and “harvest the low hanging fruit"3 The conference saw successful negotiations on Agriculture, 4 trade facilitation, 5 cotton 6 and Least developed countries treatment. 7 The same *
3rd Year Student, Hidayatullah National Law University, email:
[email protected] World Trade Organization, Ministerial Declaration (7 December 2013) WT/MIN(13)/DEC
accessed 2 January 2015 2 Randy Schnepf ‘Agriculture in the WTO Bali Ministerial Agreement’ CRS Report 1 (2014) 3 Briefing note, Agriculture negotiations — the bid to ‘harvest’ some ‘low hanging fruit’ (22November2013) accessed 7 February 2015 4 Ministerial Decision: Agreement on Trade Facilitation (7 December 2013) WT/MIN(13)/36 http://naega.org/wp-content/uploads/2012/05/WTO-Bali-Action-Item.pdf accessed 5 January 2015 5 Ministerial Decision: Public Stockholding for Food Security Purposes (7 December 2013) WT/MIN(13)/38 1
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period also saw the enactment of India’s historic Food Security Act, 8 dubbed as the world’s largest food security net;9 it seeks to serve a threefold purpose of ensuring a support price for production of major food grains, stabilize prices through buffer stocks and open market operations and subsidize the price to poor consumers. Needless to say, the implementation of the Act immediately raised several concerns regarding India’s commitments with respect to the Agreement on Agriculture.10 This essay seeks to highlight and address those concerns. This article henceforth consists of five parts. Part 2 will briefly describe the outlay of the Agreement on Agriculture as presented in the Uruguay rounds, Part 3 shifts focus onto India, first in terms of the immediate consequences of the agreement on India’s commitments and then, after presenting an overview of India’s landmark Food Security Act 2013, analyses the possible effects and questionable compliance of its promulgation on India’s WTO commitments. Part 4 briefly details the decisions reached in the Bali conference and Part 5 will highlight the debate between trade liberalization and policy space for food security made make some suggestions on how to harmonize the same. Part 6 concludes by noting that food security must be given a higher priority than international trade commitments.
II.
A PRIMER ON THE AGREEMENT ON AGRICULTURE
The Uruguay rounds negotiation viz agriculture was a result of the realization that the traditional focus of the General Agreement on Trade and Tariffs (GATT) on import access was no longer sufficient to curb all trade distorting practices in such as domestic support prices and export subsidies. 11 The pre-Uruguay rounds GATT had several exemptions regarding the agricultural trading rules,12 this was so because prior to the Uruguay rounds several developed countries, particularly the United States and the European Union, adopted protective agricultural policies which promoted domestic production and severely subsidized exports to make
6
Ministerial Decision: Cotton (7 December 2013) WT/MIN(13)/41 Ministerial Decision: Preferential Rules of Origin for Least-Developed Countries (7 December 2013) WT/MIN(13)/42 8 National Food Security Act 2013 9 Press Information Bureau, Government of India, Year End review (20 December 2013) at ( Last visited on 9 March 2015) 10 Nayanima Basu, Food security law’s WTO complications, BUSINESS STANDARD (7 August 2013) 11 WTO The WTO Agreements Series – 3 Agriculture (WTO Secretariat, 2003) 3 (Last visited on 7 February 2015) 12 Barkema A, D Henneberry, Agriculture and the GATT: A Time for Change. Economic Review 21, 23 (1989) 7
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them more competitive in the global market. 13 The Agreement on Agriculture’s14 stated long term objective is to ‘establish a fair and marketoriented agricultural trading system that includes substantial reductions in agricultural support and protection.’15The inception of this agreement was not uncontroversial- agriculture was an important part of most developing countries’ economies, and they were concerned that without an agreement on agriculture they would not have similar market power as the developed countries enjoy. The liberalization of trade in agriculture rests on what are often called the three pillars of the agreement; (i) Increased market access, (ii) reduction of domestic subsidies and (iii)reduction of export subsidies. (i)
MARKET ACCESS:
The process to increase market access, presented in Article 4 of the Agreement, involved converting all non-tariff barriers, into tariff barriers by a process of “tarriffication”16 so as to guarantee minimum access levels for all agricultural products, the reason being that they are easier to monitor than non-tariff barriers. The resultant tariffs are then bound so as to reduce them below a base level year (1986-88) over several years. There is however, a special safeguard mechanism by way of Article 5 of the agreement, which allows for protectionist measures by raising tariffs in some circumstances17 whereby a member may invoke a special safeguard clause if the volume of import exceeds a “trigger level” or if the price of imports falls below a trigger price which are normally predetermined,18 so as to create imbalance in domestic trade. (ii)
DOMESTIC SUPPORT:
The crux of the commitment on reducing domestic subsidies rests on what is called the “Aggregate Measure of Support” (AMS) expressed as the “annual level of support, expressed in monetary terms, provided for an agricultural product in favour of the producers of the basic agricultural product or nonproduct-specific support provided in favour of agricultural producers in 13
Carmen G Gonzalez, Institutionalizing Inequality: The WTO Agreement on Agriculture, Food Security, and Developing Countries, 27 COLUM. J ENVTL. L 433, 441 (2002) 14 Agreement on Agriculture, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, THE LEGAL TEXTS: THE RESULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 33 (1999), 1867 U.N.T.S. 410.(Hereafter Agreement on Agriculture) 15 Agreement on Agriculture, supra note 14, Preamble 16 Agreement on Agriculture, supra note 14, art 4:1 read with Foot Note 1 (original) of the Agreement (which provides a list of non-tariff barriers which are required to be converted into tariffs) 17 Provided in Agreement on Agriculture, supra note 14, Art. 5: 1(a) 18 Agreement on Agriculture, supra note 14, Art. 5: 1(b)
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general.”19 This AMS is essentially the aggregate of the domestic subsidies, clubbed into what is called the” Amber Box” provided by a member, and the base period 1986-88 acts as a standard by which a member makes reduction commitments. The AMS is measured against a Fixed External Reference Price which is different as per each remembers schedule.20 However, these commitments are not uniform across all subsidies and Article 6.2 read with Annex 2 of the Agreement allows for “green-box” subsidies which are minimally trade distorting and so exempt from reduction commitments. 21 Such green box measures include both product specific support, such as public stockholding for food security purposes, domestic food aid, general services provided to agriculture, income support, insurance programs etc., and investment subsidies generally made available low income and resource poor farmers. 22 Annexure 2 of the Agreement subjects these subsidies to two conditions, First that the subsidy must be provided through a publicly funded government programme and second that it should not have the effect of providing price support to producers.23 Next, Article 6.5 also excludes direct payments under production limiting programmes, commonly called the “blue box”, it applies only if payments are based on fixed areas or made on 85 percent or less of the base level of production. 24 Essentially, “While the Green Box covers decoupled payments, in the case of the Blue Box measures, production is still required in order to receive the payments, but the actual payments do not relate directly to the current quantity of production.”25 However, if a country has zero domestic support in the base year, then Article 6:4 of the agreement comes into play which provides for measures which are exempt from calculation of the total AMS specifically if the product support and the non-product support was lower that 5 percent of total agricultural production for the developed countries and 10 percent for developing countries, these percentages are commonly called the deminimus percentage. 26
19
Agreement on Agriculture, supra note 14, Art. 1(a) Agreement on Agriculture, supra note 14, Art 1(a)(i) and Art 1(a)(ii) 21 Agreement on Agriculture, supra note 14, Annex 2 22 Agreement on Agriculture, supra note 14, art 2 23 Agreement on Agriculture, supra note 14, Annex 2:1 24 Agreement on Agriculture, supra note 14, art 6:5(a), (b) 25 WTO The WTO Agreements Series – 3 Agriculture (WTO Secretariat, 2003) 13 (Last visited on 7 February 2015) 26 Agreement on Agriculture, supra note 14, art 6:4(a), (b) 20
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(iii)
EXPORT SUBSIDIES:
Article 8 provides that export subsidies must only be used in conformity with the agreement and the commitments in each member’s schedules. Article 9:1 lists six specific export subsidies which are subject to reduction. These reductions take place both as budgetary outlays and as quantative reduction commitments; 27 Article 9:4 lists some circumstances in which developing countries are exempt from their commitments and Article 10 provides from anti-circumvention measures in order to limit the use of subsidies not specified in Article 9. (iv)
OTHER IMPORTANT PROVISIONS:
Apart from the ‘three pillars’ there are a few other distinctive provisions: for example Article 13, famously called the peace clause, restricts the use of the Agreement of Subsidies and Countervailing Measures on measures of domestic support which are in conformity with the agreement on agriculture28 and subjects export subsidies to such countervailing measures only if there has been a determination of injury.29 There are provisions for special and differential treatment as well under Article 15 which grants developing countries an extension with respect to the implementation period and allows for the possibility of exempting least developed countries entirely. Article 20 provides for reform processes in agriculture and states that a new round of negotiations should take place with respect to agriculture before the end of the implementation period, i.e 2004, so as to analyze the effect of the agreement.
III.
INDIA, THE FOOD SECURITY ACT 2013 AND THE AGREEMENT ON AGRICULTURE
During the base year period, i.e., 1986-88, India’s product specific AMS was a negative 22 percent of the total value of agricultural production and even though the non- product specific AMS was positive it was only around 4 percent.30 This meant that any subsidies provided by India could now only be justified under the de-minimus provisions under Article 6:4 or a limit of 10 percent of the total value of agricultural production. In the 1990’s, the then Commission for Agricultural Costs and Prices (CAPC) would declare a minimum support price (MSP) for different commodities and the Government would procure them at that price, In the years immediately 27
Agreement on Agriculture, supra note 14, art 9:2 Agreement on Agriculture, supra note 14, art 13:b 29 Agreement on Agriculture, supra note 14, art 13:c 30 FAO ‘Agriculture, Trade and Food Security Issues and Options in the WTO Negotiations From The Perspective of Developing Countries’ (Commodities and Trade Division, FAO 2000) Chapter 6 28
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subsequent the Agreement on Agriculture, i.e., 1995-96, the total product specific support or green-box support was negative 38.5 percent, well below the de-minimus limit of 10 percent; 31 this was because the total support amounted to much less than the external price fixed. In-fact the Government of India itself had expressed the view that these domestic inputs would be exempt from its reduction commitments for some time,32 to put this in context, the MSP on products such as wheat, for example, had increased, by up to 45 percent in just 2000.33 Described by some as a game changer for India, 34 The National Food Security Act was promulgated in September 2013 with the stated objective of being “able to provide for food and nutritional security…by ensuring access to adequate quantity of quality food at affordable prices to people.”35 Chapter II vide Section 3 of the Act provides for legal entitlements to food grains at subsidized prices not exceeding rupees 3 per kg for rice, rupees 2 per kg for wheat and rupee 1 per kg.36 Priority households are entitled to 5 kg of food grains per person per month, and households under the Antodyadaya Anna Yojana are entitled to 35 kg. The combined coverage of both these households (eligible households) will extend to 75 percent of the rural population and 50 percent of the urban population. The Governments scheme for food security has remained largely the same since the early 1990’s, i.e, an MSP is declared by the government on various food grains, which are then procured by the Food Corporation of India and then sold at a Central Issue Price via the Targeted Public Distribution System. The economic costs of this process include the MSP, procurement costs, buffer stock costs and distribution costs, 37 all of which raise test India’s commitments under the agreement on agriculture. Even before the implementation of the act, India’s food security scheme resulted in an increase of subsidies by almost 25 times in 20 years, from 2800 crore rupees in 1992 to 72800 crore rupees in 2011. 38The Act expands what is already a mammoth task, the Government estimates that approximately 60 million 31
Ibid Press Information Bureau, Government of India, Q&A: Trade in Agriculture- Uruguay Round and after: A brief glimpse at < http://pib.nic.in/focus/foyr2001/foapr2001/aoa1.html > (Last visited on 5 March 2015) 33 CH Hanumanta Rao, WTO and the Viability of Indian Agriculture, 36 Economic and Political Weekly 3453, 3455 (2001) 34 NC Saxena, Food Security Bill a game-changer? BUSINESS STANDARD (July 8, 2013) at (Last visited on 7 March 2015) 35 Objectives, National Food Security Act 2013 36 As laid out in Schedule I of the National Food Security Act 2013 37 Vijay Paul Sharma, Food Subsidy in India: Trends, Causes and Policy Reform Options 4 (Indian Institute of Management-Ahmedabad, Working paper no. 2012-08-02, 2012) 38 Ibid at pg. 4 32
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tonnes of foodstuff will be procured at the MSP and distributed to over 800 million people at subsidized rates through the public distribution system.39 The National Food Security Act 2013 is essentially a ‘public stockholding for food security purpose’ as listed in Annexure 2:3 of the agreement.40 It raises concerns in all three stages of its operations; First, implications at the procurement stage, essentially the MSP provided to farmers and the subsidies on fertilizers and electricity amount to product and non-product specific support and second, regarding expenditures relating to public stockholding and finally any concessions provided at the distribution stage meaning the central issue price. Regarding the implications at the procurement stage, because the government provides a MSP, it is essentially an ‘administered price’ and will be counted towards a countries AMS. 41 The question therefore is, whether or not India has breached the de-minimus provisions. It should first be noted that the Government of India notifications used to denominate the value of its subsidies in dollars, as opposed to the base year (external reference price) which is fixed in rupees. 42 Narayan 43 notes that denominating the subsidies in rupees would not account for domestic inflation and denominating it in dollars would mean that the conversion of the MSP from rupees into dollars would be at current exchange rates and therefore suggest a larger subsidy amount simply because of the lower ERP, and confirms that if the subsidies are represented in dollars, then the total subsidy is well below the de-minimums level. However, Brink44 notes that adopting this methodology is probably inconsistent with a literal reading of the Agreement on Agriculture disciplines, specifically Annexure 3 of the agreement which lays down the modalities for calculating the AMS and finds that if India were to strictly comply with these obligations the AMS had exceeded the de-minimus well before the implementation of the Act itself.
39
Press Information Bureau, Government of India, The National Food Security Ordinance: Highlights (July 5, 2013) at (Last visited on 7 March 2015) ; see also Sakshi Balani, Functioning of the Public Distribution System 8 (PRS Legislative Research, report, 2013) 40 Agreement on Agriculture, supra note 14, annex 2:3 41 Agreement on Agriculture, supra note 14, footnote 5 & 6 to annex 2:3 42 Munisamy Gopinath, India: Shadow TO Agricultural Domestic Support Notifications 5 (International Food Policy Research Institute, Discussion paper 00792, 2008) 43 S Narayan, In the balance The National Food Security Act vis-à-vis the WTO Agreement on Agriculture 6 (Indira Gandhi Institute of Development Research, Working paper 2013026, 2013) 44 Lars Brink, Support to Agriculture in India in 1995-2013 and the Rules of the WTO 34 (International Agricultural Trade Research Consortium, Working paper 14-01, 2014)
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Coming to the legal implications of the cost incurred on maintaining a bufferstock ,the agreement exempts the following expenditures from the AMS, “Expenditures (or revenue foregone) in relation to the accumulation and holding of stocks of products which form an integral part of a food security programme identified in national legislation. This may include government aid to private storage of products as part of such a programme.” 45 Arguably the costs of maintaining the buffer stocks itself should not pose an additional barrier to the implementation of the Act. However clause 3 goes on to state that “the volume and accumulation of such stocks shall correspond to predetermined targets related solely to food security,” 46 India has a history of accumulating stocks well above the required quantity, for example the CAPC47 estimates that against the annual requirement of approximately 61 million tonnes in 2013 for the purpose of the PDS, an actual approximate of 81 million tonnes was made at severely exaggerated costs. Further the accumulation of such stocks is rarely done only with respect to food security; often stocks are accumulated to provide support to farmers irrespective of need48 and also in relation to maintaining lower prices in the domestic market to ensure that the burden on consumers is not high.49 It is therefore unclear whether these policies are in conformity with the text of the agreement. Finally, at the last stage, that is the distributive one, the Act clearly sets out the eligible population and their respective legal entitlements, thereby conforming with Annex 2:4 which states that expenditure in relation to the provision of domestic food aid is exempt from the AMS provided that the eligibility to receive food aid is subject to clearly defined criteria related to nutritional purposes, such provisions may also be made at subsidized prices. However the Act only states the total percentage of eligible population and depends upon the states to form a criterion, it is unclear whether this policy is in conformity with the text of the agreement or not. Further footnote 5 and 6 to Annex 2:4 states that ‘the provision of foodstuffs at subsidized prices with the objective of meeting food requirements of urban and rural poor in developing countries on a regular basis at reasonable prices shall be considered to be in conformity with the provisions of this paragraph.’ It is unclear how rural and urban poor are defined, for example the Tendulkar 45
Agreement on Agriculture, supra note 14, Annex 2:3 Ibid 47 A. Gulati and S. Jain, ‘Buffer Stocking Policy in the Wake of NFSB: Concepts, Empirics and Policy Implications’ 6 (Commission for Agricultural Cost and Prices, Discussion Paper 6, 2013) 48 Shweta Saini & Marta Kozicka, ‘Evolution and Critique of Buffer Stocking Policy of India’ 19 (Indian Council for Research on International Economic Relations, Working paper 283, 2014) 49 Ibid at 20 46
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Committee Report 50 based on its calculation of the poverty line for the urban and rural areas estimated that approximately 22 percent of the population is below the poverty line; however, the National Food Security Act is estimated to cover approximately 70 percent of the population with the current government showing no signs of reducing the same.51
IV.
THE BALI MINISTERIAL DECISION
The failure of the Uruguay rounds to adequately address agricultural trade reforms from a developing countries perspective lead it to be a hotly debated issue in the Doha development round which began in 2001. 52 However, even after several years no firm conclusions were ever reached in the Doha rounds53 and the modalities that were sought to be revised continued to be considered in the Bali Conference. There were primarily three issues of focus at the Bali conference in terms of agriculture, two of which relate to export controls 54 and tariff rate quotas. 55 Regarding the export controls; members wanted to reaffirm the commitments made during the Doha rounds, namely that developed countries would eliminate all export subsidies.56 However the Bali decision was more political than legal, with members agreeing to: 57 recognize that all forms of export subsidies are highly trade distorting, exercise utmost restraint in using export subsidies, attempt to eliminate such subsidies and enhance transparency measures. The tariff-rate quota, as agreed to under the Uruguay rounds, works on the principle that a limited volume of imports or the quota amount is allowed at a lower tariff rate and when the quantity of imports exceeded that quota the tariffs were escalated. Several developing countries had raised the concern 50
Planning Commission, Government of India, Report of the Expert Group to Review the Methodology for Estimation of Poverty (November 2009) 51 Press Information Bureau, Government of India, There will be no cut in the coverage of the National Food Security Act (5 March 2015) at (Last visited on 8 March 2015) 52 See generally Ved. P. Nanda, Selected Aspects of International Trade and the World Trade Organization’s Doha Round: Overview and Introduction, 36 Denver J. Int’l L. & Policy 255, 257 (2008) 53 For an elaborate analysis of the Doha round see generally, Sungjoon Cho ‘The Demise of development in the Doha Round Negotiations’ 45 Texas Int’l L J 573 (2010) 54 World Trade Organization, Export Competition, Ministerial Declaration (7 December 2013) WT/MIN(13)/40 55 World Trade Organization, Understanding on Tariff Rate Quota Administration Provisions of Agricultural Products, as Defined in Article 2 of the Agreement on Agriculture, Ministerial Decision (7 December 2013) WT/MIN(13)/39 56 Randy Schnepf ‘Agriculture in the WTO Bali Ministerial Agreement’ 3 (Congressional Research Service, Report 43592, 2014) 57 Briefing note: Agriculture negotiations — the bid to ‘harvest’ some ‘low hanging fruit’ (22 November,2013) (Last visited on 7 February 2015).
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that that many countries practice under-filling of their quotas, 58 which would then become an additional trade barrier. Therefore under the highly complex Bali decision, if these quotas remain under-filled persistently then, after a consultation process, the importing country would have to follow a defined set of practices for administering the quotas.59 The third, and arguably the most contentious issue, 60 related to public stockholding for food security was raised by a group of developing countries who, in their proposal,61 sought some specific amendments in the agreement to grant policy space for their food security concerns. The first set of amendments were aimed at including certain payments in the “Green box” such as those for farmer settlement, land reforms, rural development etc. The second amendment proposed to remove the difference between the administered prices and the fixed external price from the Ambit of the AMS for price support to low income or resource poor farmers, similar to the proposal already put forth in the Doha rounds.62 However the Bali decision on public stockholding was more of a settlement with countries agreeing not to challenge any food security programmes already existing at the date of the decision. 63 In the end an interim peace clause was worked out, with members agreeing to “negotiate on an agreement for a permanent solution, for the issue of public stockholding for food security purposes for adoption by the 11th Ministerial Conference”64
V.
WHAT’S NEXT FOR INDIA?-POLICY SUGGESTIONS
The relationship between trade liberalization and food security has drawn interest for obvious reasons. More than being a guaranteed right, food security is often a political rhetoric in most developing countries. Viewed from the perspective of international trade however, food security schemes 58
World Trade Organization, Market Access Submission by Cuba, Dominican Republic, El Salvador, Honduras, Kenya, India, Nigeria, Pakistan, Sri Lanka, Uganda, Zimbabwe (24 September 1999) G/AG/NG/W/37 59 World Trade Organization, Understanding on Tariff Rate Quota Administration Provisions of Agricultural Products, as Defined in Article 2 of the Agreement on Agriculture, Ministerial Decision (7 December 2013) WT/MIN(13)/39. 60 Bridges News, "Peace Clause" Controversy Pushes Bali Deal Into Eleventh Hour (International Centre for Trade and Sustainable Deveopment, 6 December 2013) < http://www.ictsd.org/bridges-news/bridges/news/bridges-daily-update-4-peace-clause-contr oversy-pushes-bali-deal-into> (Last visited on 30 January 2015) 61 World Trade Organization, G-33 Proposal on Some Elements of TN/AG/W/4/Rev.4 for Early Agreement to Address Food Security Issues, Committee on Agriculture, Special Session, (13 November 2013 )JOB/AG/22 62 World Trade Organization, Revised Draft Modalities for Agriculture (6 December 2008) TN/AG/W/4/Rev.4 63 Public Stockholding for food security purposes, Ministerial Decision (11 December 2013) WT/MIN(13)/38 64 Ibid
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are often seen as trade distorting. 65 The most popular argument for liberalization versus protectionism of agricultural markets is the inherent inefficiency in the administration of food security schemes and that in the long run only serves to perpetuate food insecurity as a result of higher prices and weak production and storage.66 Critics of these arguments often argue that addressing food security in purely economic terms is not sufficient, primarily because agriculture itself is an abnormal subject matter of trade with links to environmental functions and rural development. 67 Another oft-cited misunderstanding is that agricultural productivity is always fully causally connected to access to food,68 this paradox is evident in India as well, with the FCI reporting record procurements year after year while millions in India continue to remain food-insecure. 69 Further liberalizing trade in agriculture has often made developing and less developed countries extremely vulnerable to changes in international prices, making it harder for domestic policy makers to sustain productivity and lower prices.70 In addressing this debate, several arguments have been put forth in an attempt to harmonize the various food subsidy programmes carried on globally and the agreement on agriculture, which many believe is an unjust burden on developing countries. Some of these arguments and their implications for India have been examined under; (i)
FORMALIZING THE ADJUSTMENT FOR INFLATION-
Notably Article 18:4 of the agreement says that “In the review process, Members shall give due consideration to the influence of excessive rates of inflation on the ability of any Member to abide by its domestic support
65
Islam A. Siddiqui , ‘The politics of Food Security and the World Trade Organisation’ ( 18 December 2014 Centre for Strategic and International Studies) at < http://csis.org/ publication/politics-food-security-and-world-trade-organization> (Last visited on 7 March 2015) 66 WORLD BANK, ‘GLOBAL MONITORING REPORT 2012:FOOD, NUTRITION AND THE MILLENNIUM DEVELOPMENT GOALS’ (WORLD BANK PUBLICATIONS; 1 EDITION APRIL 20, 2012) 67 IISD, ‘Non-Trade Concerns in the Agricultural Negotiations of the World Trade Organization.’ 1 (International Institute for Sustainable Development Trade and Development, Issue brief 1, 2003) 68 Amartya Sen ‘Why is there so much hinger in the world’ (Food and Agricultural Organisation Conference 2013) < http://www.fao.org/fileadmin/user_upload/ newsroom /docs/mg856e.pdf > (Last visited on 7 March 2015) 69 Vivek Kaul, Why food prices will rise even with record procurement, FIRSTPOST (13 May 2013) < http://www.firstpost.com/business/economy/why-food-prices-will-rise-evenwith-record-procurement-776947.html > (Last visited on 7 March 2015) 70 Olivier De Schutter, International Trade in Agriculture and the Right to Food 37 (Dialogue on Globalization, Friedrich Ebert Stiftung, Geneva, Occasional Paper No.46, 2009)
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commitments.” Hoda and Gulati 71 have estimated that after giving due consideration to effects of inflation on the external reference price, the total product specific support still remained well below the de-minimus level and that with such adjustments even the National Food Security Act is unlikely to breach the commitments regarding support prices. However Matthews,72 argues that Article 18.4 should only be construed to mean that the reviewing members may give “due consideration” and not that members may treat it as an enabling clause. A WTO secretariat paper73 lends credence to this argument observing that members in their notifications should make both on an un-adjusted and on an inflation adjusted basis. Narayan74 finds no difficulty with this, observing that unless there is a disproportionately low overall production as compared to the increase in subsidies, inflation should not play a role in contributing to the AMS. However the UNCTAD rebuts this presumption stating that when the administered price is updated on a regular basis; inflation may distort the AMS commitments, and it recommends a case-by-case approach in deciding whether or not the commitments on subsidies are eroded because of inflation.75 (ii)
REDEFINING ELIGIBLE PRODUCTION-
In considering the legal issues one of the first suggestions must be to change the way “eligible production” is defined under the agreement;76 For example, In the Korean beef case77 the appellate body of the WTO found that by notifying the production Korea actually bought as opposed to its total eligible production as defined by the government, which was higher, it was in violation of the agreement. Narayan78 highlights this disparity and notes that it applies to India as well, essentially that the support should not exceed 10 percent of the total production. However the report of the Expert Committee on the food security bill79 projects that procurement for rice and 71
A Hoda & A Gulati, Indias Agricultural Trade Polic and Sustainable Development 31 (International Centre for Trade and Sustainable Development, Issue Paper No. 49, 2013) 72 Alan Matthews, Food Security and WTO Domestic Support Disciplines post-Bali 14(International Centre for Trade and Sustainable Development, Issue Paper No. 53, 2014) 73 World Trade Organization, Notification Issues, Background note by WTO Secretariat (18 June 1999) G/AG/W/45 74 S Narayan, supra note 43, at 10 75 UNCTAD ‘An analysis of the agricultural domestic support under the uruguay round agreement on agriculture: the blue box’ (6 Novenmber 2003) UNCTAD/DITC/COM/2003 76 Agreement on Agriculture, supra note 14, Annex 3 77 WTO, Korea: Measures Affecting Imports of Fresh, Chilled, and Frozen Beef. (31 July 2000) WT/DS161/R and WT/DS169/R [195]-[196] 78 S Narayan, supra note 43, at 7 79 Economic Advisory Council, Government of India, ‘Report of the Expert Committee on National Food Security Bill’ (2011)
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wheat will be close to 30 percent of their total production in 2014, therefore it should be possible for the Government of India to notify the total eligible production or an approximate thereof, based in its excess requirements either for price support or to maintain a buffer stock. (iii)
EXEMPTING PROCUREMENT FROM RESOURCE POOR FARMERS-
Another proposal as put forward in the Doha draft modalities includes amending footnotes 5 and 6 to Annex 2 to add that: 80 “However, acquisition of stocks of foodstuffs by developing country Members with the objective of supporting low-income or resource-poor producers shall not be required to be accounted for in the AMS” and “the acquisition of foodstuffs at subsidised prices when procured generally from low-income or resource-poor producers in developing countries with the objective of fighting hunger and rural poverty.” Essentially these measures would then be within the “green box” and thus not an addition to the AMS as contemplated by Article 6.2. There are some drawbacks with this proposal, for example there is no fixed definition on who is a resource poor producer. Gopinath81 finds that India’s definition of resource poor producers on the basis of the size of landholdings came close to exempting all its farmers under this category in relation to non-product subsidies because of the traditionally small size of such landholdings. Further, it is noted that allowing price support even for such a category of persons defeats the purpose of the green box, which specifically excludes price support measures.82 (iv)
ADOPTING A DIFFERENT STANDARD FOR EXTERNAL REFERENCE POINT –
Another proposal put forward by the G-33 group countries in their nonpaper, 83to address the anomaly of a dated fixed external reference point change the method of its calculations and instead use calculations based on preceding years average. Another solution could also be to fix the external reference point in dollars instead of domestic currency, for example 80
Revised Draft Modalities for Agriculture (6 December 2008) TN/AG/W/4/Rev 4 Munisamy Gopinath, India: Shadow Agricultural Domestic Support Notifications 16 (International Food Policy Research Institute, Discussion paper 00792, 2008) 82 Oryza, Bali Package on Foodgrain Stockpiling Against WTO Ideals, Claim Pakistan Rice Growers’ , 25 December 2013, available at < http://oryza.com/news/bali-packagefoodgrain-stockpiling-against-wto-ideals-claim-pakistan-rice-growers> (Last visited on 1 March 2015) 83 World Trade OrganizationG-33 Non Paper, Committee on Agriculture, Special Session (3 October 2013) JOB/AG/25 81
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Montemayor 84 highlights that if the ERP is fixed in dollars there is a reduction in the possibility that a member will breach the de-minimus limit (v)
LINKING DOMESTIC PRICE AND INTERNATIONAL MARKET PRICES-
One novel idea put forth by Diaz-Bonilla85 is to link the administered prices to prevailing international price, it is noted that for several developing countries the administered price is well below the international market price for the same food stuff. Hoda and Gulati86 confirm this estimation in the Indian context, finding that the administered price for wheat and rice as per the inflation adjusted MSP is lower than the prices prevailing internationally even in 2013. According to Annex 2; for subsidies to qualify within the green box the food purchase must be made at current market prices. If the administered prices largely coincide with international market prices, it seems counter-intuitive to label it as distortionary simply because the so called administered price is higher than the ERP which itself was fixed in 1988.
VI.
CONCLUDING REMARKS
India’s agricultural sector represents an imbalance between its contribution to the GDP which is around 14 percent and the total number of persons employed which is approximately 68 percent of the population. 87 The Government of India in its economic survey has stressed that agricultural growth and productivity are vital to ensure job and food security.88 This is further accentuated by the FAO’s report which estimates that 213 million people in India are undernourished as of 2013.89 It is unfortunately against the backdrop of these ideological and methodological differences that the policies regarding food security and trade liberalization have been framed. India has shown considerable resilience in being vocal about its food security concerns during the Bali 84
R Montemayor, Public Stockholding for Food Security Purposes: Scenarios and Options for a Permanent Solution 14 (International Centre for Trade and Sustainable development, Issue paper 51, 2014) 85 Eugenio Diaz-Bonilla, Some Ideas to Break the Stalemate on Agricultural Issues at Bali, 5 December 2013, available at (Last visited on 8 March 2015) 86 A Hoda & A Gulati, Indias Agricultural Trade Policy and Sustainable Development 49 (International Centre for Trade and Sustainable Development, Issue Paper No 49, 2013) 87 OECD/Food and Agriculture Organization of the United Nations, OECD-FAO Agricultural Outlook 2014, 65 (OECD Publishing, 2014) 88 Government of India, ‘Economic Survey’ Chapter 8 (2013) at < http://indiabudget.nic.in/es2012-13/echap-08.pdf > (Last visited 3 March 2015) 89 FAO, The State of Food Insecurity. The multiple dimensions of food security’ 44 (Food and Agriculture Organization, Rome, 2013)
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Deo / National Food Security Act 2013 Test India’s Obligations Under the Agreement on Agriculture?
conference and leaning towards protectionism as opposed to un-inhibited liberalization having recognized the direct impact of policies affecting agriculture on the livelihoods of millions of persons unwittingly party to such policies. In the words of India’s then Commerce and Industry Minister Anand Sharma, noting that food security was non-negotiable:90 “Agriculture sustains millions of subsistence farmers. Their interests must be secured. Food security is essential for over four billion people of the world. For India, food security is non-negotiable. Need of public stockholding of foodgrains to ensure food security must be respected. Dated WTO rules need to be corrected,”
90
Press Trust of India, Food security non-negotiable: Anand Sharma THE HINDU (4 December 2014) accessed> (Last visited on 9 March 2015)
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