Food bill brinkmanship in Bali

Anand Sharma (centre) at Nusa Dua in Bali for the WTO meet on Wednesday. (AFP)

New Delhi, Dec. 4: India has thrown down the gauntlet — it has told WTO members in Bali that either they agree to concessions on the food security bill or face the prospect of another failure in global trade talks.

Indian officials are betting the West, suffering from growth slowdown, will be the first to blink.

At the Bali WTO ministerial conference today, commerce minister Anand Sharma said, “For India, food security is non-negotiable… a trade agreement must be in harmony with our shared commitments of eliminating hunger and ensuring the right to food.”

What India has been seeking is the right to buy and stock huge quantities of foodgrain for distribution at subsidised prices to its nearly 820 million poor.

Under current WTO rules, India could face sanctions if it went ahead with this huge food security programme as the subsidy involved could breach the limits set by the world trade body.

The WTO has set a limit of 10 per cent of the market price of food as subsidy. But to calculate this it uses as base the prices prevalent in 1986-87, whereas India has started notifying subsidies only from 2004. The West, on its part, has offered India a peace deal that allows exemption for just four years.

Indian officials said New Delhi would demand at all costs a longer exemption period and removal of a clause that allows any member state to drag India to arbitration by claiming its subsidies distort world trade.

“Of course, our subsidies distort world trade … even if we buy 10 per cent more or less in the world market, it distorts global trade flows … in the years we stopped rice exports there were famines and riots in Africa … we and the Chinese are the proverbial ‘elephants in the room’ … that does not mean you punish us for feeding our poor,” said top officials involved in drafting India’s stand at Bali.

For the developed West, the food security bill offered a chance to force India to open its doors to more imports of its manufactures in return for concessions on this count. India, along with other developing world countries, has agreed to reduce peak tariffs on a range of manufactures.

However, as officials bitterly complained: “They want to export more to us to allow us the right to feed our poor, but won’t even give us that right fully.”

Officials also pointed out that in absolute terms India’s subsidies are far lower than in the West. The EU spent some 57 billion euro in 2010 on farm subsidies, three times what India could spend on its food security bill annually.

The problem for the developed world is that another empty round of talks will go down badly with their own people. US trade representative Michael Froman, consequently, warned: “Let us not sugar-coat reality: Leaving Bali this week without an agreement would deal a debilitating blow to the WTO.”

“It’s now a question of who will blink first … we have nothing to lose … they lose more heavily and I am betting the West will blink first,” said a top finance ministry official.

Officials point out that the food deal is not just about benefiting India’s poor. Subsidising grain for 820 million people actually increases the non-food consumption spending of India’s rural population — a sure step to pep up rural demand, which has been driving Corporate India’s sales in the past few years.

“The world has to realise that food subsidy could actually push up India’s demand for goods and services … which would benefit not only Indian business but also global business,” said officials.