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WTO 'peace clause' and Indian food subsidy
Nov 23, 2013

As India is launching food subsidy programme, it may be in dispute with WTO clause related to subsidies allowed for Agricultural purposes; thus WTO is ready to offer this as an interim measure in the form of “Peace clause” under the World Trade Organization (WTO)’s food security agreement.

Under this clause while developing countries can provide WTO-prohibited subsidies to farmers without inviting any dispute under the Agreement on Agriculture, rich countries will have the right to drag these countries to the WTO Disputes Settlement Body, under the Agreement on Subsidies and Countervailing Measures. The clause will not guarantee any protection to India from being dragged into trade disputes by developed countries.

The government seems to be divided over the issue. While  some senior officials want India to agree to the offer so as to not to be seen as spoiling the talks, others want India to put its foot down on the matter, as any such trade-off would impact the livelihood of 600 million farmers.

Currently, developing countries can provide subsidies up to 10 per cent of the production value. For China, it is eight per cent. Developing countries such as India, China and Brazil are already on the threshold of these levels. Whereas presently under the newly enacted Food Security Act, India will provide 60 kg of food grains a person; the US provides 385 kg of food a person through several programmes. In 2010, the US spent $94 billion on its food aid programmes; in 2012, the amount stood at $100 billion. Against this, India’s food subsidy bill is estimated at about $20 billion this financial year. However, this isn’t acceptable to the US and the EU.

 


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