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‘They are ending MSP under WTO policy’: As farmers justify demand to exit WTO, read how India is resisting western pressure to reduce farm subsidies

Contrary to the allegations of the protestors, the Indian government has been resisting the pressure of several agriculture-exporting countries at the WTO and the multinational agency itself. Notably, an influential group of 19 agri-exporting countries – the Cairns Group has been trying to get India to “dismantle” the MSP scheme or “reduce its scope”.

Apart from the enactment of a Law to ensure Minimum Support Price (MSP) for all crops, the protesting farmers also raised the demand that the Indian government should withdraw the agriculture sector from the World Trade Organisation (WTO). Speaking with media persons on Sunday (25th February), the leader of the protesting farmers Jagjit Singh Dallewal reiterated the same and explained the reason behind this demand.

He accused the Modi government of working under the WTO policy and trying to end the MSP at the multinational non-governmental forum adding that it will be harmful for Indian farmers.

He alleged, “We want MSP guarantee from the government, but under WTO policy, they are working to end MSP. If MSP ends under WTO, it will be harmful for our farmers as well, and we can’t let that happen. So, our demand is that the government should remove the agriculture sector from WTO’s agreement.”

Conspicuously, contrary to the allegations of the protestors, the Indian government has been resisting the pressure of several agriculture-exporting countries at the WTO and the multinational agency itself to reduce subsidies in agriculture, including MSP. Notably, an influential group of 19 agri-exporting countries – the Cairns Group has been trying to get India to “dismantle” the MSP scheme or “reduce its scope”, as per Abhijit Das, an expert on international trade and the former head, Centre for WTO Studies.  

The Cairns Group consists of countries such as Australia, Brazil, and Canada, which have accused India of heavily subsidising its public stockholding (PSH) program. They allege that India’s agricultural support distorts global food prices and negatively impacts the food security of other nations.

Despite their pressure on India to reduce agriculture subsidies including MSP, India has been maintaining it as per the Peace Clause of the Bali Declaration 2013 and fighting to get better legal protection for its MSP program.

Notably, Canada is one of the countries demanding the end of MSP in India at the WTO, while the same country is supporting the demand of legal guarantee of MSP by Punjab farmers.

The technicality explained

The peace clause was negotiated as a temporary solution at the Bali Ministerial Conference in 2013. It insulates developing nations against legal action in case they breach subsidy limits. 

However, it is restricted as it applies only to programs that existed before 2013. The existing Agreement on Agriculture puts a cap on public stockholding (PSH) programs of developing nations, including minimum support price (MSP), at 10 percent of the value of production of particular crops. This restricts developing countries from funding food security programs for millions of its poor and vulnerable population.

Additionally, the peace clause has many conditions or restrictions attached to it that make the country liable to legal proceedings in case of breaching the prescribed limit. 

India has invoked the ‘peace clause’ twice for exceeding the prescribed MSP limits. But, it faces scrutiny at the WTO over meeting conditions. At the WTO, India reported its rice production value for 2019-20 as $46.07 billion, with subsidies of $6.31 billion (13.7%), exceeding the 10% limit. However, the Government officials pointed out that India’s farmer subsidy is $300 per farmer, far lower than the US’s $40,000.

Farmers’ groups demand the government insist on a permanent solution to food security at Abu Dabi’s Ministerial conference

Pertinent to note that if the Union government agrees to the demands of the protesting farmers and if new schemes are implemented, then for those products, India will have to comply with the 10% subsidy ceiling and they will not be protected under the ‘Peace Clause’, as explained by Abhijit Das. 

According to Das, this means that if the government were to agree to farmers’ demands for an MSP law, it would not be covered under the peace clause that gives India protection from legal disputes at the WTO.

For this, the farmer groups have been demanding that the government push for a permanent solution to food security issues at the WTO’s 13th Ministerial Conference (MC13) because of the shortcomings and restrictions in the Peace clause. 

The Indian Coordination Committee of Farmers Movements (ICCFM) recently wrote a letter to Commerce and Industry Minister Piyush Goyal over this issue. It is a network of farmers’ organisations and includes farmers movements from Uttar Pradesh, Haryana, Punjab, Himachal Pradesh, Madhya Pradesh, Karnataka, Tamil Nadu, Kerala, and Maharashtra.

In its letter to Union Minister Piyush Goyal, the ICCFM wrote, “Attempts by agricultural export powerhouses to first allow only an onerous peace clause and then challenge the application of the peace clause highlight the need for a permanent solution. Amending the Agreement on Agriculture (allowing subsidies for food security under the Green Box without any limit) would provide greater legal certainty and address the limitations of the current clause.” 

India is working towards achieving more flexibility in providing agricultural support by advocating for a permanent solution at the upcoming inter-ministerial summit in Abu Dhabi, scheduled from February 26 to 29. India aims not only to revise the formula for calculating the food subsidy cap but also to ensure that programs implemented after 2013 are covered by the ‘Peace Clause.’

India will be represented by Union Minister Piyush Goyal at WTO MC13 in Abu Dhabi. At the meeting, many developed members, led by the US, would want to further postpone a permanent solution to public stockholding (PSH).

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OpIndia Staff
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