News Analysis: WTO’s Trade Agreement and India
WHAT IS IT?
– WTO when it was established in 1995, to facilitate global trade has put a cap on subsidies provided by host countries for number of products being produced, farm produce being one of the major one.
-Accordingly a cap of 10% subsidy was put of total farm output for any country.
– Drawback of this agreement is, it was based on 1986-88 prices. It has been over 3 decades and Obviously prices have been jumped to many folds since then. So in a way it becomes hindrance esp. for the developing countries in providing sufficient subsidy and protecting the interest of its stake holders against intense competition from global players.
-Also this creates an undue advantage for developed countries because of their large GDP and also as they don’t have to run these kind of social programmes, for instance India provides $12 billion worth subsidy to its 500 million farmers, whereas USA provides $120 billion worth subsidy to its 2 million farmers. Still India is in verge of violating the agreement not USA.
- India passed the food security act 2013, accordingly the govt is bound to provide food to the less affluent classes which is almost 2/3rd of our population or in gross terms numbering 82 crores people.
- It is also in tune with UN’s millenium developmental goal where one of its basic foundation being to erradicate hunger and poverty from world.
- To successfully implement this programme of this scale and magnitude, we must ensure that the prices are kept low, should have a sound supply chain, remove beaurocratic hurdles, even taxes and custom duties must be feasible and simplified.
on its way WTO’s 10% cap agreement can be a potential road block for this programme. So Indian govt sought a peace clause i.e., it can violate the said agreement for a period of 4rs ((without attracting any sanctions or fines for the violation)) and it was signed last yr at Bali summit.
Off late, a new TRADE FACILITATION AGREEMENT has come up and India has put a pre-condition that if it has to ratify then it sought peace clause for indefinite number of years.
Following this USA agreed and signed the pact with India recently.
The notable fact is that this has not only enabled India to bypass the agreement but also many other developing countries which houses most of the poor people.
POINT OF DEVELOPING COUNTRIES:
- Developed countries are worried that due to these subsidies provided by developing countries cheaper food grains shall be dumped in world market.
- If there is cap of 10% then its predicted that it adds to 1 trillion dollars to global GDP and adds 2 million jobs worldwide.
WHAT SHOULD BE INDIA’S HOMEWORK TO IMPLEMENT THIS PROGRAMME:
- Take care of fiscal deficit limits and inflation. Right now as global oil and gas prices are low and also fate of farm output to a large extent is dependent on monsoons, so because of this volatile nature we should be prepared enough to absorb the shocks if anything arises in the future.
- Govt schemes or any programme of this nature should be system driven, i.e., a systematic process should be put in place so that no matter what policy is to be implemented it is done in a hassle free manner and reach the targeted group.
- UID, DIRECT BENEFIT TRANSFER AND PM’s new initiative of JAN DHAN SCHEME where it targets to open an account for every citizen of this country.
It may be true that 10% cap of WTO may be in the larger global trading economic and trading interests but definitely it is detrimental against the interest of the poor people in developing countries and also violation of UN millennium developmental goals