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What makes India's Food Security Bill trade distorting?

edited December 2013 in Current Affairs
what makes india's food security bill trade distorting if USA argument is right??

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  • India is net exporter of if govt implements food security will have to buy huge amounts of not a lot will be left to obviously international food prices will rise....i hope that explains
    “It's not the size of the dog in the fight, it's the size of the fight in the dog.” ― Mark Twain

    One mouse to another (both looking at a mousetrap)
    "You see a mousetrap?? .. I see free cheese and a fucking challenge!!"
  • The rich countries aka US n others are insisting that the G33 countries led by india to accept trade facilitating agreement or treaty .
    India and other poor countries who provide sudsidies to its farmers for agricultural production are against this proposal.Question is why ?
    India alongwith other countries had signed an agreement at WTO in 1988 called as Agreement on Agriculture.Under this agreement India agreed that it will offer its farmers a procurement price (a price at which govt actually procures grains from farmers)which is below the then notified import price fixed in rupee terms in 1988 when the agreement was signed.The minimum support price (MSP) India can offer under AoA is the notified import price duly compensated for inflation in subsequent years.
    Now , India recently passed its food bill which would require it to procure more , to successfully implement the target of supplying grains at cheap prices to 67% of population.To do this India would have to incentivise its farmers to produce more by offering them higher MSPs & this offering of higher MSP is what US allege would be trade distorting as according to it if state agencies start buying from farmers at well above international prices then it would act as indirect incentive to them to produce more then they otherwise would.This would squeeze out global grain suppliers, creating a trade distortion.
    Now india is contesting this claim by saying that persistently high inflation has caused them to raise MSPs. Also India is planning to evoke the clause 18.4 of AoA which says that "due allowance" shall be given to the inflation factor while assessing whether MSP being offered by a country is in violation of the terms of AoA.
    But whether this "due allowance" can be moulded into its favour as "full allowance " by India remains to be seen .
    Hope it helps.
    : )
    The fault , dear Brutus, is not in our stars, / But in ourselves, that we are underlings .
  • OK, here is my understanding.

    AoA -
    (1)- Trade distorting subsidies < 10% (as per 1986 prices) [complete stupidity]
    (2)- Article 18.4 - 'Due allowance' for inflation [as pointed out above]
    (3) - Annexure 2.3 - Domestic food security policies allowed as long as identified in national legislation [as is the case with India]

    Claim of developed countries: India has enacted a Food Security Act which will lead to a breach of (1) only if the currency is used as anything other than Indian Rupee. (This claim ignores (2) & (3))

    Indian position: (1) has to be made more flexible

    Western offer: Peace clause - 4 year period for which there will be no actions against India under Agreement on subsidies & countervailing measures; post that we'll see. Also, this is not free, please also sign the Trade Facilitation agreement which will kill you in ways that you can't even imagine!

    India's response: There has to be a permanent solution or at least a solution which lasts till a permanent solution can be reached.

    Others: We have enough troublemakers in the West to sabotage any deal, India please compromise.

    Start the conference!
    I don't like to reply to idiots and if you think I am referring to you, you are probably correct.
  • Hello @aketh !
    Allow me to put across a few points that I think one must know (which awesome Hindu never reports being anti-west)
    1) Western powers argue that India's claim that almost 58% of its population is still dependent on Agriculture and most of them are poor and so they need some kind of support, as a 'moral responsibility' is bogus. They say that your subsistence farmers are anyway so poor that they really don't have anything to spare to get MSP on. They consume what the produce (hence subsistence farmers). So your program is for the ultra rich only.
    2) Its interesting to note that India and USA were the champions of AoA back in 1992. India merrily signed it. According to it, the developed countries got 8 odd years of respite to be able to shift their subsidies from the amber box, which can be challenged, to green box, which can't be dragged to dispute settlement in WTO. So, India feels cheated. Nevertheless, India signed it. Western powers don't want India to act like a sour loser and accept the status quo which it once so passionately fought for.
    3) India is almost looked upon with disgust in the multilateral fora, especially at WTO. All countries realize the benefits of a multilateral negotiations. WTO is actually in interest in their interest to make it work. Developed countries prefer to arm-twist the individual countries (african countries) by going for bilateral and regional trade agreement.
    4) this disgust is spilling over to other trading platforms also, especially TPP where US doesn't want India to be a party pooper there as well.

    Now what makes India's food subsidy trade distorting?
    1) Any subsidy India provides will have no trade distortions as long as India doesn't start to export those food materials.
    2) India specifically provides MSP to food grains of Indian farmers only, which they object as discriminatory. India says that's because they sell cheaper grains. Now that's because India has import duty of 15% on imported food stuffs; India provides fertilizer subsidy to its farmers; different kinds of subsidies like on water, diesel, etc.
    3) Canada insists that if India is so serious to provide nutritious food to their farmers then provide pulses also. But India wouldn't as it is a net importer of pulses. So, utter disgust for India's hypocricy and double standards.

    Sources: Eco teacher at Vaji; Chai tapri discussions with some very awesome friends; Down to Earth had a very nice article not so long ago.
    Sitting, Waiting, Wishing.
  • 2 more quick points....
    4) India's main line of argument so far has been that as the price levels are set long back in 1988, when thing were very cheap, so please do some inflation adjustment. USA reminds India that we are trying to sign a Free trade agreement. WTO members slowly aspire to remove such protectionist measures of providing subsidies. How will revising the prices every now and then help this cause? If we keep on revising then you'll keep on increasing procurement. Instead You better improve your shoddy PDS system and reduce corruption which will reduce your procurement quantities and bring it below 10%.
    5) India needs to procure 34 million tonnes in its godowns to implement FSA next year. Of course this will decrease supply in International market. This will inflate prices and may create trade distortions.
    Sitting, Waiting, Wishing.
  • @slimshady786
    is the trade facilitation Agreement same as AOA.
  • It is one of issues being discussed at Bali talks of Doha round. AoA was an agreement signed in 1987 or similar. In short, no.
    I don't like to reply to idiots and if you think I am referring to you, you are probably correct.
  • @aketh
    Trade facilitation agreement or treaty is the one which developed countries like US and Europian Union wants india to sign.
    Its different then AoA which was signed in 1987 during Uruguay round of talks of the GATT(General Agreements on Tariffs and Trade).
    It might be known that GATT was replaced by WTO under Marrakesh Agreement from jan1 ,1995 which established WTO regime .
    GATT was formed in 1948.
    The fault , dear Brutus, is not in our stars, / But in ourselves, that we are underlings .
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