Can WTO rules that prevent excessive agriculture subsidies be transformed to fight hunger?
The World Trade Organization survived last month “the most serious crisis the WTO has ever faced,” as it was described by the head of the WTO. The crisis was a dispute between the United States and India that says a lot about hunger and the current state of trade debates.
In 2013, India enacted an historic new food security law, which gives legal rights to more than 800 million people to secure low-cost food. To support this, the government runs a large food procurement and stockholding program for food staples. The new law is an expansion of existing programs to reduce hunger and malnutrition in India, which are already among the biggest and most comprehensive in the world.
Expanding and improving these programs is critically important because India, by itself, bears one-quarter of the world’s burden of hunger and malnutrition. Close to 20 percent of the population is undernourished and approximately 40 percent of children under 5 years old are underweight. India rates an “alarming” score on the Global Hunger Index.
Just as India was enacting this historic legislation, the US raised objections at the WTO. The problem wasn’t so much the food security program, but to the food procurement element of it. WTO rules limit how much governments can subsidize their farmers and India’s food procurement program looks like a subsidy, even though it does not provide much real economic support for farmers. Due to obscure WTO rules, any price paid by the government over the 1986 prices are considered a subsidy, which is ridiculous on its face. Simple inflation means that food prices today are 500% higher than in 1986 in nominal terms. It doesn’t mean food actually costs 500% more, or that farmers would be getting a huge subsidy if they are paid current prices.
But WTO rules are WTO rules.
India, quite reasonably, insisted on changing the rules and made several proposals for how to do this. The US trade negotiator responded with, “Frankly, the very essence of this proposal is confusing and concerning.”
And so, a crisis ensued, in which basic functions of the WTO seemed at risk as India obstructed the WTO from moving forward on non-controversial issues – a sort of WTO filibuster.
Things were deadlocked and looking increasingly grim for the WTO until the US and India negotiated a ceasefire. India agreed to release its unilateral hold on WTO processes, and the US agreed not to insist on enforcing ridiculous WTO rules. It’s called a “peace clause.”
The ceasefire could last a while, but it’s fundamentally a patch rather than a solution. The rules are still the rules and India needs a long-term solution to protect its food security program. For its part, the US and other WTO members deserve to know that countries like India won’t use the banner of “food security” to provide inappropriate subsidies to farmers. (Note that the US, still provides plenty of these inappropriate subsidies to farmers in the Farm Bill, so a dose of humility is certainly in order.)
Looking forward, there might be ways that the crisis could be transformed into an opportunity. A change to the WTO rules that protects bona-fide food security programs from running up against limits to agriculture subsidies is needed – and not just by India. But that’s just a start.
Here’s three other ways the crisis could be transformed into an opportunity:
- The US and India could use this opportunity to actually improve the impacts and efficiency of India’s expanded food assistance program. The program, for instance, faces serious risks of fraud and corruption with some studies showing that more than 50% of the food in India’s program “lost” before it reaches poor people. The US could offer ideas on how to minimize these risks based on the highly successful US food assistance program, “food stamps” or SNAP. The US program has reduced corruption rates to one-percent, according to the most recent evidence.
- Both US and India both run large food procurement programs. Finding ways to make these programs work better, reduce inefficiency, and support struggling farmers could be a great area for mutual learning.
- Both the US and India run large food assistance programs. But each has been criticized for paying too little attention to improved nutrition, rather than providing basic calories. Figuring out how to improve the nutrition and targeting the most vulnerable people – especially young children and pregnant women – could be an area for joint learning and improvement.
Even though the immediate crisis at the WTO has now passed, the challenges still remain. This could be the time to convert an antagonistic tension into a constructive relationship. Hungry people around the world would benefit.