WTO Stockholding Limits Peace Clause | UPSC

Public Stockholding and WTO | De Minimis Limits | Peace Clause | UPSC

  • Context: Negotiations at the World Trade Organisation’s (WTO) 13th Ministerial Conference finally concluded on March 2, 2024 in Abu Dhabi.
  • However, the Conference failed to achieve any outcome on public stockholding (PSH) for food security and domestic support for farmers in developing countries, including India, which has been demanding a permanent solution on these issues.


Public stockholding and food security

  • India and 80 other countries have been negotiating a permanent solution for public stockholding (PSH) of food instead of temporary measures.
  • The PSH policy makes it possible for the government to procure crops like rice and wheat from farmers at MSP, store and distribute these food grains to the poor and is thus essential for India’s food security strategy.
      • However, PSH and other measures like subsidies and minimum support prices (MSP) are viewed as trade-distorting domestic measures by the developed world and have been a long-pending mandated issue at the WTO.
  • Currently, under global trade norms, a WTO member country’s subsidy bill should not breach the limit of 10 per cent (for developing countries) and five per cent (for developed countries) of the value of production-based on the reference price of 1986-88. These allowances are called de minimis
  • Apart from increasing this de minimislimit, India has asked for amendments in the formula to calculate the price support subsidies given to farmers for government procurement.
      • Currently, it is calculated as the reference price for 1986-88. This, the developing countries, said, is a flawed calculation.
      • India has asked that the reference price should be either the three-year average price based on the preceding five-year period excluding the highest and the lowest entry for that product; or adjusted for excessive inflation.
  • On the objections to the 10 per cent limit by many countries including India, as an interim measure, the WTO members at the Bali ministerial meeting in December 2013 had agreed to put in place a mechanism popularly called Peace Clause and committed to negotiating an agreement for a permanent solution.
  • Under the Peace Clause, WTO members agreed to refrain from challenging any breach in the prescribed ceiling by a developing nation at the dispute settlement forum of the WTO.
  • This clause will stay till a permanent solution is found to the food stockpiling issue.
  • India also asked for SSM (special safeguard mechanism), which aims at protecting poor and marginal farmers from any surge in imports or a steep decline in prices.

No agreement on fisheries text

  • The agenda for the WTO members was to discuss how to curb harmful fisheries subsidies that contribute to overcapacity and overfishing. No agreement could not be reached on this pillar.
      • The Agreement on Fisheries Subsidies (AFS) was signed in 2022 at the 12th Ministerial Conference (MC12) of the WTO but covered prohibiting subsidies for only illegal, unreported and unregulated fishing and overfished stocks, two of the three pillars under which negotiations have evolved. The third pillar concerns subsidies that contribute to overfishing and overcapacity.
      • India is one among those that have yet to ratify the agreement on fisheries. India has argued that developed countries have depleted marine resources through industrialised overfishing and deep-water fishing.

Transition period

  • Another thorny issue was the transition period. Members of the least-developed countries (LDC) and developing countries, with a global share of marine catch not greater than 0.8 per cent (de minimis) would be excluded from the core prohibition on subsidies.
  • Countries not falling into either of the other groups would have to demonstrate fulfilling the sustainability-based conditions outlined in the draft text in their regular notifications of fisheries subsidies.
  • India’s global share of marine catch is greater than 0.8 per cent (between 4-5 per cent) and thus becomes excluded from the prohibitions.
  • India has sought a blanket exemption from subsidy cuts for all its fishers for a ‘transition period’ of 25 years to address their development needs and ensure their livelihoods. Meanwhile, the developed nations want to limit this period to no more than seven years.

GS Paper 2 : Effect of Policies and Politics of Developed and Developing Countries on India’s interests

Practice Question:

Q. Critically analyze the role of Public Stockholding in ensuring food security, particularly in developing countries, and assess the discussions and outcomes related to this issue in Ministerial Conferences of the World Trade Organization (WTO). (Answer in 250 words)


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