WTO and Food Security: Biting the Hand that Feeds the Poor“We call it the season of death,” said...
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1 WTO and Food Security: Biting the Hand that Feeds the Poor Food Tank, December 8-9, 2017; 2-part series Timothy A. Wise ([email protected]; WhatsApp: 1-617-218-7670) Since 2013, controversy has swirled around India’s National Food Security Act (NFSA), the most ambitious food security initiative in the world, with its plans to buy food grains from small-scale farmers to distribute to some 840 million poor Indians, two-thirds of the country’s people. The controversy came at the World Trade Organization (WTO), where the U.S. government accused India of unfairly subsidizing its farmers by paying a support price above market prices. At the WTO biannual ministerial conference in Bali, India stood firm, questioning the subsidy calculation as an artifact of old WTO rulemaking and asserting that, in any case, such programs that are used for legitimate food security purposes should be exempt from such restrictions. The conflict nearly torpedoed the WTO’s modest negotiated agreements in Bali, but a “Peace Clause” granted India and other developing countries with such programs a grace period while negotiators tried to reach a permanent solution. That grace period is up now, as trade ministers from across the globe board planes for the December 10 opening of the WTO’s 11th Ministerial Conference in Buenos Aires, Argentina. With no progress on the matter at the 2015 conference in Nairobi, Kenya, India and other developing countries have called for a simple exemption of such programs from WTO restrictions. U.S. negotiators, themselves under fire for “dumping” agricultural surpluses on global markets at prices below the costs of production, are demanding more restrictive measures and further concessions from developing countries.
Transcript of WTO and Food Security: Biting the Hand that Feeds the Poor“We call it the season of death,” said...
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WTOandFoodSecurity:BitingtheHandthatFeedsthePoor
FoodTank,December8-9,2017;2-partseriesTimothyA.Wise([email protected];WhatsApp:1-617-218-7670)
Since2013,controversyhasswirledaroundIndia’sNationalFoodSecurityAct(NFSA),themostambitiousfoodsecurityinitiativeintheworld,withitsplanstobuyfoodgrainsfromsmall-scalefarmerstodistributetosome840millionpoorIndians,two-thirdsofthecountry’speople.ThecontroversycameattheWorldTradeOrganization(WTO),wheretheU.S.governmentaccusedIndiaofunfairlysubsidizingitsfarmersbypayingasupportpriceabovemarketprices.AttheWTObiannualministerialconferenceinBali,Indiastoodfirm,questioningthesubsidycalculationasanartifactofoldWTOrulemakingandassertingthat,inanycase,suchprogramsthatareusedforlegitimatefoodsecuritypurposesshouldbeexemptfromsuchrestrictions.TheconflictnearlytorpedoedtheWTO’smodestnegotiatedagreementsinBali,buta“PeaceClause”grantedIndiaandotherdevelopingcountrieswithsuchprogramsagraceperiodwhilenegotiatorstriedtoreachapermanentsolution.Thatgraceperiodisupnow,astradeministersfromacrosstheglobeboardplanesfortheDecember10openingoftheWTO’s11thMinisterialConferenceinBuenosAires,Argentina.Withnoprogressonthematteratthe2015conferenceinNairobi,Kenya,IndiaandotherdevelopingcountrieshavecalledforasimpleexemptionofsuchprogramsfromWTOrestrictions.U.S.negotiators,themselvesunderfirefor“dumping”agriculturalsurplusesonglobalmarketsatpricesbelowthecostsofproduction,aredemandingmorerestrictivemeasuresandfurtherconcessionsfromdevelopingcountries.
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IcoveredtheBaliconflict,pointingouttheunabashedhypocrisyoftheU.S.government,whichsubsidizeswealthierfarmersathigherratesforlesscompellingreasons,callingoutafarpoorercountryforsubsidizingitsmuchpoorerfarmersforthepurposeoffeedingalargeandhungrypopulation.AsthecontroversydraggedontowardtheNairobiWTOmeetinginlate2015,ItraveledtoIndiatoseetherealityoftheNationalFoodSecurityAct.WhatIfoundweremoderatesubsidies,whichhelpedstabilizeruralmarketswhileputtingurgentlyneededfoodrationsintohandsofpoorwomensotheycouldfeedtheirfamilies.WhatIsaw,infact,wasafarmoreambitiousversionoftheU.S.farmprogramsenactedaspartoftheNewDealformuchthesamereasons.FeedingthehungryItraveledtoShivpuriinthestateofMadhyaPradesh,anareaofthecountryinwhich26starvationdeathsin2001and2002hadshockedthenationandpushedthecountry’sSupremeCourtintointerveningtoinsistthatthegovernmentdomoretoensurepoorcitizens’righttofood.Accordingtothe2011MadhyaPradeshDevelopmentReport,thestatehadthehighestinfantmortalityrateinIndia—42percentofchildrenunderfivewerestuntedand36percentwereunderweight,with18percentqualifiedasseverelyunderweight,or“wasted.”AsoneofIndia’smostpopulousstates,with75millionpeople,thehumancostsoffoodinsecurity,eveninjustthisonestate,boggledthemind.In2003,anestimated160,000childrendiedbeforetheirfifthbirthday,achilddeathrateof89per1,000livebirths.TheNFSAincreasedthebasicfoodrationfrom20to35kilos/month(44to77pounds/month)ofcerealsforafamily,andexpandedeligibilitysothemajorityofruralIndianscouldqualify.Beyondthebasicgrains—riceandwheat—theNFSAentitledrecipientstodistributionsofsugar,salt,andkeroseneforcooking.AllweregivenoutbythePublicDistributionSystem(PDS)throughanetworkofthousandsofvillagelevelrationshops.Recipientspayverylow,subsidizedprices;akiloofricethatmightcost20rupeesinthemarketcostjust1rupeeintherationshop—about1pennyperpoundinsteadof10.Arationcardwasissuedtoqualifiedfemaleheadsofhousehold,withthecardstampedandregisteredtoshowcompliance,asystemsoontobereplacedwithmorecorruption-proof,Fingerprint-basedbiometricsystemsforidentifyingbeneficiariesanddocumentingdistributions.InthevillagesofUpsil,Benskedi,andBineka,Imetvillagerswhogenerallyapplaudedtheexpansionoftheprogrambutdemandedbetterservicefromtherationshopsaswellastheinclusionoflentilsandcookingoil,keylocalsourcesofproteinandfat.Childrenseemedpoorbutnotdesperatelymalnourished,thoughonecan’tknowfromsuchavisit.Asitturnedout,Ivisitedthesevillagesatoneofthelessneedytimesofyear,justafterfoodcropshadbeenharvested.Threemonthsearlier,Iwouldhaveseenthehungryseason,that
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paradoxicalperiodwhenthefieldsaregreenwithearlygrowthbutlastyear’sstoreshavelongrunout.InregionsaspoorasShivpuri,theyhaveadifferentnameforthatseason.“Wecallittheseasonofdeath,”saidSachinJainofVikasSanvad,amemberorganizationoftheRighttoFoodNetworkinthestatecapitalofBhopal.Nineteenpeopleintheregiondiedin2011frommalnutrition.Sixdiedjusttwomonthsbeforemyvisit.ButSachinconfirmedthatthingswereimprovingwiththeNFSA.Thankstothefullrangeofcourt-orderedanti-hungermeasures—schoollunches,IntegratedChildDevelopmentServicesforwomenandyoungchildren,andtheNationalRuralEmploymentGuaranteeProgram,inadditiontoNFSA—ruralwelfarehadimprovedconsiderably.Governmentspendingonprogramsforchildrenundersixyearsoldincreasedtwentyfoldoverthepreviousdecade.Thechilddeathratehadbeencutalmostinhalfin10years.InMadhyaPradesh,thepercentageofunderweightchildrenhaddroppedfrom60percentin2006to43percentin2016.FoodbettertodistributethancashThereissignificantvariationinhowwelltheNFSAisbeingimplementedacrossIndia’svastterritory,butMadhyaPradeshhasemergedasaleader.ThatwasthanksinnosmallparttogovernmentofficialslikeDr.ManoharAgnani,StateCommissionerforFoodandCivilSupplies,theagencyinchargeofthePublicDistributionSystem.Dr.AgnanitoldmethatMadhyaPradesh,withitshighpovertylevelsandstrongprograminclusion,expectstoenroll75percentofthestatepopulation,notjust67percent,morethan60millionpeople.Forreference,thatismorebeneficiariesthantheU.S.hasinitsentireSNAP(foodstamp)program.HesaidfooddistributionsforIndiawerefarpreferabletocashbenefits,whicharefavoredbytheU.S.governmentbecausetheyareseenasless“market-distorting.”Agnaniwasdismissiveofthenewfascinationwithcash.“Wehavediscriminationbasedongenderandcaste,”hesaid.Manymaleheadsofhousehold,hetoldme,wouldusecashdistributionsforthingsotherthanfood,andforthemselvesratherthantheirfamilies.Menwouldmorereadilycontroltheincome.“Idon’tbelieveinefficiencyatthecostofeffectivenessandgenderequity,”hewenton.Agnani,whohassincemovedontoajobwiththenationalHealthMinistry,saidthatMadhyaPradeshhasproventhattheNFSAcanbeimplementedefficientlyandeffectivelytoreachthemillionsofIndiansgoinghungry.Butwhataboutitsprocurementatsubsidizedprices?ThatwasthequestiononthetableattheWTO.
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India’sPublicStockholding:“Muchmorethanawelfareprogram”TimothyA.Wise,FoodTank,secondoftwo-partseries.
India’sNationalFoodSecurityAct(NFSA)seemedtobeaneffectivewaytogetabasicfoodrationtothemajorityofIndianswhostruggletofeedtheirfamilies,atleastinthestateofMadhyaPradesh.There,Dr.ManoharAgnani,StateCommissionerforFoodandCivilSupplies,wasexpandingthereachandscopeoftheprogramwhilewringingfraudandinefficienciesfromthesystem.Butwhataboutthepaymentofsubsidizedpricestofarmerstoacquirethatfood,thepartoftheNFSAthathadrunafoulofWorldTradeOrganization(WTO)rules?“TheNFSAstartswithfarmersandprocurement,”Agnanistressedtome.“Itismuchmorethanawelfareprogram.”Heattributedtheirsuccessinthestateto“goodsupplychainmanagement,”aphraseheseemedpleasedtoborrowfromtheprivatesector.Thisincludescollectionfromfarmers,localwarehousing,anddistributiontothenetworkofrationshops.“It’sverydecentralized,with3,000collectioncentersinthestatemostlymanagedbycooperativesocieties,”Agnaniwenton.“Thegovernmentisbuyingabout40percentofthestate’swheat,andevensendingittootherstates.”Butaren’tthelargerfarmersandthemiddlementheoneswhobenefitfromtheminimumsupportprice?Iasked.“Wearebuyingfromthesmallerfarmers,”Agnanisaid.HeexplainedthatinMadhyaPradeshfarmerswhoareregisteredtoselltothePublicDistributionSystem(PDS)cannotbelarge-scalefarmers,traders,orfromanotherstate.Thoserulesarestrictlyenforced.Highsupportprices?FakenewsHesaidgovernmentsupportpricesarenotalwayshigherthanmarketprices,andtheyareneverfarabovethemarket,inanycase.Hesaidthatfarmersselltothegovernmentnotonlybecausethepriceishigherbutbecauseitisguaranteed.Betterstill,farmersarenotlockedin,soifpricesarehigheratharvesttime,farmerscansellontheopenmarket.Andthegovernmenttakescareoftransportation,makingiteasierforfarmerstocooperateinpoolingtheirproduction.Oneofthemostimportantbenefitsoftheprogram,Agnaniconcluded,wasthatitstabilizedprices.Withthegovernmentprocuring40percentofthestate’swheat,thesupportpricecreatesapricefloorforthemarketwheretherewasnonebefore.Middlemencan’tpaylowatharvesttime,whenthecropisplentiful,andtheycan’tsellhighlaterwhenpeoplearehungry.Suchpracticesarecommonplaceinruralareas.AgnaniseemedparticularlyproudoftheroletheNFSAplaysinstoppingexploitativetradersfromtakingadvantageofpoorfarmers.AgnaniattributedIndia’srelativepricestabilityinriceandwheat,eveninbadcropyearssuchasthisone,inparttogovernmentprocurement.Hecontrastedthecurrentmarketforlentils,whichwereseeingpriceincreasesthatmadethisIndianstaplemoreexpensivethanchicken.Indiaimports40percentofitslentilsandotherpulses.AgnanifavoredaddingpulsestothePDSsystem,notonlytoaddproteintodietsbutalsotocreateastablemarketandequalizesubsidiesforthedifferentstaplecrops.Oneofthereasons
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lentilproductionisdownisthatguaranteedpricesforwheatandricemakethemasaferbetforfarmers.Itoldhimthathislistofbenefitstofarmersbeyondthepricesoundedlikeapointbypointresponsetowhateconomistscallmarketfailures,casesinwhichmarketsfailtorespondefficientlytosupplyanddemand,pricesfailtoreflectcosts,andmarket“imperfections”allowunscrupulous—orjustintelligent—economicactorstotakeadvantageofothers.Dr.Agnanismiledatmyreferencetomarketfailures.“Yes,”hesaidconfidently,“weareeliminatingtheinformationasymmetries.”NobelPrizewinningeconomistJosephStiglitzcouldn’thavesaiditbetter.WiththeNFSA,Agnaniwenton,thegovernmentwasmakingruralmarketswork,notdistortingthem,andgovernmentinvolvementwaslessamarketdistortionthanitwasamarketcorrection.BacktotheWTOBirajPatnaikofIndia’sRighttoFoodMovementhadbeeninBaliandNairobiexplainingtoanyonewhowouldlistenthattheNFSAdeservedtobeexemptedfromtheWTO’sarcanerules.Indiahadbeenaccusedofdistortingtradebyexportingfromitsfoodreservewhenstocksaccumulate.Byallaccounts,theysellonlocalmarkets,whichmaywellaffectexportprices.Buttheyarenotdumpingsurplusgrainsoninternationalmarkets.Inanycase,India’sactualsubsidies—theportionofthesupportpriceabovemarketprices—isfarlowerthantheWTOalleges.AsBirajpatientlyexplained,India’s13,600rupee/tonsupportpriceforpaddyricethatyearwasabout100rupeeshigherthanmarketprices.That’sa100rupee/tonsubsidy,whichdoesnotevenapproachIndia’sWTOlimits.TheonlyreasonitseemedlikealargesubsidywasthatWTOrulescomparethesupportpricenottocurrentmarketpricesbuttotheoldreferenceprice,from30yearsearlier,of2,280rupees/ton.Whythebigdifference?Inflation,ofcourse,andanydecenteconomistwouldtelltheWTOtoindexitsreferencepricesforinflationsosuchmisleadingcalculationscouldbeavoided.ThatWTOaccountingtrickmakesIndia’s100rupeericesubsidylooklikeonethatisatleasttentimeshigher.ItwouldputIndiaaboveitsagreedsubsidylimits.In2017,agriculturalpricesareonceagainlow,andthereisevidencetheU.S.isagainexportingitsownsubsidizedcropsatdumping-levelprices.ProgramssuchasIndia’sbecomemoreimportantthanever,astheyallowgovernmentstoprotectsomeofthemostvulnerablefarmersfromdumping.Thosefoodreservescancushionpricespikesintheeventofdroughtormarketfluctuations.India’sfoodsecurityandstockholdingprogramusespreciselythesamepoliciesthattheU.S.usedinitsearlyfarmpolicycomingoutoftheGreatDepression.Exactlythesame:pricesupports,foodreserves,administeredmarkets,subsidies.TheU.S.governmentusedthembecausetheywork.Indiaandothercountriesshouldbeallowedtousethem,too.Becausetheywork.
