African Group Seeks Permanent Solution for Public Stock Holding (PSH) Issue at WTO

African Group Seeks Permanent Solution for Public Stock Holding (PSH) Issue at WTO

Sub: IR

Sec: Int org

Why in News:

The African Group, along with India and other developing countries, is pushing for a permanent solution to the Public Stock Holding (PSH) issue at the World Trade Organization (WTO). They seek a solution independent of the ongoing agriculture negotiations, reflecting the need to secure food security and price support measures for small-scale farmers.

What is Public Stock Holding (PSH)

Public Stock Holding (PSH) refers to a government program in which essential food commodities are purchased at a Minimum Support Price (MSP) from farmers and stored to ensure food security. PSH systems aim to maintain an adequate stock of food grains to stabilize prices, manage food shortages, and provide food to vulnerable populations during times of crisis.

The African Group views PSH as essential for ensuring food security by supporting production and consumption in developing countries.

PSH helps governments maintain stocks of essential food items to stabilize prices and prevent food shortages, especially during times of crises.

Alignment with Developing Nations

The African Group’s stance aligns with countries like India and members of the G-33 group, which also advocate for flexibility in food stock policies at the WTO.

Developing nations aim for a solution that allows them to exceed WTO-prescribed Minimum Support Price (MSP) limits without facing penalties or restrictive conditions.

About G-33: The G-33 (or the Friends of Special Products in agriculture) is a coalition of developing countries, established prior to the 2003 Cancun ministerial conference, that have coordinated during the Doha Round of World Trade Organization negotiations, specifically in regard to agriculture.

Dominated by India, the group has “defensive” concerns regarding agriculture in relation to World Trade Organization negotiations, and seeks to limit the degree of market opening required of developing countries.

When rich governments can afford to heavily subsidize their agriculture, predatory dumping can undermine a poorer country’s agricultural economy.

Developing countries aim to balance power through tariffs, in order to manage their own food security, stabilize of the livelihoods of their farming populations, and strengthen rural development.

The group has advocated the creation of a “special products” exemption, which would allow developing countries to exempt certain products from tariff reductions, and also a “special safeguard mechanism” which would permit tariff increases in response to import surges.

WTO-prescribed Minimum Support Price (MSP) limits

They refer to the restrictions set by the World Trade Organization (WTO) on the level of domestic agricultural subsidies that member countries can provide to their farmers. These limits are part of the Agreement on Agriculture (AoA), which aims to prevent trade distortions and unfair competition in the global market.

Key Aspects of MSP Limits Under the WTO:

Aggregate Measurement of Support (AMS): The AMS is the total amount of subsidies or support that a country provides to its agricultural sector, including MSP programs. Countries must report their AMS to the WTO, and they cannot exceed certain levels, which are calculated based on a reference price from the 1986-88 period.

De Minimis Limits: For developing countries, the de minimis limit allows up to 10% of the total value of agricultural production to be provided as support without it being counted towards the AMS.

For developed countries, this limit is set at 5%.

Peace clause: The Bali Ministerial Decision on Public Stockholding for Food Security Purposes allows developing countries to breach the 10% ceiling without legal consequences.

Product-Specific Support: The WTO sets limits on subsidies provided for individual crops, such as wheat, rice, or cotton, to prevent countries from favoring specific agricultural products and causing trade distortions.

Non-Trade Distorting Support (Green Box): Some subsidies, like food security programs or environmental protection measures, are categorized as Green Box measures, which are exempt from limits as they are considered non-trade distorting.

Issue with MSP and PSH:

Developing countries, such as India, argue that their public stockholding programs, where they procure food grains from farmers at MSP for food security purposes, should not be counted towards trade-distorting subsidies.

The problem arises because the WTO calculates the subsidy based on outdated reference prices (from 1986-88), making the support appear much higher in today’s terms, even if it is necessary for food security.