Bali Peace Clause

Context: India has come under World Trade Organization’s scrutiny for its Minimum Support Price (MSP) programme.

Bali Peace Clause Background

• India’s MSP programme is under scrutiny as it is the first country to invoke the Bali ‘peace clause’ to justify exceeding its 10% ceiling (of the total value of rice production) for rice support in 2018-2019 and 2019-2020.

The Bali Peace Clause

• Problem of Trade Distortion: Being the guardian of ensuring ‘free’ and ‘fair’ international trade, the WTO puts the actions of a member country under scanner to see if the MSP for any agri-commodity is higher than its international price.
  • If, yes this is viewed as giving an unfair advantage to farmers in the global market.
  • The state support which helps farmers in securing this advantage is termed as a trade distorting subsidy.

• • The rules as specified in WTO’s Agreement on Agriculture (AoA) cap the trade distorting subsidy at 10% of the value of farm production for a developing country.
    • The intent behind putting a cap is to prevent trade distortion.
• The Clause: The “peace clause” was the approach adopted at WTO’s Bali Ministerial Conference (2013) unless a permanent solution was found for the food security concerns of the developing countries.
  • The ‘peace clause’ said that no country would be legally barred from food security programmes even if the subsidy breached the limits specified in the WTO agreement on agriculture.
• India and the Peace Clause: The peace clause protects India’s food procurement programmes against action from WTO members in case the subsidy ceilings are breached.
• Problems with the Clause:
• • Full Disclosure Needed: The clause also requires full disclosure of MSPs and annual procurement for food security programmes, which the Government fears would leave India open to questioning by other countries on domestic matters.
  • Less Market for Developed Countries: The developed nations see India as a huge market for foodgrains and other products.
    • But their produce is rendered uncompetitive when the Government is willing to subsidize farmers, purchase their produce for a minimum support price and then sell it at a loss through the public distribution system and other channels.
  • No Distortion of Global Trade: While the ‘peace clause’ allows developing countries to breach the 10% ceiling without invoking legal action by members, it is subject to numerous conditions such as not distorting global trade and not affecting food security of other members.
  • Accusation on India: WTO members, including the U.S, have been accusing India of habitually not including all required information in its notifications.
    • Some members had pointed out earlier that while it was mandatory to report all public stockholding programmes (like India’s MSP) under the ‘peace clause’, India had not been doing so.
    • India did not have an adequate monitoring mechanism to ensure no stocks were exported.
• G-33 Group: The G33 (or the Friends of Special Products in agriculture) including India is a coalition of developing and least developed countries.
  • The G33 has been advocating a permanent solution at WTO to address their food security concerns.

World Trade Organization (WTO)

• World Trade Organization (WTO) is an international organization established to supervise and liberalize world trade.
• The WTO is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947.
• India has been a WTO member since 1 January 1995 and a member of GATT since 8 July 1948.

Important Facts

• Dispute Settlement Body (DSB): The General Council convenes as the Dispute Settlement Body (DSB) to deal with disputes between WTO members.
• Appellate Body: Appeals are handled by the permanent seven-member Appellate Body which is set up by the Dispute Settlement Body and broadly represents the range of WTO membership.

India’s Disputes at WTO

• Sugarcane Subsidies: India faced a challenge by Australia, Guatemala, Costa Rica, Thailand, the EU and Brazil at the WTO for its sugar and sugarcane subsidies.
  •  WTO asked India to withdraw its subsidies.
• Export Subsidies: India faced a challenge by the US for its export subsidies. Members like the EU, Republic of Korea, China, Canada etc. participated in the dispute as third parties.
  • WTO ruled that these export subsidy programmes provided by the Indian government violated provisions of the trade body’s norms.
• National Solar Programme: The US had filed a challenge over elements of India’s national solar program, which it said discriminated against foreign solar products in violation of a core global trade rule. WTO ruled against India.
• Renewable Energy: India had challenged the US on the ground that America’s domestic content requirements and subsidies provided by eight of its states in the renewable energy or the solar sector were violative of global trade norms.
  • WTO ruled in favour of India.
• Import Duties on steel and aluminium: India has a dispute with the US over the additional import duties imposed by Washington on Indian steel and aluminium in 2018.
• The decision is awaited by WTO’s dispute settlement panel.
• World Trade Organization (WTO) is an international organization established to supervise and liberalize world trade.
• The WTO is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947.
• India has been a WTO member since 1 January 1995 and a member of GATT since 8 July 1948.

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