Does India Withdraw from WTO?

Context: A recurring demand from a section of Indian farmers is that India should exit the World Trade Organisation (WTO).

Why Are Indian Farmers Demanding Exit from WTO?

Limits on Minimum Support Price (MSP) & Subsidies

• WTO’s Agreement on Agriculture (AoA) restricts India’s MSP and other support to farmers.
• The External Reference Price (ERP), fixed based on 1986-88 prices– only 10% of the total value of agricultural production as subsidies, does not account for inflation, making India’s MSP seem excessive in World Trade Organisation (WTO) calculations.
• Farmers believe these restrictions hinder their right to secure a legal guarantee for MSP.

Threat from Cheap Imports

• WTO promotes free trade, leading to the import of cheaper agricultural goods from developed countries.
• Eg., India faces cheap dairy imports from New Zealand and oilseeds from Argentina, which harm domestic producers.

Lack of Fair Market Access for Indian Exports

• Developed nations impose non-tariff barriers (e.g., strict quality standards, and sanitary measures) that restrict Indian agricultural exports.
• India struggles to export products like rice, wheat, and dairy due to such restrictions.

Developed Countries’ Unfair Subsidies

• The U.S. and EU heavily subsidize their farmers (U.S. farm subsidies exceed $100 billion annually).
• This makes their agricultural products artificially cheaper, reducing the competitiveness of Indian exports.
• India cannot match these subsidy levels due to WTO’s trade-distorting subsidy caps.

Restrictions on Public Stockholding for Food Security

• India maintains food stocks for welfare programs like the Public Distribution System (PDS).
• WTO rules limit food stockpiling beyond a certain level, calling it a trade distortion.
• This creates challenges for India’s food security and buffer stock programs.

Lack of Progress on “Special & Differential Treatment” (S&DT)

• WTO promised special treatment for developing countries, allowing them to protect farmers.
• However, developed countries block these reforms while enjoying policy flexibility for their own farmers.

What Can India Do Instead of Exiting the WTO?

Utilize WTO’s “Peace Clause” Effectively

• The peace clause protects India from legal action even if it exceeds subsidy limits for food security programs.
• India should continue using this clause to provide MSP and stockpile food grains while negotiating for permanent relief.

Advocate for Reforming the External Reference Price (ERP)

• India should push for updating the ERP from the outdated 1986-88 levels to current inflation-adjusted values.
• This would make India’s MSP more justifiable under WTO norms.

Increase Non-Trade-Distorting Support

• Instead of relying solely on MSP, India can expand direct income support schemes like PM-KISAN, which are WTO-compliant.
• Other investment-based incentives (e.g., irrigation infrastructure, crop insurance) can also be strengthened without violating WTO rules.

Strengthen Tariff and Non-Tariff Barriers on Imports

• India should strategically use tariff and non-tariff measures to curb excessive agricultural imports harming domestic farmers.
• Sanitary and Phytosanitary (SPS) measures can be used to set higher quality standards, restricting unfair imports.

Secure Bilateral and Regional Trade Deals

• India should negotiate fairer Free Trade Agreements (FTAs) to reduce dependence on WTO-led global trade rules.
• Eg., The India-UAE CEPA (Comprehensive Economic Partnership Agreement) ensures better export opportunities for Indian agricultural goods.

Strengthen WTO Negotiations Rather Than Exiting

• India should lead coalitions of developing nations to push for fairer agricultural trade policies.
• Strengthening multilateralism instead of exiting will help India shape global trade rules in its favor.

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