India pushes to change WTO subsidy rules

India is pushing hard for a change to global trade rules that would allow governments in developing countries more leeway to pay poor farmers above-market prices for food for national stockpiles. Critics warn, however, that such a policy shift - which India is pursuing in the name of food security - could end up hurting poor producers in other parts of the world.

The proposed rule change was officially put forward by the G33 coalition of developing countries last November, but India is widely acknowledged to be the driving force behind the bid. Debate on the issue is heating up as negotiators prepare for the World Trade Organisation's (WTO) next high-level meeting, which is due to take place in Bali in December.

Officials in India, which is home to about one-quarter of the world's hungry, insist that the rule change is essential to the country's development.

"The farmers [need] some sort of a price guarantee," says Jayant Dasgupta, India's ambassador to the WTO. "If you can't give this price guarantee, then many of the farmers who are on the margins may quit farming ... Food production will go down, lands will lie fallow, and the unemployment problem will increase."

In August, India's parliament voted to expand the country's wide-ranging agriculture subsidy programme significantly. The new food security act, which took effect in September, aims to provide subsidised rice, wheat and millet to two-thirds of the country's 1.2 billion people.

But if India pays its farmers above-market prices to build those stockpiles of grain, then analysts say the scheme is likely to cause the country to breach its subsidy limits at the WTO. That would leave it open to challenges from other countries, which could sue India under the WTO's dispute settlement body for violating its subsidy commitments.

Ten years ago, India spent nearly $15bn on domestic farm support (in the 2003-04 market year). The country hasn't reported any subsidy data to the WTO since, but analysts say that the figure has certainly grown.

The WTO rules on farm subsidies are designed to prevent domestic policies from distorting the price of food on the international market. India claims that the food it procures for its stockpiles is intended for domestic consumption, but analysts say that once those stocks are released into the market, they could very well be shipped overseas. Critics warn that a flood of cheap food imports from India could threaten the livelihoods of farmers in other countries, who may suddenly be forced to compete with the heavily subsidised Indian grains.

Relatively rich developing countries such as Indonesia, China and the Philippines are rumoured to support India's request, but opposition to the proposed rule change is strong and widespread.