WASHINGTON: The United States and India signed an agreement on Thursday, which discourages governments from stockpiling food and selling it at subsidised rates.

“This breakthrough will strengthen the multilateral trading system and give a boost to its ongoing work, including in the area of food security,” said White House Press Secretary Josh Earnest.

In a statement issued by his office in Washington, Mr Earnest said the deal would also unlock progress towards the full and immediate implementation of the World Trade Organisation’s trade facilitation agreement.

The agreement, reached in Bali, Indonesia, in December 2013, calls for expediting the movement, release and clearance of goods, including goods in transit.

It will enter into force once two-thirds of WTO members complete their domestic ratification process.

The agreement between the US and India focuses on certain practices common in developing countries. In India, the government buys food, including grain, from its farmers and stockpiles it for a public distribution system.

It is later sold at government-run stores at subsidised prices to millions of citizens who cannot buy food at market rates.

This food subsidy programme is available to 75pc of India’s rural population and 50pc of the urban population.

WTO discourages this practice, arguing that subsidising more than 10pc of the grain produced in a country distorts the market for trade. India, however, has been reluctant to accept the 10pc cap.

India’s Commerce Minister Nirmala Sitharaman told a news conference in New Delhi that India has sent alternative proposals to WTO and the organisation’s General Council would review India’s proposals in its next meeting.

Neither India nor the US explained these proposals. They also refused to disclose the details of the agreement they signed on Thursday.

The White House press secretary said that President Obama and Prime Minister Narendra Modi had discussed the issue during Mr Modi’s visit to Washington in September.

The president “appreciates Mr Modi’s personal leadership in finding a path forward,” Mr Earnest said.

In July, India had threatened to veto the WTO trade facilitation agreements un­­less the dispute over its food security programme was resolved.

Published in Dawn, November 14th, 2014