India gets back its bargaining chip by delaying trade facilitation

India has wrested back its bargaining chip at the World Trade Organisation (WTO) to work out a satisfactory permanent solution to its food security concerns, by not agreeing to a trade facilitation agreement (TFA) pushed by developed countries, say experts.

Developed countries, including the US, blamed India for going back on its commitment made in Bali of supporting a protocol for trade facilitation by July 31. They alleged that it is a huge setback for the entire Doha Round (launched in 2001).

But, timelines have not always been sacrosanct at the WTO. “The Doha Development Agenda was mandated by 2005. We are almost a decade behind. The US agreed to remove cotton subsidies by 2006, which has not happened. In Hong Kong, the EU agreed to remove export subsidies by 2013, which is again pending,” argues Abhijit Das from the Centre for WTO Studies.

“India took the tough stand of not supporting the TFA at the WTO as there were enough signs after the Bali Ministerial Meeting in December to show that developed countries were not interested in making any progress in the talks on a permanent solution,” Biswajit Dhar, Professor of Economics, Jawaharlal Nehru University (JNU) said.

So, what exactly happened in Bali that has created so much heartburn amongst members in the aftermath?

In the run-up to Bali, developed countries had tried to hard-sell a TFA, which fixes obligations on member-countries to upgrade their Customs infrastructure and streamline and fast-track clearance processes, as something that would benefit all.

Since it was clear that developed countries (which already have good infrastructure in place) would gain most from the TFA, developing countries such as India decided to get something in return. They demanded that the WTO correct a historical wrong in the area of agriculture subsidies simultaneously with the TFA.

The WTO’s rules on agriculture are framed in a way that allow countries such as the US to get away with agriculture subsidies of over $120 billion (in the form of food stamps, etc) as they are bracketed under non-trade-distorting, while India’s food procurement subsidies, which may be lower than $20 billion, stand the risk of being challenged.

India and the G-33 had demanded that the rules be changed so that food procurement subsidies are not subjected to caps. Alternatively, they want the reference for calculating the subsidy to be changed as it is fixed at prices prevailing way back in 1986-88.

In Bali, the developed countries managed to get all members, including India, to agree to finalising a protocol on trade facilitation by July 31, 2014, in return for a promise that a permanent solution would be in place by 2017. The ‘Peace Clause’ given to developing countries as an interim protection against action if subsidies breached limits, proved to be insufficient because of various conditions attached and the late realisation that it would not be applicable after 2017.

“The success or failure of the talks once they resume in September will depend on the sensitivity that the developed countries show towards meeting India’s legitimate concerns,” Das said.

(With inputs from Aditi Nigam)

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