At the ‘brink of crisis’

TANYA THOMAS | Updated on March 08, 2018
Who is?

An isolated India accused of playing spoilsport on a deal that 159 other countries had agreed to.

Which deal is this?

The landmark Trade Facilitation Agreement (TFA), hailed the next big thing in global trade reforms.

How so?

Essentially, it’s meant to dismantle all red tape when signatory nations trade with each other and cut costs by making import/export procedures the same everywhere. The OECD says every 1 per cent cut in global trade costs leads to a $40-billion rise in incomes. The TFA could have cut costs by 14.5 per cent in the developing world and by 10 per cent in the developed world, besides creating about 20 million new jobs.

And we said no?

We didn’t, initially. The UPA Government had promised to back the deal at a meeting in Bali last December, and accepted a ‘peace clause’, which gave four years to find a solution. The current NDA Government, however, refused to sign the deal in Geneva last week, missing the July 31 deadline and bringing the WTO, as the US put it, to the “brink of crisis”.

A little dramatic, if anything

They’re still smarting because had the TFA gone through, it would have been the first time that all WTO members had agreed on any one thing.

So why did we refuse?

India’s volte-face has to do with WTO rules on farm subsidies, which we are technically breaching right now. India wants international rules on food and farmer subsidies relaxed for developing countries and is refusing to sign the TFA until that’s done.

That means no deal until the subsidy question is settled?

Yes, pretty much.

What do we want exactly?

We want our food subsidy programme, under which the government buys food from farmers at ‘Minimum Support Prices’ and distributes to the poor at subsidised prices, to be out of the purview of WTO regulations.


Because the WTO says that a government cannot buy food directly from its farmers at a price more than 10 per cent above the ‘market price’. India says WTO’s ‘market price’ is based on 1986-88 prices, which is too low. Further, WTO says farm subsidies (on fertilizer, credit and price support) cannot exceed 10 per cent of the value of agricultural output. India says this also is laughably low since a majority of its farmers are poor, with small landholdings and need more support.

Is politics involved here?

Food security is, of course, a valid concern, but if you’re following that line of thought, then there is the fact that Assembly elections are due this year in Andhra Pradesh, Haryana, Odisha and Maharashtra – some of our major grain-producing States.

Has nixing the deal hurt us?

India has fairly isolated itself with its refusal to sign the TFA. Even Brazil, Russia, China and South Africa — our BRICS buddies — wanted the TFA to go through. Any meagre support for India’s stance has come from Cuba, Bolivia and Venezuela, countries which have similar food security programmes of their own.

So what happens next?

Well, before the deadline passed, India was warned that it would have to face dire consequences if the TFA fell through. We will now have to see what this means. The WTO, for its part, wants to restart negotiations on the trade deal in September.

A weekly column that helps you ask the right questions

Published on August 06, 2014

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor