WTO failure — Who is to blame?
Food security for the poor or free trade across borders? Or both?
The World Trade Organization meeting in Genva ended as a failure. India is receiving at the receiving end for this anti-climax.
What was at stake? Had India not fallen out in the last moment, the first real agreement forged by the trade body in 19 years could have come into force. This agreement known as the Trade Facilitation Agreement (TFA) stipulates drastic simplification of customs formalities and paper work done when goods and commodities cross borders either on land, sea or in the air. Once these stifling procedures are done away with, goods movement could be quicker, easier and less expensive. Cross-border trade would get a big boost, resulting in nearly one trillion dollars of additional global trade. All economies big or small, developed, developing or even least developed would benefit from increased global trade.
Such an understanding was reached at the 9th Ministerial Round in Bali in December, 2013. This matter was decided upon after the developed world agreed to find a permanent solution to the issue of stockpiling of food grains by the developing countries by 2017. This particular issue has been the bone of contention between the rich and poor nations for years. The compromise was reached during the Bali summit of WTO when it was agreed to incorporate a ‘peace clause’. This is a concession which allowed countries like India to continue with their food subsidy programmes till 2017.
What went wrong? … India supports the TFA. But, it does not quite accept the objection of the rich western countries on government-supported food subsidies. The western nations argue that the system of subsidy runs counter to the spirit of free trade as they distort the market and its ability to reach fair and competitive prices for both the producer and the consumer. This argument sounds good, but does not really address the needs of countless numbers of small farmers and impoverished consumers to accept market-driven competitive prices. It is the government’s duty to protect the two most vulnerable groups (poor farmer and poor consumer) from the ruthlessness of market economy.
This is why India has opposed the 10 percent upper limit on the quantum of government subsidy. This quantum is calculated by referring to the value of food grains output in a year with the base year for prices set at 1986-88.
India wants the limit to be recalculated taking into account the inflation and the resulting currency depreciation. Secondly, India wants the base year to be reset to a later period. For a large impoverished country like India, these are justifiable arguments. Failure to feed the hungry will destabilize any government in India.
Why is the Government constrained further? … There is the Food Security Act passed by the parliament and made into a law. Now, the government is bound by law to continue the programme to subsidize the farmer and the urban poor. There are nearly 270 consumers living below the Poverty Line in India.
Why made India angry? … The main ground behind India’s resentment lies in the cavalier attitude of the rich and powerful nations. They have been indifferent towards India’s persistent requests to discuss the possibility of accommodating India’s needs for concessions of the WTO rules so that the system of subsidies could continue. Without formal concessions, India will be breaking the WTO rules and could face litigations. Since the Bali summit, the western nations pushed for the Trade Facilitation Agreement with great vigour, but showed little inclination to heed India’s pleas to discuss its case for legalization of the system of subsidies.
India categorically stated its position in Geneva. It said that it supports the TFA, but can not accept it until the subsidy matter is settled. India feared that after the formal passage of the TFA, the western nations will drag their feet on India’s pleas on subsidy. This apprehension forced India to make its acceptance of the TFA conditional to the mutually agreeable settlement of the subsidy issue.
What can be done now? …Clearly, the blame for scuttling of the TFA lies both at the doors of India and the western nations. Still, there is some chance to revive the TFA. Mr. Jaitley has clarified that India is willing to return to the table if the ‘peace clause’ is given indefinite extension until a final understanding on subsidy is reached. WTO can consider extending the TFA deadline suitably if India could be brought on board through liberal consideration of its need to continue the system of government intervention of food prices.