India at WTO: Global trade facilitation agreement row explained

Written by Express news service | New Delhi | Updated: Jul 24 2014, 16:32pm hrs
Trade dealIndia will not back WTO trade protocol unless its concerns are addressed. (Reuters)
An agreement by the WTOs 160 members, including India, during the ninth ministerial conference in Bali last December saw the members committing to streamline the flow of goods across international borders. Key to the deal was a consensus on pushing through a trade facilitation agreement or TFA, which seeks to streamline border procedures, making it easier for merchandise goods to cross international borders. The new NDA governments threat to veto the implementation of the TFA, in an effort to seek a negotiating space for public stockholding in food grain and food subsidies, has shaken up the WTO set-up.

What is the recent controversy all about

The ongoing controversy has its roots in the Indian government threatening to veto the implementation of the deal struck in Bali, in an effort to seek a negotiating space for public stockholding in food grain and food subsidies. The current WTO norms limit the value of food subsidies at 10 per cent of the value of foodgrain production. However, the support is calculated at the prices that are over two decades old and not at the current prices.

If India blocks the global attempt to push through a trade facilitation agreement, it will be the only country in the entire WTO membership to stop the deal from getting implemented. The WTOs agriculture committee, which is dealing with the food security issue, is due to meet later on Wednesday in what will only be its third meeting since the Bali ministerial last December. The agriculture committee meeting will be followed by a crucial meeting of the general council on Thursday.

Why is the TFA ratification so important

The TFA faces its first implementation deadline on July 31 when WTO members, who make decisions by consensus, must approve a one-paragraph accession protocol. The deadline of July 31 is by when all the 160 WTO member countries have to sign the agreement into a protocol, marking implementation of the first phase of the deal. It was to come into force fully from 2015.

When the deal was struck in Bali in December, it was decided that as an interim measure, in respect of public stockholding for food security, developing countries would be protected from WTO disputes for non-compliance with the relevant provisions of the Agreement on Agriculture. This protection would be available till a permanent solution, the deadline for which was 2017.

What is the Indian position

India wants the talks on public stockholding for food security to happen immediately, an issue that has domestic compulsions in India. For the government, the issue of livelihood of its marginal farmers is a deeply political one, especially in light of the stockpiling needs on account of requirements of the Right To Food Act.

Commerce minister Nirmala Sitharaman has indicated earlier this month that India would not back the TFA protocol because it was unhappy with the progress of talks on food security that ministers also committed to in Bali. Those, she was quoted as saying, had been cast aside.

Soon after, commerce secretary Rajeev Kher issued a statement saying until India got an assurance that WTO members were ready to discuss a permanent solution on public stockholding, it would be difficult for it to sign the protocol on TFA.

Central to the Indian position is the governments move to procure grains, largely by way of offering a minimum support price to farmers, and distributing them to BPL consumers through the public distribution system (PDS) at a subsidised price.

To treat such schemes under WTO rules remains an area of contention that ministers in Bali agreed to tackle by 2017. The government is demanding a reworking of the rules to ensure that developing countries do not breach the prescribed subsidy cap.

Is there support for India

South Africa is said to be backing India, and other African members of the WTO have raised concerns over whether the financial aid they were promised to help revamp customs procedures will materialise. But broadly, India could be isolated. Domestic analysts say that India is perhaps not doing the right thing by going against the broader global coalition.

Critics have even hinted that India is doing this because it is not prepared to take on the requirements of TFA, with a relatively weak trade infrastructure.