India treading the wrong course at WTO

Written by Ashok Gulati and Anwar ul Hoda | Updated: Jul 23 2014, 07:45am hrs
India is once again in the corner. In the world trade talks, it has baulked at the implementation of the Trade Facilitation Agreement.

The General Council of the World Trade Organisation (WTO) is scheduled to meet in Geneva on July 24-25, 2014. On its agenda is the Trade Facilitation Agreement, which was the high point of the outcome of the meeting of trade ministers in Bali in December 2013. While adopting the agreement, the ministers had established a Preparatory Committee on Trade Facilitation, which was mandated to draw up a Protocol of Amendment for inserting the agreement into the WTO agreement. The ministers had instructed the General Council to meet no later than July 31, 2014, to adopt the protocol and to open it for acceptance until July 31, 2015. The agreement will take effect for members, who have accepted it upon acceptance by two-thirds of the members. India has declared that it is not willing to go forward on the Protocol of Amendment.

The first shot of dissent on implementation of the agreement was fired by the African countries. At a meeting of the African Union trade ministers in April 2014, the idea of a single undertaking of the Doha Round was resurrected, and it was suggested that the Trade Facilitation Agreement should be implemented on a definitive basis only after agreement had been reached on other areas of the Doha Round.

Since then, most African countries seem to have changed their position and are now willing to endorse implementation. India remains the only hold out and this became clear at the G20 meeting in Australia last week.

India does not have a substantive concern with regard to the Trade Facilitation Agreement itself. Its position is based on the concept of issue reciprocity in trade negotiations, whereby a group of participants agrees to negotiate on issues of interest to another group provided the latter agrees to bring on the agenda some other issues of interest to the former. It was on the basis of this approach that India was able to leverage its concerns and put the public stockholding issue on the agenda.

However, we need to remember the two issues were not at the same stage, neither did the Bali Ministerial Declaration envisage a parallel movement on them. In respect of the Trade Facilitation Agreement, the negotiations had already been concluded and the text adopted, while in respect of food security concerns, the issue was merely placed on the agenda and a commitment secured to negotiate on an agreement for a permanent solution.

In the above context, the strategy of trying to halt the implementation of the Trade Facilitation Agreement needs a rethink, particularly when the agreement is likely to boost our export prospects in developing countries. The whole objective of the Trade Facilitation Agreement is to reduce the opportunities for delay at every stage of clearance of shipments.

According to estimates made by experts, the tariff equivalent of each day taken in transport or clearance is 0.8%. Whether it is risk assessment, authorised operators, single window or advance rulings, the objective is to reduce transaction cost by eliminating delays.

The obligations of the agreement are also none too onerous for India. Many of the obligations are couched in best endeavours terms and, importantly, developing country members have been given the flexibility to avail of a transitional period for the obligations for which they are not ready immediately.

In order to secure its concerns with respect to food security, India needs to pursue its objective by making credible proposals. A proposal will be credible only if it does not go against the grain of the Agreement on Agriculture and does not seek to open a big loophole that may allow members to grant additional subsidies and create distortions in agriculture. The proposal made earlier by the G33 for exemption of purchases made from resource-poor or low-income for the public stockholding operations did not meet this test. On the other hand, a proposal for an interpretation of the Agreement on Agriculture to the effect that a nominal increase in support prices that merely neutralises inflation should not be deemed to constitute a breach of the Aggregate Measurement of Support (AMS) commitment, would meet the test.

Similarly, a proposal could be made to exempt price support operations from the AMS calculations when the level of such support is below the import parity price. Price support operations can cause distortions only if the level is above the international price level.

One reason for Indias concerns with respect to domestic support not being understood in the WTO is that we have not been making notifications of our domestic support programmes as we are obliged to do under the Agreement on Agriculture. The last notification made by India was in 2011 and that covered the period up to 2003 only. Until India fulfils its transparency commitments, it cannot hope to engage its trading partners in meaningful negotiations.

The authors are professors at ICRIER. Views are personal