Historic trade facilitation deal struck at WTO after consensus on food security

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New Delhi | Updated: November 28, 2014 1:25:41 AM

The stage was set on Thursday in Geneva for a multilateral boost to the stagnant global trade. The World Trade Organisation...

This is the first major deal for trade reform in the WTO’s 19-year chequered history. (Reuters)This is the first major deal for trade reform in the WTO’s 19-year chequered history. (Reuters)

The stage was set on Thursday in Geneva for a multilateral boost to the stagnant global trade. The World Trade Organisation removed, by a special general council resolution, the perceived ambiguity over the permanency of a peace clause for the benefit of developing countries breaching limits set on product-specific support to agriculture. It also approved a protocol on the trade facilitation agreement (TFA), meant to add $1 trillion to the global economy by easing customs rules.

Commerce secretary Rajeev Kher confirmed to FE that the WTO general council at Geneva approved the deal late on Thursday. Commerce minister Nirmala Sitharaman will make a statement in Parliament soon, he added.

This is the first major deal for trade reform in the WTO’s 19-year chequered history, and was supported by all its 160-member countries.
A July 31, 2014, deadline for finalising the TFA protocol could not be met as India, with support from a tiny group of developing countries, insisting that their concerns on public stockholding for the food security purpose be addressed with the same seriousness as TFA, for the world body’s December 2013 Bali package to be implemented.

What enabled Thursday’s resolution is an agreement between the US and India in the run-up to the G-20 summit at Brisbane in Australia, underlining the perpetual nature of the peace clause till a lasting solution to the vexed issue is found. The ice was broken during Prime Minister Narendra Modi’s meeting with US President Barack Obama in Washington in late September.

The peace clause ensures that WTO members will not challenge developing countries’ food security programmes at the WTO dispute settlement body until a permanent solution regarding this issue has been agreed on and adopted.

Earlier, there were different interpretations over whether the relevant Bali package provision is of perpetual validity or available only till the WTO’s 11th ministerial conference slated for December 2017. On Thursday,  the general council also agreed to a proposal to fast-track the completion of work on a permanent solution well before the 10th ministerial conference in December 2015, sources here said.

However, to benefit from the ‘peace clause’, India and other developing countries will have to meet many stringent conditions including submission of detailed reports in case of violation or likely violation of the stipulated  domestic support to farm sector.  As per the reporting system, developing countries have to submit on an annual basis details of their aggregate measurement of support (AMS), including the number of beneficiaries of the public stock-holding programme for food security, the relevant laws and rules, the number of crops covered, volume and accumulation of stocks, purchase and release prices, measures aimed at minimising trade distortion, and the amount of food grains distributed.

As per WTO norms for developing countries, ‘trade distorting’ domestic support of items (such as rice and wheat) cannot be higher than 10% of the value of their production. India running a massive food support programme for its millions of poor and implementing a food security law is concerned about this cap. It is also challenging the calculation of domestic support at 1986-88 reference prices citing inflation and currency fluctuation since then, and therefore wants the base year to be changed from 1986-88 to reflect current market realities and inflation adjustment. These will be part of negotiations on the ‘permanent solution’ while an abiding peace clause in force.

Without adjusting for inflation, India’s product-specific supports for rice and wheat in 2010-11 was much higher than the WTO-mandated cap of 10% of the , at 26% and 17.9% of the total output value, respectively, as per a study by Icrier experts Anwarul Hoda and Ashok Gulati.

However, these supports for rice, as per the study, stood at minus 2.87% and that for wheat at minus 10.22% of the respective production values in 2010-11 when calculated on a fully inflation-adjusted basis.

The developed world, including the US, is keen on faster implementation of TFA to boost their sagging economies through international trade, unhindered by red tapism and lethargy at the customs stations.

Following demands from a few members including Argentina, the general council meeting also agreed to give equal prominence to all elements of the Bali work programme for easing world trade and all other areas of the post-Bali work, as given to food security issues and TFA. Another issue was a demand from least developed nations to pursue on a priority basis a package for their benefit.

Clauses and effect:

Deal removes perceived ambiguity over the permanency of a peace clause

Peace clause ensures members will not challenge developing countries’ food security programmes at WTO

Approves a protocol on the trade facilitation, meant to add $1 trillion to global economy by easing customs rules and create 21 million jobs

First major deal for trade reform in WTO’s 19-year history

 

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