India and USA Reach Compromise on Food Subsidies before WTO

November 14
09:49 2014

Nirmala Happy Over Accord – Doors open for Trade Facilitation Agreement

By TN Ashok   Economic Editor

New Delhi, Nov 13 India and the United States have successfully hammered out a compromise formula on food subsidies today thus heaving off a major road block in the stalled World Trade Organization (WTO) deal on easing of customs rules. This is a major step forward from the Doha round and Bali declaration.

“We will continue to work for the implementation of the Bali package and Doha developmental agenda,” India’s Commerce Minister Ms Nirmala Sitharaman told newsmen today while hailing the agreement.

“The United States and India reached agreement today on a set of measures intended to break the impasse in the work of the World Trade Organization (WTO) to implement the agreements reached last December,” said a US government statement.

The two countries agreed that India’s food security programmes would not be challenged under WTO rules “until a permanent solution regarding this issue has been agreed and adopted,” it said.

India now virtually follows its big neighbour China which also after years of wrangling clinched a deal with the United States on climate change on emission norms stipulation for both countries This will “pave the way for spurring the WTO to more such success,” she said, while expressing confidence that members would “take the matter forward in WTO in a constructive spirit”.

Under the compromise, India and the US now agree to an indefinite “peace clause” on food security until a permanent solution is found. This signals a major success for the Narendra Modi government in global trade talks against mounting diplomatic pressure from developed countries.

A “peace clause” gives legal security to member countries and protects them from being challenged under other WTO agreements.

Hailing the accord, India’s Commerce Minister Ms Nirmala Sitharaman said “We are extremely happy that India and the US have successfully resolved their differences relating to the issue of public stockholding for food security purposes in the WTO in a manner that addresses our concerns.””

This will end the impasse at the WTO and also open the way for implementation of the Trade Facilitation Agreement, he said adding,”” We are confident that the membership will take the matter forward in the WTO in a constructive spirit. This would be an important contribution by the WTO reflecting its commitment to development.””

“”We urge the WTO membership to take this forward in the General Council on behalf of the Ministerial Conference and pave the way to spurring the WTO to more such successes, he said here .

Possibility of a breakthrough in the impasse on the food subsidies issues was available during Prime Minister Narendra Modi’s visit to the United States recently and his meeting with the US President Barack Obama at Washington.

Developed nations have supported the idea of a “peace clause” as it brings an agreement on developing countries’ demands on food security for a period of four years.

India was pitching for a guarantee on exemption till a permanent solution was found to find a way to allow countries the right to provide higher levels of subsidies for their poor beyond these four years. The latest move is to help WTO members ratify the so-called trade facilitation agreement (TFA) to make trade easier, faster and cheaper by making systems transparent and reducing red tape, ministry sources said.

In July last, India had survived mounting pressures from north led by US, all of whom  pushed to Delhi to the corner accusing it of indulging in hard bargaining which they feared could lead to eventual collapse of trade talks pushing WTO’s  framework for trade to an uncertain future.

India had always insisted that state-funded welfare schemes for the poor were non-negotiable even as it took the fall for hindering the TFA. No agreement comes bundled with a roadmap for rules on food subsidies, India had felt.

A statement from the commerce ministry said India is a strong supporter of the multilateral trading system and is committed to strengthening it and ensuring that the WTO remains a key pillar of the global economic edifice. The WTO is in the best interest of developing countries, especially the poorest, most marginalized ones among them and we are determined to work to strengthen this institution.

The principles of non-discrimination, predictability, and transparency and, most importantly, the commitment to development underlying the multilateral trading system are too valuable to lose. Plurilateral trading arrangements, among a few, cannot substitute the multilateral system and are also against the spirit of the fundamental WTO principles of transparency and inclusiveness.

Reasons for India’s Stand

·         The Doha Development Agenda which was agreed in the year 2001 is the very first round dedicated to development. The agenda is a fine balance between market access and development issues.

·         We supported the Bali Package but when subsequent developments belied that hope, India had no option but to seek a course correction. India, therefore, took the stand that till there was an assurance of our concerns being addressed, it would be difficult to join the consensus on the Protocol of Amendment for the Trade Facilitation Agreement, Commerce Minister Ms Nirmala Sitharaman said .

WTO Rules and Food Security

·         The relationship between international trade and food security has been the subject of much debate. So also, the role of WTO rules in enabling and promoting food security.

·         While the relevant WTO rules recognize food security concerns, their primary focus is to liberalise agricultural trade rather than to ensure food security. However, the fact is that some of these rules are proving to be a hindrance to food security efforts.

·         We believe that the rules of the WTO should support the food security efforts of countries rather than “rather than policies having to tiptoe around WTO rules,” as the former UN Special Rapporteur on the Right to Food said.

Commitment to the Trade Facilitation Agreement

·   India has reiterated its commitment to the Trade Facilitation Agreement a number of times.

· We recognise its value for trade and for that reason we agreed to it in the larger interest of global trade. Ms Sitharaman said.

· However, for developing countries the benefits may not be commensurate with the associated costs.  Implementation of the rest of the Bali Decisions will give some comfort to the developing countries and LDCs, even though most of the non-binding decisions do not hold out the promise of substantial gains for these countries. We will continue to work for the implementation of the Bali Package and the DDA.

Broader Understanding of India’s Position/Resonance in the Developing World

While there was much media debate and concerns expressed regarding the impact of India’s stand in the WTO, it has undeniably resonated across the world. Many countries saw merit in what we wereasking for. India was not alone or isolated. Others were simply not speaking up, Ms Sitharaman said .

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