Food for thought at Bali

The Hindu Business Line, September 04, 2013

By Pradeep S Mehta

India says it is imperative that development be at the core of all negotiations

As we draw closer to the ninth ministerial conference (MC9) of the World Trade Organisation to be held in Bali, Indonesia, there is growing optimism that members may finally be able to strike a deal in December.

Although the proposed ‘small package’ remains a far cry from the conclusion of the protracted Doha development round, it could provide the impetus for members to finally break through the impasse that has characterised these talks since their breakdown in 2008.

Having previously been opposed to the idea of an early agreement package, India now supports an early outcome. But it is of the view that if a small package is to be the result of the deliberations in Bali, it is imperative that development be at the core of all negotiations.

The three main components of the small package are: least-developed country (LDC) issues, agriculture and food security, and trade facilitation. While India is willing to support the LDC package, it has been more active in the two latter areas.

Developing concerns

Having been one of the main supporters of the G-33 proposal that was tabled for agriculture and food security negotiations, India remains a strong proponent of developing country concerns, as it has been traditionally ever since the Uruguay round.

The main tenets of the G-33 proposal are food security and flexibility in public stockholding operations for public distribution.

It aims to address the need for developing country governments to buy food from small producers at administered prices in order to stock it for food security purposes.

Opponents of this proposal have argued that while the issue of stockpiling for food security reasons is indeed a salient issue, commitments negotiated during the Uruguay round should not be undertaken independent from agricultural negotiations as a whole.

India, however, also has a strong domestic motivation for pushing the G-33 proposal. Given that it will be soon adopting a food security Act, if the G-33 proposal is not accepted in December, India may find itself breaching its WTO commitments. However, the proposed law will not violate them.

Currently, there is growing convergence on an interim mechanism that will allow specific countries to raise support prices for their farmers.

But without a concrete agreement in December, WTO members would be entitled to retaliate against this Bill with counter-measures that may have adverse effects on India’s economy.

Perhaps strategically, India has intimated that unless members come to a conclusion on the G-33 proposal, India will not support the Trade Facilitation Agreement (TFA).

Although not fundamentally opposed to a TFA, as it was proposed by a group of developed countries, India has insisted there is need to ensure that the Bali ministerial provide a balanced outcome in favour of both developed and developing countries.

Facilitator mode

The TFA, as a part of the Doha round package, was proposed in an effort to facilitate trade, simplify and harmonise customs rules, and reduce transactions cost.

India has submitted two proposals in this area of negotiation.

The first states that the agreement should make it mandatory for customs authorities to give exporters the option of taking back rejected consignments before destroying them and the second proposal covers measures to be followed by all countries in order to enhance impartiality, non-discrimination, cooperation and transparency at customs.

While rich countries agree with such conditions as best endeavour, India wants it made mandatory.

The most contentious area of debate within the TFA negotiations, however, lies in that India believes that in its current form, it places the burden of policy changes needed to implement this agreement on developing countries.

India argues that, if not altered, developing countries will have to bear the costs of scaling up. Section two of the agreement provides flexibility for developing countries to implement the binding disciplines that are outlined in section one.

These flexibilities are about developing countries scheduling commitments under specific categories according to their ability to implement them, coupled with technical assistance based on needs assessments. As such, India is calling for a more balanced approach for both sections in the TFA.

Standing to gain

In spite of this, however, India could benefit largely from a TFA. According to the Organisation for Economic Cooperation and Development (OECD), India has the potential to draw considerable benefits in terms of trade volumes and trade costs from significant improvements in the areas of fees and charges, and the streamlining of procedures. Pascal Lamy, the outgoing Director-General of the WTO, stated that an agreement on trade facilitation had the potential to boost the global economy by one trillion dollars.

Such growth could have real economic deliverables for India if it finds a way to leverage this growth through means such as further integrating into global value chains that are increasingly beginning to define the contours of the global economy.

In spite of this increasing momentum leading to the Bali ministerial, there has not been enough discussion about what will happen after Bali.

Given the arduous nature of trade negotiations at the multilateral level, members continue to lean towards exclusive accords which could jeopardise the multilateral trading system.

Developed countries have already begun to negotiate preferential trade agreements. In light of this growing trend, India should aim to ensure that an assurance of the inclusion of the unresolved issues that have not been included in the small package will remain on the negotiating table after December.

Many have said that the future of multilateralism will be determined by the outcome of this ministerial.

Indeed, as a member of the WTO and as a respected voice for developing countries, India will have to strategically establish an approach that will balance, on the one hand, its international commitment to multilateralism and on the other, its growing role as an advocate for developing country concerns.

(The author is Secretary-General of CUTS International. Chenai Mukumba of CUTS contributed to this article)

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