India risks losing the interim protection available to it’s food security programme under the World Trade Organisation’s Bali agreement if the deal falls through because of the tough stand the country has taken, experts say, adding that this could also give the developed countries such as the US an excuse to ignore the international body and focus on bilateral trade deals at the expense of other nations.
As per the deal worked out in Bali in December 2013, India had agreed to the trade facilitation agreement or TFA pushed by the developed countries in return for provision of interim relief to the developing countries under the clause allowing members to impose trade restrictions on countries that breach the cap of 10% on farm subsidies.
The cap is calculated on total production based on the 1986-88 output, a limit already close to being breached by most developing countries on account of high inflation over the years. However, as per the peace clause reached in Bali, no country can take action against another till a lasting solution to the issue of public stockholding for food security is firmed up.
However, if the deal falls through, the interim relief may also go. In a strong statement at the WTO’s General Council meeting in Geneva on Friday, India sought deferment of the July 31 deadline to sign the TFA, saying that the entire Bali package including issues of food security crucial to the developing countries needs to be delivered as a package.
The legally binding TFA aims to provide seamless cross-border trade by easing customs procedure and red tape and needs to be ratified by July 2015. India has suggested that the whole package and not just trade facilitation be negotiated by December 31. The US, EU and Japan, among others, have hit out at India and said they would not renegotiate the timeline.
This could lead to a debilitating stalemate since WTO’s decisions must be taken by consensus. US Ambassador to the WTO Michael Punke warned, “It is no use to sugar-coat the consequences of such action or to pretend that there would be business as usual in the aftermath.”
The WTO General Council will meet again this week to attempt a solution. WTO director general Roberto Azevedo could also speak to India’s commerce and industry minister Nirmala Sitharaman to seek the country’s support, officials familiar with the matter told ET.
The developed countries could, however, use India’s stand as a ruse to walk away from the WTO that had made some progress in Bali after years of stalemate, an official said on condition of anonymity. “The US is as guilty as they are not keen to invest any energy in WTO. They would rather work on Trans-Pacific Partnership (TPP),” the official said, adding that India had a bigger stake in keeping the multilateral system alive.
Multilateralism matters for smaller trading countries but not so much for large trading economies with enough market power such as the US or China, said Anwarul Hoda, former, deputy director general of WTO and presently chair professor at ICRIER.
“In the recent past, the US is moving from multilateral approach to mega plurilateral approach, be it TPP or TTIP (Transatlantic Trade and Investment Partnership). India frustrating the multilateral negotiations or creating obstacles will be adverse to its own interest,” said Hoda.
The TPP is a proposed trade agreement under negotiation among 12 countries — Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam.
The TTIP, on the other hand, is a trade and investment agreement under negotiation between the European Union and the US. Experts say the standards and intellectual property rights regime being negotiated under these agreements, beyond the ones in place under the WTO, may isolate India out of a large trading network.
“We do carry a lot of burden to protect the multilateral institution. We are in a catch-22 situation. We are not a part of these regional blocs being negotiated, so if the Bali accord fails there will be a rebound and the best thing about the WTO, dispute settlement, may also lose respect,” said Pradeep S Mehta, secretary general of the NGO CUTS International and former member of the WTO’s high-level panel on the future of trade.
India must move more boldly with reforms to enter into these agreements, he added. Commerce secretary Rajeev Kher had warned of consequences for Indian exports after the regional trade agreements headed by the US come into force.
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