The Road to Bali: India and the WTO
September 17, 2013, 8:48 am

As one of the main supporters of the G33 proposal (regarding food security and flexibility in public stock-holding operations for public distribution) – that was tabled for the agriculture and food security negotiations – India remains a strong proponent of developing nations’ concerns, writes Mehta [Getty Images]

Negotiations for the WTO’s Doha Development Round had been suspended for years due to differences on issues such as trade barriers and agricultural subsidies.

Although the proposed ‘small package’ of trade reforms (which many see as an important first step for the WTO to salvage a means to a solution) 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 the nature of these talks since their breakdown in 2008.

The three main components of the small package are: Least-developed country (LDC) issues, agriculture and food security, and trade facilitation.

Agreement on the small package has been deemed essential if members hope to instil confidence into the multilateral trading system once again.

India’s focus on development

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

While India is willing to support the LDC package, it has been more active in the areas of agriculture and food security, and trade facilitation.

As one of the main supporters of the G33 proposal (regarding food security and flexibility in public stock-holding operations for public distribution) – that was tabled for the agriculture and food security negotiations – India remains a strong proponent of developing nations’ concerns.

This has been its traditional position ever since the 1986 Uruguay Round of trade negotiations.

The G33 proposal also aims to address the need for governments of developing countries to buy food from local small producers at administered prices in order to create a stockpile for food security purposes.

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

India has strong domestic motivation for pushing the G33 proposal. Given that New Delhi has recently adopted a Food Security Act, if the G33 proposal is not accepted in December, India may find itself in breach of its international WTO commitments. However, some – like me – believe that the proposed law will not violate these commitments.

TFA: Avoiding countermeasures

Currently, there is growing convergence on an interim mechanism that will allow specific countries to raise support prices for their farmers – but this is only a temporary measure. Without a concrete agreement in December, WTO members would feel entitled to retaliate against this bill with countermeasures that may have adverse effects on India’s economy.

Perhaps strategically, India has intimated that unless WTO members come to a conclusion on the G33 proposal, it will in turn not support the Trade Facilitation Agreement (TFA).

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.

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

India has submitted two proposals in this area of negotiation.

The first states that the TFA should make it mandatory for customs authorities to give exporters the option of taking back rejected consignments before destroying them.

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 is seeking to make them mandatory.

India believes that the most contentious area of debate in TFA negotiations is how the burden of policy change needed to implement this agreement is placed on developing countries.

If the current conditions are not modified, developing countries will have to bear the costs of scaling-up, India says.

Section Two of the TFA 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 Sections One and Two in the TFA.

In spite of this however, India could benefit largely from a TFA. According to the Organisation of 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 earlier that an agreement on trade facilitation had the potential to boost the global economy by $1 trillion.

Leveraging growth

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.