The deal between India and the U.S. on the contentious issue of public stockholdings of foodgrains for security should put the global trade negotiations back on track. The bilateral compromise provides the much-needed window to save the multilateral Trade Facilitation Agreement (TFA), a significant step in the history of the World Trade Organization (WTO). The TFA, cleared at a WTO ministerial meeting in Bali last year, is intended to simplify customs rules, speed up the release of goods from ports, and pare transaction costs. The Narendra Modi-led BJP government refused to sign the TFA, insisting on a permanent solution to the food subsidy issue before signing it. The bone of contention is over a WTO rule that caps subsidies to farmers at 10 per cent of the total historical value of farm production. This stipulation — as is articulated at the WTO — is seen to undermine the responsibility of developing countries to feed the poor. Not surprisingly, India and some others have questioned the methodology of arriving at such a subsidy cap. A ‘peace clause’ in the WTO rules does indeed provide a limited-year protection to India and the like from legal challenges by member-nations should they exceed the farm subsidy cap. What if the farm subsidy concerns remained unaddressed once the peace clause expires and member-nations are allowed to legally challenge violations of the subsidy cap? Complaints based on rules limiting farm subsidy could seriously hamper the government’s ability to ensure food stocking and supply for the poor. These fears were behind the blocking of the TFA by the Modi government. Had the impasse continued, the beneficial provisions on trade facilitation would have been delayed too.
The deal with the U.S. now provides for an indefinite peace clause until a permanent solution is found to the farm subsidy issue. The deal is a reflection of the Modi government’s assertion of national interest while being flexible on modalities. Once India’s stand and its concern over the implications for food security were explained clearly to the U.S., it came up with a reasonable response. If at one stage India risked global isolation, New Delhi did not insist on an immediate solution to the food subsidy issue but agreed to an indefinite peace clause. In all, it is a pact that enables the multilateral trade negotiations to move forward. With this deal in place, the TFA could become a reality. Of course, the bilateral pact will have to be ratified by the WTO but with the U.S. showing the way, other members would find it acceptable. It underscores once again the dominance of the U.S. in a multilateral global forum even while it is a recognition of India’s place in the global economic environment.
