India plays spoilsport at WTO

For the past one month, the one topic that has dominated policy discourse in India — and to an extent outside — has been one which normally should not have evoked such strong reactions. Trade matters, as a rule, have a limited appeal, beyond, of course, those who have a vested interest — those involved in global trade and policy-makers. Even at a time India’s international trade has been expanding at a fast clip, trade issues, especially on matters of treaties and other arcane stuff, hardly excite the public at large.

By the middle of last week, there were apprehensions that India’s stance would derail a hard won agreement at the Bali ministerial in December last. This unfortunately came true as India refused to climb down despite some persuasion by, among others, the U.S. Secretary of State and the Commerce Secretary who were in India.

Enormous ramifications

The ramifications of the failure to reach an agreement, which was considered a done deal, are enormous and affect not just India but the entire multilateral trading system embodied by the WTO. It deals a severe blow to the WTO’s credibility, already tenuous after years of stalled negotiations. Under the world body’s rules, a consensus among all 160 members is necessary: in effect that means every member has a right to a veto. The deal at Bali in December 2013, the first ever concluded under the Doha development round, breathed new life into WTO, which was fast losing its relevance.

The breakthrough was rightly considered to be a huge personal triumph for the new Brazilian Director-General, Roberto Azevedo.

Bali declaration The Bali ministerial declaration encompassed three major issues — a Trade Facilitation Agreement (TFA); an agreement to negotiate a permanent solution for food subsidies and stocking of foodgrains to be negotiated by 2017; and an action plan for the least developed countries.

The significant achievement at Bali was the TFA. India and all other WTO members agreed to the TFA, which is meant to simplify customs procedures, facilitate speedy release of goods from ports, and cut transaction costs. According to some estimates, the TFA would save nearly $1 trillion for WTO members.

There are no two opinions that the TFA will benefit all countries although some commentators tried to inject a developed versus developing country angle. In their view, developed countries stand to gain more from a concluded TFA.

No special reasons Even if it were so, there were no special reasons for India to play the spoiler’s role, nullifying the gains at Bali and threatening to force members to adopt a new timeline.

In fairness, India did not object to the TFA per se but wanted the other agreements at Bali, specifically dealing with food security to be discussed simultaneously.

The belief that the developed countries were dragging their feet over food-related issues while pressing for the TFA to move forward (July 31 was the deadline) has weighed with India.

There is a strong suspicion that Indian negotiators pushed themselves into a corner from which they could not extricate themselves in time.

Food security concerns are certainly important for India as indeed for many other developing countries. But agreeing to the TFA, India would in no way have compromised on those. If the objective was to turn the spotlight on food security concerns and the developed world’s relative lack of enthusiasm to pursue those, its strategy of holding out till the last minute would have made sense. However, by not agreeing to the trade facilitation deal at all, India would appear to have lost whatever clout it has had. Not surprisingly, only a handful of countries supported India’s involving many countries. None of these are big names in global trade.

The failure to gather some more support is seen as a failure of trade diplomacy. Also, the fact that the BJP then in Opposition was critical of the Bali deal might have conditioned today’s negotiators. In any case, in a matter so important as this, there has been very little communication from the government side on the issues involved, the need for India to go out on a limb and so on.

The weakening of the WTO is certainly not a good thing for India and developing countries. In the wake of the latest failure, major countries are scrambling to cobble up bilateral and plurilateral deals (involving many countries). This is an ominous development for India, which has long held the view that these trade pacts, despite their short-term advantages, stand in the way for multilateral trade. More immediately, India runs the danger of being left out of these agreements.

narasimhan.crl@thehindu.co.in