#dnaEdit: The WTO dilemma

Between now and July 31,India faces a difficult choice over WTO. A major agreement —WTO’s first since 1995 — on trade facilitation is set to come into effect from the end of July. India will have to take a decision whether to go along with the rest of WTO members and accept its implementation. Alternatively, India may be isolated, if its implementation is opposed.

At stake for India is its programme for food subsidy. The trade facilitation agreement was arrived at the Bali meeting of WTO in December last year.  The meeting had a three-point agenda: first — an agreement about trade facilitation, second —  a farm agreement and third — addressing the concerns of the least developed countries. 

The Bali meeting achieved a fully worked out agreement on trade facilitation. It also reached an understanding on eliminating food subsidies beyond 10% of domestic production. The last issue though was addressed perfunctorily. 

At the time of the Bali agreement, India had differed with other countries, virtually alone and wanted that the food subsidy clauses should be properly modified and India should be allowed exemption from the bar on holding public foodgrain stocks. The Bali agreement had come shortly after Parliament had passed the Food Security Act providing for food security for all which meant substantial food subsidy. 

To buy peace with India, the WTO members had worked out what came to be known as a peace clause, that is, the food subsidy clause will not kick in — before 2017. By then, all countries should be able to address the question of food subsidy in excess of 10% of domestic production. 

The problem defied a permanent solution. India insisted that the declaration should also include a provision that a permanent solution to the subsidy issues would be worked out by 2017. That, however, was not formally included in the agreement. 

With the date of implementation of the trade facilitation agreement nearing, the problem has surfaced once again. At a meeting of trade ministers in Sydney in Australia over the last weekend, the matter was discussed. The assembled trade ministers hoped that India would not oppose the implementation of the agreement. India however reiterated its position.

The developed countries are setting a great deal in store by the implementation of the trade facilitation agreement. But without committing themselves on the food subsidy issue. It is believed that once the agreement is fully implemented, global trade should increase by over $1 trillion. And that should generate  jobs to a tune of 21 million of which 18 million will be created in the developing countries, This was the  calculation that the highly respected thank tank — the Peterson Institute for International Economics — arrived at. 

Developed countries are lobbying hard for the trade facilitation agreement. India, already, stands isolated on this issue as even other emerging market economies have also accepted the present form of the Bali agreement. 

India is caught on the horns of a dilemma. Either accept the trade facilitation agreement and its implementation, thereby jettisoning its rights on food subsidy after 2017. Or face international isolation on trade and economic policies. India can, however, still retain its bargaining power over the next round of negotiations to find a permanent solution to the food subsidy question. India can press for a delinking the implementation of trade facilitation from food subsidy.