Unni Krishnan New Delhi
India and the US reached a breakthrough agreement on food stock holdings, clearing the way for passage of the biggest trade deal in the World Trade Organisation’s (WTO) 19-year history.
The two countries agreed that India will extend the world’s biggest food subsidy programme until a permanent solution is reached, according to a US statement. India in July blocked part of the WTO deal because it was unclear if the programme could continue beyond a 2017 deadline.
“India and the US have successfully resolved their differences relating to the issue of public stock holding for food security purposes in the WTO in a manner that addresses our concerns,” Indian Trade Minister Nirmala Sitharaman told reporters in New Delhi yesterday. “This will end the impasse at the WTO and also open the way for implementation of the trade facilitation agreement.”
The announcement gives new life to the WTO after repeated setbacks at reaching a global agreement raised questions about its effectiveness. The trade body estimates that the agreement would stimulate the world economy by $1 trillion (R11 trillion).
“On the face of it, the Bali package can now be implemented since India and the US had contrasting positions and there is a convergence now,” said NR Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a government-backed research institute in New Delhi.
“Developed economies are keen on increased trade as recovery in their economies is not strong.”
The India-US agreement reflects “shared understandings” about the WTO’s work on food security, US Trade Representative Michael Froman said in a statement yesterday. It will reduce the cost of trade by about 10 percent for developed countries and 14 percent for developing countries by removing delays at border crossings.
“This has been a good week for trade and the growth and jobs it supports here in the United States,” he said in the statement, also citing an agreement on information technology with China and progress on a regional trans-pacific trade agreement.
“Together, these will provide a major boost to the global trading system at a critical time in the world’s economic recovery, a central focus of the upcoming G20 [Group of 20] summit.”
The agreement paves the way for full implementation of the Bali package, the EU’s Trade Commissioner Cecilia Malmstroem said.
“Now, we are looking forward to take the next steps on the implementation of all the elements of the Bali package, notably the immediate adoption of the Trade Facilitation Protocol due by July 31,” she said.
Indian Prime Minister Narendra Modi is expected to meet US President Barack Obama at the G20 summit in Australia later this week.
The Bali agreement would shield India’s stockpiles for food security from a legal challenge even if the programme distorts trade and exceeds India’s agreed subsidy limits, according to the WTO.
India last year allocated 1.25 trillion rupees (R224 billion) for its public food distribution system to help more than two-thirds of its 1.2 billion people who eat less than the minimum target set by the government.
India saw the language in the present text as vague, arguing that it doesn’t explicitly say an interim agreement on food stocks will continue beyond a 2017 deadline to reach a permanent solution, the Modi administration officials said.
In particular, they said, India wanted a comma replaced with “or” in a section dealing with food stock holdings, as well as a guarantee the interim agreement would continue.
While some countries wanted to reassess the Bali decisions, others said they “cannot be changed or amended in any way,” WTO director-general Roberto Azevedo said in a July 31 statement, without naming specific countries.
The US’s envoy to the WTO had previously said a failure to agree would be tantamount to killing an accord that the global body estimates would stimulate the world economy by $1 trillion. – Bloomberg