India can ill afford to let its Bali stand derail the WTO process.
India is finding itself increasingly isolated at the WTOs ninth Ministerial Conference in Bali,where the two main points of contention relate to agricultural subsidies and trade facilitation Indias problems are concentrated in the first of the two areas. Commerce Minister Anand Sharma has dug his heels in to defend Indias right to run its food security and farm support programmes,arguing that even a peace clause which protects India from any complaint by WTO members for a few years is not acceptable. Indias stance may have some validity since,apart from the fact that a country should be free to decide its domestic subsidy levels,the 10 per cent cap on subsidies is itself based on outdated 1986-88 prices and doesnt take into account the inflation in subsequent years if that were done,Indias subsidies could well be below the stipulated 10 per cent of output value ceiling.
But there is something greater at stake here the breakdown of the Bali meeting will not just be seen as the failure to conclude the Doha round,it will be seen as a damning verdict on multilateralism and the WTO as a whole. The trans-Atlantic powers already seem to be itching to move towards bilateral and regional trade agreements. India should accept a three- or four-year peace clause rather than risk damaging a system that has helped it so much.
Ironically though,the WTO cap on subsidies could actually help India. Right now,the MSP-based system encourages farmers to cultivate mainly wheat and rice,and that too in states like Haryana and Punjab,where the water table is falling. Were India to give per-acre subsidies,as the US and Europe do this is what allows them to effectively violate the 10 per cent subsidy cap,which is linked to crops and not income as such farmers could move to less water-intensive crops and rice/ wheat could shift to states like Bihar and West Bengal. And cash transfers in place of a Food Security Act could help cut the 40 per cent leakage in the PDS. Given the benefits of keeping the WTO process alive and the fact that this serves Indias medium- to long-term goals,the governments stance is curious.