Tuesday, Sep 23, 2014

A ‘principled’ Congress stance at the WTO?

Narendra Modi-led BJP government is allowing itself to be captured by Congress-appointed bureaucrats — yet again. Narendra Modi-led BJP government is allowing itself to be captured by Congress-appointed bureaucrats — yet again.
Written by Surjit S Bhalla | Posted: July 29, 2014 12:09 am | Updated: July 29, 2014 6:36 pm

If India succeeds in stalling talks, Modi will only be endorsing UPA’s very bad food procurement and economic policies. 

As is well known and appreciated by now, India has taken yet another principled stand at the World Trade Organisation (WTO). Showing its deep concern for the welfare of the poor, India is threatening to defeat the universally agreed commitment to improving trade facilitation between countries.

No, this is not some banquet, but rather a mundane agreement that will increase the ease of doing business and lower prices for all the world’s consumers. What is this great Indian rope trick? That the WTO should allow India to pursue the Congress and Sonia Gandhi’s dream of the food security act. As shown in the table, this BJP-Indian stance has nothing to do with the food security act or the poor, and everything to do with the bad, bad growth-destroying and inflation-generating policies of the Congress.

Thus, the Narendra Modi-led BJP government is allowing itself to be captured by Congress-appointed bureaucrats — yet again. The first major capture was in the budget speech — universally disliked by all (including chuckle-chuckle, wink-wink, UPA politicians and bureaucrats).

The budget speech, by not emphasising reforms, undermined the authority of the newly elected prime minister, though as I have argued earlier (‘Watch what we do, not what we say’, IE, July 19) this might not be as bad if the BJP introduces reforms and action for which it was overwhelmingly voted in.

Some facts about the WTO case. First, there are precious few countries that are supporting India’s WTO stance. At last count, there were just three countries, well-known for having done wonders for the poor — the venerable states of Bolivia, Cuba and Venezuela. Second, India is attempting to violate the very policy it agreed to in December 2013.

Third, contrary to what many believe, the WTO subsidy agreement is only with regard to production and procurement of agricultural goods, and has precious little to do with consumer subsidies. Fourth, India had already agreed to a resolution of the food subsidy issue by 2017. So why are we demanding that an agreement be reached now? It gets worse.

There is a major flaw in the existing WTO policy on subsidies. The current reference price for the calculation of subsidies is based on an outdated average world price for the three years of 1986-88. One of the desirable and universally accepted WTO policy changes is that the reference world (WTO) price for calculation of the production subsidy be some recent price. All countries (even India and Cuba) want the reference price to be a dynamic price, for example, a moving three-year average. This reference price (RP) is reported in the table as the lagged price (by one year). The domestic procurement price continued…

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