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Victory,for now

For India,the good news from Bali was the survival of the WTO itself.

For India,the good news from Bali was the survival of the WTO itself.

The ninth ministerial meeting of the WTO at Bali was a test of its credibility. With mega-regional trade deals like the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership fast taking form,the future of multilateral trade was in serious doubt. It was important for the WTO to send a signal that all was not lost with multilateralism.

The meet took up parts of the Doha Development Agenda (DDA),on which the WTO had failed to progress for nearly a decade because of the sharp differences between developed and developing countries. These almost irreconcilable differences have broken up multilateral trade talks on several occasions in the past. Most trade experts had accepted the futility of trying to achieve a consensus and were reconciled to the WTO playing an increasingly marginal role in global trade. It was important for the WTO to dispel these notions by making progress on the DDA.

A key element of the Bali package was the trade facilitation deal. By ensuring easier cross-border movement of goods through simpler customs procedures and greater harmonisation,the deal is expected to increase world trade by almost $1 trillion. Agriculture and cotton were the two other main components of the Bali package,along with specific measures for the least-developed countries.

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India was critical to the success of Bali. In the past,India’s strong and inflexible positions at the WTO have led to its locking horns with the US,EU and other OECD countries,and a stalemate in the negotiations. This time too,India was expected to play spoilsport. Its stand on the public stockholding of foodgrains threatened to hold up the Bali package as the trade facilitation deal could not have come through without accommodating India’s position on this.

The eventual package represents a win-win situation. India was particularly pleased with the flexibilities incorporated in the public stockholding rules,which allow it to procure foodgrain unhindered and distribute it at subsidised prices. In return,it was happy to agree to the rest of the package including the trade facilitation deal.

What was India demanding and what did it eventually agree to? The procurement of foodgrain at specific administered prices in order to build up food stocks is considered a limited area of domestic support by the WTO’s Agreement on Agriculture because of its trade-distorting effects. The fear among many WTO members is that the procured food grains can be offloaded in the world market at cheap prices to the disadvantage of other producers. The support allowed for an “amber box” measure of this kind is capped at 10 per cent of the value of agricultural production. India’s apprehension was that over stockholding for its food security programme would cause it to breach this cap. It argued for the relaxation of the cap for members on the basis of their specific circumstances.

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The Bali package includes a “peace clause” that restrains members from acting against India and other developing countries for exceeding the 10 per cent cap. However,this is an interim solution,which is expected to be in place till a lasting one is found. The timeframe to develop a permanent solution is four years — by the 11th ministerial meeting of the WTO.

While the nationalist view would be to argue that the WTO succumbed to India’s pressures and India succeeded in protecting its food security programme,the opposite view would be to claim it was much ado over nothing. A peace clause was already on the agenda in the run up to Bali. India has ensured that it is maintained in the foreseeable future. Given the WTO’s poor track record of moving on sensitive issues and India’s ability to block negotiations successfully,India would have assumed that the interim solution had a good chance of staying put for years to come.

Bali demonstrated,once again,that the WTO is a forum where India can flex its muscles. The WTO’s consensus-based approach to taking decisions allows members the room to voice their views and hold back the adoption of work agendas until disputes are settled to their satisfaction. This has made mega-regional agreements popular. India will find these deals much tougher than the WTO. Its reputation of blocking negotiations,though salvaged somewhat at Bali,makes it a “difficult” member to work with. A stage may come when India’s inflexible positions created by domestic political economy compulsions might find it isolated even at the WTO. This was evident at Bali when major emerging markets like China,Brazil and Indonesia backed off from supporting India. The least that India can do is to ensure that its populist domestic programmes are consistent with its obligations at the WTO and elsewhere. Otherwise,much of the rest of the world,including emerging markets,will run out of patience to deal with India’s demands.

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The writer,formerly with the Union finance ministry,is head (partnership and programme) and senior research fellow at the ISAS,National University of Singapore

express@expressindia.com

First published on: 13-12-2013 at 12:17:12 am
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