A new future for the WTO was acclaimed last December after the WTO Ministerial meeting in Bali, Indonesia approved a set of agricultural trade policy changes known as the Bali Package. This was the first multilateral agreement to update existing trade rule since the establishment of the WTO in 1995 as the successor to the GATT (General Agreement on Tariffs and Trade). The failure of India to follow through on its commitments resulted in the WTO missing a July 31deadline for the adoption of the protocol of amendment on the Trade Facilitation Agreement (FTA) and has called into question the future of the WTO as a trade rules setting body.
The TFA will reduce the cost of trade by streamlining and harmonizing customs rules and procedures and reducing the travel time for products from producers to consumers in developing and developed countries. India supported the TFA in return for a ‘peace clause’ from WTO legal challenges to food programs in developing countries like India’s current agricultural stock holding policies and negotiations on new permanent policies by the end of 2017. After the deal was completed, India pushed for new permanent long-term policies to be put in place before the FTA is implemented. An EU representative has recently said if permanent policies were not in place by the end of 2017, the peace clause would continue in effect.
India’s opponents argue it is attempting to hold the TFA hostage to gain additional concessions beyond the overall Bali package in order to maintain its failed policies. The new government, in place since May, of Indian Prime Minister Narendra Modi, appears to want to show that it will fight for a better deal than was negotiated by the previous government. That government was perceived to be more supportive to rural areas and the poor than the new government.
There is no formal or legal linkage between stockholding programs and trade facilitation, but there is an important political link bringing them together. Each issue can move forward on its own when a political solution is found.
WTO Director-General Roberto Azevedo framed the issue, “Therefore the question that WTO members are trying to answer is not whether members can ensure their food security but rather under which commonly agreed disciplines they can implement policies to achieve this goal without further distorting trade or aggravating the food insecurity of third countries.” Under current Indian policies, the government uses price support programs to achieve high internal market prices. When government stocks accumulate to excessive levels, those stocks are sold into export markets at lower world market prices.
India was required as part of the agreement to notify the WTO of its agricultural subsidies after delaying for ten years. The notifications show India in compliance with its commitments, but there are wide disagreements over the data submitted and what was not submitted. Recent analyses by private groups indicate that agricultural supports in India may now far exceed support in the U.S. and most other developed countries even using the Indian methods that under report costs. The recent worldwide decline in grain prices will likely result in increased program costs.
Director-General Azevedo takes the issue seriously. On September 22 he said in a speech, “My assessment is that we risk disengagement if we don’t solve this impasse shortly… All negotiations mandated in Bali, such as the one to find a permanent solution for the issue of public stockholding for food security purposes, may never even happen if members fail to implement each and every part of the Bali Package, including the Trade Facilitation Agreement.”
The U.S. and the EU have repeated their longstanding positions that without implementation of the TFA, it is difficult to see how WTO members could move forward on the so-called post-Bali agenda. That includes drafting a work program by the end of this year to conclude the Doha Round of trade policy talks that is seen as beneficial to developing countries.
Prime Minister Modi will be in Washington, DC to meet with President Obama on September 29-30. Acting Deputy U.S. Trade Representative Wendy Cutler was in India last week doing background on that meeting. According to an Indian government press release, “(Indian Commerce Secretary) Mr. Kher in categorical terms reiterated India’s avowed position on Food Security and Trade Facilitation at great length, re-affirming and reassuring India’s commitment to the Bali Agreement while re-emphasizing a desire for a time bound and permanent solution to the food security issue.”
Cutler’s boss, U.S. Trade Representative Michael Froman, has taken a firm stance on the issue. He received a letter dated September 19 from about 40 U.S. agricultural groups and companies that began, “The undersigned food and agricultural organizations wish to express their deep appreciation to you and your staff for defending U.S. interests and the integrity of commitments undertaken in the World Trade Organization (WTO) by refusing to acquiesce to demands by India to reopen agreements reached at the WTO Ministerial in Bali last December.”
Meetings in Geneva to find a solution have been ongoing since the middle of September. The key issue is will India accept some type of compromise. The hope is to find a way forward by the first week of October.
There is chatter already about what happens if there is no breakthrough. U.S. Ambassador Michael Punke, head of the U.S. delegation to the WTO in Geneva, said at the end of a short statement on the FTA issue on September 15 if there is no breakthrough , ” we will then need to start an entirely different discussion, one oriented towards new and more productive ways of accomplishing things within this institution.” Some WTO members have discussed turning the WTO negotiations into a plurilateral ‘coalition of the willing’. This would have its own struggle to gain sufficient support from WTO members and likely have issues of its legal status.