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India: Tough Talk and the Bali Trade Facilitation Agreement

by Alyssa Ayres
July 29, 2014

India's then-minister of commerce and industry, Anand Sharma (C), congratulates the director-general of the World Trade Organization (WTO), Roberto Azevedo (2nd R), after the closing ceremony of the ninth WTO Ministerial Conference in Bali on December 7, 2013 (Edgar Su/Courtesy: Reuters). India's then-minister of commerce and industry, Anand Sharma (C), congratulates the director-general of the World Trade Organization (WTO), Roberto Azevedo (2nd R), after the closing ceremony of the ninth WTO Ministerial Conference in Bali on December 7, 2013 (Edgar Su/Courtesy: Reuters).

Last week India’s top trade negotiators told the World Trade Organization (WTO) that India would not support the package of trade facilitation measures that had been agreed to last December at the Bali ministerial. Because adoption of these measures must be done by consensus among WTO members by July 31, India’s rejection of the agreement now stands to render moot the entire trade facilitation effort. New Delhi’s stance not only puts up a roadblock on global trade, but will effectively halt any efforts to envision a larger ambition for the U.S.-India economic relationship—which badly needs one—by signaling that India at present does not want to stand with the global free and open trading system.

Since the long-running Doha Round of global trade negotiation has accomplished rather little—recall the collapse of talks during July 2008—the Bali agreement had been heralded as an important benchmark to reaffirm that global trade talks can still get something done. The Bali ministerial itself went down to the wire in December 2013, and then across it, with the WTO’s new Brazilian director-general Roberto Azevêdo working overtime to facilitate a compromise acceptable to all members.

The outlines of the compromise involved securing a 2014 agreement on ways to ease trade around the world (such as customs facilitation, advance notification, etc.), coupled with a simultaneous commitment to tackle thorny issues of food security (stockpiling and subsidies) by 2017. Countries whose current stockpiles exceed WTO guidelines would get a reprieve until 2017.

It’s important to remember, especially in light of this week’s trade facilitation crisis, that India was foremost among the dissatisfied countries in the run-up to the Bali ministerial, and it was Azevêdo’s fine work in December that achieved an agreement—to which India concurred. Press reports from early December 2013 all acknowledge India’s food security concerns as the primary hurdle which Azevêdo managed to clear. This headline from the Hindu sums up the Indian media take at the time: “India’s Stand Prevails in Bali” (December 7, 2013).

That’s why the Government of India’s abrupt U-turn on a package it brokered has utterly confounded the world. What’s more, not a few Indian media reports have suggested that New Delhi’s willingness to forego the trade facilitation agreement in order to push for faster progress on food security is a victory for India “against the West.” This is not true; such an interpretation relies on an old opposition, greatly misrepresenting the case. This is not India against the West but against itself and the world, backing away from the terms of a deal it participated in designing as recently as December.

The argument made by India in Geneva is that sufficient attention to food security matters has not occurred in the seven months since December, therefore India cannot in good faith adopt the trade facilitation package. Since the timeline for food security negotiations was explicitly set for the period after 2014, it is very difficult to understand the basis for such a strong objection on lack of progress after seven months.

Meanwhile, back on the bilateral front—what I watch most closely—it’s no secret that Washington and New Delhi hit a rough patch on trade and economics over the last couple of years. One consequence of the turbulence has been difficulty, at least in Washington, to envision a larger and more ambitious economic agenda with India. For example, India is not part of the path-breaking Trans-Pacific Partnership (TPP) trade negotiation—our most significant effort in the rebalance to Asia—nor do there seem to be any pathways to get India within the TPP’s ambit any time soon.

Nor has the United States committed to supporting Indian membership in the Asia-Pacific Economic Cooperation forum (APEC), the premier nonbinding Asia-Pacific grouping promoting free and open trade. At the end of June, I argued that Washington should move with dispatch to work with India on APEC membership. But India’s move to disengage from the trade facilitation agreement will confirm the belief of many that India is simply not ready for larger trade-expanding agreements. Until this week, it was always possible to argue that India upholds the multilateral obligations it commits to; by next week, however, it may cease to be a statement of fact.

There is a path out of this mess, and that is for WTO members, perhaps through Azevêdo’s good offices, to reaffirm their commitment to examining the food security issues India has been raising within the 2017 timeline agreed to in December. With that explicitly renewed assurance, India could then move to adopt the Bali package confident that the questions it wants addressed will be. That would allow the hard-won trade facilitation agreement to come into force as negotiated, and would preserve global attention to food security as designed.

India’s supporters in Washington are hoping for a solution, because without one, it’s going to be a long time out on the econ front.

Follow me on Twitter: @AyresAlyssa

Post a Comment 7 Comments

  • Posted by Srini

    US and the West in general paint India in the worst possible terms and deride India for its poverty. This is not withstanding the largest effort in human history undertaken by India to pull its masses out of poverty after the plunder of India organized by the West (Britain in particular). Now India is committed to provide food security to its masses and it is its right to stock pile food grains to ensure food availability to its own population, and even provide it on a subsidy to poor people. That is the primary function of the Indian government. Indian government cannot abandon its basic function, just to be in compliance with some world organization. Even if it means going back on its word to provide food security for its people, so be it. India is doing the right thing by standing by and for its people.

  • Posted by Prakash

    I read below article and it is fair that India has rejected the WTO deal:
    US,EU are the top bullies combined with Australia, Canada who use their masters to force their agenda!

    1. These countries arm twist poor countries. I m still ok with TFA. Even though it will cost India 50 bill$ to add containers and improve port infrastructure. The most of the beneficiary would be developed nations.
    But being robbed by unfair deal on Farming is not acceptable to India.
    2. But What does India get in return?

    => USA, EU dole out 210 bill$ susbidy to farmers. They have made separate category like Green, amber to protect their interest.

    3. In last doha declaration( and ever since Uruguay declaration with introduction of GATT), EU,US have been arm twisting poor nations with carrot and stick policy. Most of the poor countries are corrupt and ruled by party that are partially democratic, while others are ruled by those with big business interests. They easily succumb to the pressures.
    ===============================
    According to Doha & Bali declaration
    ==========================
    India & other poor countries on the other hand can only give subsidy up to 10% of the product(which is also fixed at 1988 prices) but there is no limit on subsidy given by developed nations to farmers.
    Then Corrupt UPA couldnt even negotiate & gave up on dec 2013 with some stupid peace clause.

    ==================
    Peace clause
    ==================
    It merely buys some time for poor countries till 2017 while rich countries get away with TFA.

    TFA is like golden eggs and signing the deal today would have lost us the bargaining power to negotiate agricultural deal in 2017.

    ===================================================

    4. Shame on EU and US!

    5.US gives 120 bill$ subsidy and EU gives 90bill$ to farmers!

    6. USA agriculture GDP is 170 bill$ for 2-3 million farmers, and they subsidize 120 bill$(direct and indirect).

    7. Indian Agriculture GDP is 300 bill$ and it is primary job of 500 million farmers& subsidy of less than 10 billion$(direct and indirect)

    Does WTO want 500 million Indian farmers to suicide by signing the deal?

    India had a corrupt and weak govt that succumbed to EU, US bullying tactics last December.

    But present Indian govt have full mandate and it will not hurt our interests.

    8. Unlike India, China have only 100 million farmers and it has been able to move 80% farmers away from farming to industry. Moreover it seems to gain a lot from TFA & lose very little from farming( since it dont produce much farm outputs)

    ==============================================================================

    If WTO wants to remain neutral then
    =>
    1. Developed nations should reduce their subsidy. How is it possible that
    US doles our 60% of their entire agricultural gdp as subsidy, on the other hand, India don’t even give 3% subsidy of its total Agricultural GDP produce.

    Is It fair competition?

    2. Western media is crooked and run their agenda!

    =====================================================

  • Posted by Perry de Havilland

    “…after the plunder of India organized by the West (Britain in particular).”

    Sorry but the primary driver of Indian poverty post-independence is not some imaginary lingering effect of colonialism, it is the entirely Indian Permit-Raj system and a systemic unwillingness to confront reality when it threatens established domestic political structures.

  • Posted by George Chakko

    Comment on Alyssa Ayers “India:Tough Talk & the Bali Trade Facilitation Agreement (July 29, 2014) & India’s WTO Veto.

    From Alyssa’s description and from other Indian reports too, one can’t resist an impression, developments at WTO border on the comical. It seems people are racing for time. What for? Give India some time, if it so needs, instead of dwelling prematurely in scenario-type picturisations. One readily speaks even of India‘s isolation at WTO as factuality. Granted it were, isolation at times could do a nation a lot good as being much needed. It can free itself from limiting obligations and keep up its security, in this case food security for its citizens. On the other side, isolating a 1.2 Billion people, above all a “Democratic” India, in a global world, especially in Asia, is not only a dream tenuous, but an unhealthy proposition as well, as it can bring more harm than any good. India’s anchorage in BRICS would then only get stronger; the Big Asia 3 (Russia, China & India) will get more united. More, any envisaged case option of India’s membership in APEC & TPP would vanish. It would definitely not be the case of India ever seeking such “privileged” companionship, as imagined, rather, if it “ever would want it” in the first place, in its own national interests.

    The first Commenter (Srini) is hundred per cent right. You cannot play games with the “belly” of any nation; speak squeezing it through poverty creation by food shortage. Do, then ‘Entrez Révolution Rouge’ ! Streets would overflow in blood! India’s Maoists would have been waiting for one such opportunity to go full gear on their handiwork, enjoying ample tacit support from across its “North-Eastern “ neighbour. Mother India is least affined to any such calamity. Not to forget In this context is one hard reality that lurks strong in India’s memory – the artificial famine Winston Churchill machinated on India via food grains’ shipment stop to East Bengal (The Great Bengal Famine of 1943) when millions died, but failed to halt India gaining Independence in 1947). A condescending, meta-colonialist approach towards India will not work on an India under PM Modi. India is fighting for the genuine fundamental right of its citizens to access food to survive. It has its unassailable right to store unlimited its own home-produced food that is its authentic property and not of anyone else’s, and nobody, nor any world body, can challenge that on principle. Additionally, India has never in the past used its food as a tool to manipulate.

    George Chakko, Former U.N. correspondent, now retiree in Vienna, Austria. August 2, 2014, 05.30 AM CET

  • Posted by Ranjan

    What is the guarantee that once TFA is signed, America and European countries would agree to an all-side satisfactory food security agreement? In case, if the agreement on food security collapses, will TFA also stand automatically canceled? In case, if there is no agreement on food security by 2017 and cases against India begin in WTO dispute settlement mechanism, who will take responsibility? Azvedo? America? Europe? Anyone?

    As Bali agreement was a package deal (single undertaking), how can half of the agreement be signed into a rule in 2014 but the rest remains ignored, needing more consultations??? One can’t be half-pregnant !!

    In addition, its about time when Indians are left to decide what is in their best interest because telescopic analysis doesn’t stand to the actual conditions. Indian government has first responsibility towards its poor farmers and then, to those who need better facilities to push their trade in India.

  • Posted by Sophia N. Johnson

    My view is that the multilateral trading system is important not just to support economic growth and development, but also to deal with global issues. However, domestic politics matters. The reality is Indian incomes are increasing rapidly, but not as rapidly as one would infer from official labor income data and growth statistics (Piketty, 2014). Food security is a supreme national interest.

  • Posted by NPegasus

    Ms. Ayers, like some in the West, has conveniently presented one point of view in her analysis. India is not opposed to the TFC. The estimated benefits of TFC are well known. India has stood its ground on including its long standing request on resolution on food security for its poor in the agreement; critical request that the Western countries prefer to overlook, or hope that this demand can be choked with passage of time.

    When other countries, like India, resist such onerous agreements they are painted as villains of global trade. The developed countries continue to protect their holy cows, such as providing unparalleled farm subsidies to their farmers, while preaching the opposite to the developing countries. Postponing the deadline of this agreement or implementing the agreement in phases can resolve this logjam amicably.

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