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India at WTO: a victory or bailout? -Roshan Kishore
-Livemint.com

It is early days yet to claim victory in the larger struggle to correct the fundamental bias in WTO against developing countries

The impasse regarding the implementation of the trade facilitation agreement (TFA) in the World Trade Organization (WTO) seems to be coming to an end after India and the US reportedly resolved their differences on the food security outcome of the Bali ministerial conference held last December. Apparently, the US has agreed to support India’s demand for changing the duration of the peace clause from four years to until a permanent solution is found, and India will ratify the TFA, hence paving the way for its implementation. Assuming that these proposals are accepted by WTO’s general council, it is important to understand what this implies for the issues involved.

It is definitely a better outcome for India than what was agreed upon in Bali, where the peace clause would have expired in 2017, leaving India and other countries using the public stockholding route to food security vulnerable to hostile litigation. The demand for a permanent peace clause is also supported by precedence in WTO. It seems that India’s stand on the issue was strengthened by the fact that there was no concrete advance after Bali as far as reaching a permanent solution was concerned.

Having said this, there are two areas of concern which should not be lost sight of in the midst of the self-congratulatory mood which seems to be setting in.

The first is the lack of scrutiny that the TFA has received. India’s act of blocking the TFA was portrayed as the ultimate sin which would have robbed the world of billions of dollars in mutual gain. Such claims are both exaggerated and misconstrued, to say the least. To put it in layman’s terms, the TFA requires homogeneity in trade-related infrastructure across the world. Intuition suggests that developing countries would face a hard time in matching the sophistication present in advanced countries. The TFA would make compliance mandatory. It also has an inherent bias towards exporting countries, as they would gain the most from this new infrastructure. The hype around the TFA is a victory of the exporting interests of developed countries, which wanted matching infrastructure levels in developing countries. Once again, they could push their interests, even though no significant progress was made on issues of interest to developing countries in Bali.

Secondly, the demand for amending the rules to remove hindrances to using the public stockholding route for food security is part of the broader agenda of reforming WTO to remove a bias against developing countries. The Agreement on Agriculture (AoA) is perhaps the most contested terrain, where highly subsidized production in the US and European Union continues to hurt farmers in the developing world. The G-33 proposal for food security was effectively reduced to bargaining on the nature and duration of the peace clause, even before it came to Bali. This is in keeping with a strong reluctance on the part of the US and EU to allow any effort for a substantial re-examination of AoA, the biggest example of which is the impasse surrounding the Doha Round. The US is likely to use its support for a permanent peace clause as a one-time cost to get the TFA ratified and block any substantial reform in the AoA framework.

The multilateral trade regime under WTO is essentially a bargaining table where individual countries or groups push for their interests. The requirement of a consensus for decision-making ensures that no one can bulldoze their agenda. In actual practice, smaller countries are susceptible to big-brother pressures, and that is where the role of countries such as India becomes important. By agreeing on an understanding with the US, the government has bailed itself out from the uncomfortable fix it was stuck in due to the Bali decision. However, it is early days yet to claim victory in the larger struggle to correct the fundamental bias in WTO against developing countries.

Roshan Kishore is pursuing his PhD in economics looking at food security in South Asia.