Aug 01, 2014
The World Trade Organization failed Thursday to ratify an agreement designed to streamline the global trade system, frustrating a late push by U.S. officials to convince India to reach a compromise that would have secured a deal.
"I do not have the necessary elements that would lead to me to conclude that a breakthrough is possible," WTO Director General Roberto Azevedo said. "We got closer—significantly closer—but not quite there."
The WTO reached an agreement in December on the Indonesian resort island of Bali to streamline customs procedures. The deadline to ratify that agreement was Thursday, but India declined to do so without a parallel agreement allowing developing countries more freedom to subsidize and stockpile food.
Some economists have estimated that the Bali agreement, which seeks to streamline and harmonize customs practices, could save WTO members more than $1 trillion eventually.
Failure to achieve a consensus before the WTO's own deadline deals a severe blow to the Geneva-based body's credibility, already tenuous after years of stalled talks on tariff reductions. The trade-easing deal was viewed as a way to create some momentum.
As a raft of regional trade deals moves ahead, the WTO's ability to act as a catalyst for global trade liberalization is in doubt.
India had insisted for weeks that it wouldn't sign off on the Bali pact unless the group comes to a faster accord on exempting food-subsidy and stockpiling programs like India's from current WTO rules that limit them.
The Bali meeting had produced a truce: WTO members agreed not to file complaints against India's food subsidies for the time being and said a permanent solution would be found by 2017. India wanted speedier progress on meeting its demands.
"The bottom line is that we are very sensitive to, and we care about, and we will work with India," U.S. Secretary of State John Kerry told NDTV, an Indian news channel earlier in the day. "The key is, don't lose the opportunity."
To maintain government reserves and provide subsidized food to needy households, India buys rice and wheat from farmers in enormous quantities at above-market prices. That has put it at risk of violating WTO rules capping subsidies that influence agricultural prices and production. For developing countries, the yearly ceiling for "trade-distorting" subsidies is 10% of the value of agricultural production.
Economists have estimated that India has exceeded its cap in the last few years as the size of its grain stockpiles—and hence the prices it must pay to growers—has grown rapidly. But the WTO doesn't have current data on the size and nature of India's agricultural subsidies. India hasn't submitted the requisite documentation since 2011, when it reported the assistance it provided to farmers between 1998 and 2004.
An Indian trade official confirmed that New Delhi hadn't submitted its documents for more-recent years but said it would do so soon. There are "tens of nations" that are behind on their WTO reporting, said the official, who didn't want to be named. "What's the big deal?"
This isn't the first time WTO members have come to loggerheads over agricultural policy and government protections for poor farmers. The Doha Round of trade negotiations broke down in Geneva in 2008 because the U.S. and India couldn't agree on developing countries' rights to ramp up tariffs in the event of a surge in agricultural imports.
The collapse in Geneva proved traumatic. WTO talks on major issues were on hold for years.
The Bali talks in December also came close to falling apart. Then as now, Indian negotiators portrayed the food-security standoff as one between developing countries seeking to provide for their poor and developed ones privileging freer trade over the lives of millions of vulnerable people.
A coalition of developing countries initially backed India's proposal to uncap farm subsidies provided as part of food-security programs. But in this month's showdown, India was supported only by Cuba, Bolivia and Venezuela.
Meanwhile, China, Thailand and Mexico, among other large emerging markets, have publicly criticized India's intransigence. Pakistan—poorer per capita than India but also a major rice-grower—has quizzed India about its rice subsidies at WTO meetings.
Source: The Wall Street Journal