India-US resolve food security deadlock: Here's what the fight was about

India and US have finally resolved differences on the public stockholding issue for food security purposes in WTO, paving the way for implementation of trade facilitation pacts at WTO.

India had been facing flak for holding up the trade pactunder the WTO. It did so because it wanted to first settle the question of flexibility to buy and stock as much food as it wants from its farmers to ensure the implementation of the Food Security Act.

With the US agreeing to support India’s proposal on public stockpiling of food, it would now go for ratification by the WTO General Council to facilitate signing of Trade Facilitation Agreement (TFA) that has been stalled for months.

This will “pave the way for spurring the WTO to more such success,” she Nirmala Sitharaman, while expressing confidence that members would “take the matter forward in WTO in a constructive spirit”.

The Minister further said that many nations saw merit in India’s stand at WTO and that the US has also “appreciated and now openly supported our concerns on public stockholding.” “India has never obstructed trade facilitation. We were only trying to safeguard our farmer’s interests,” she added.

“India is a strong supporter of the multilateral trading system and is committed to strengthening it and ensuring that the WTO remains a key pillar of the global economic edifice. The WTO is in the best interest of developing countries, especially the poorest, most marginalized ones among them and we are determined to work to strengthen this institution,” said a statement realeased by Commerce and Industry Minister.

Here’s a quick post that will tell you everything related to the WTO deal:

- What is the deal?
The deal, termed a trade facilitation agreement (TFA), aims at simplifying customs procedure, increasing transparency and reducing transactions cost.

The TFAis thefirst major global trade reform pact in two decades. Estimates suggest the pact could add$1 trillion and 21 million jobs to the world economy.

The deal was the first global trade pact reached by the WTO and was hailed as having restored credibility to the group and reviving the Doha Round of trade negotiations.

- Why did it fail?
India decided not to sign the protocol of the Trade Facilitation Agreement (TFA), concluded at the Bali ministerial conference of the WTO held in December last year.

WTO ministers had already agreed the global reform of customs procedures during the Bali talks but were unable to overcome last minute Indian objections and get it into the WTO rule book by the July 31 deadline.

- Why did India say no?
India was trying to win guarantees to protect a $12 billion annual programme to feed its poor that risks breaking WTO rules on price support subsidies to farmers.

India’s new nationalist government has insisted that a permanent agreement on its subsidized food stockpiling must be in place at the same time as the trade facilitation deal, well ahead of a 2017 target set last December in Bali.

The WTO Agreement on Agricultural (AoA) subsidies allows only 10 percent (of production) subsidy for most of the developing countries based on 1986-88 prices.Rich countries argued that the Food Security Bill exceeds this 10 percent and therefore it would “distort” international trade.

India wanted the base of calculating food subsidies updated to current price levels, taking into account inflation and currency movements. Otherwise, the government would not be able to provide subsidised food to some 67% of its 1.2 billion people it wishes to cover under the food security law.

The government had wanted indefinitely to extend a ‘peace clause’ to protect a subsidised food distribution scheme until the WTO could strike a definitive deal on stockpiling. In Bali, the WTO agreed that the clause would expire in four years.

How the US has responded
An agreement between the United States and India to move ahead with a global trade facilitation agreement should give new momentum to multilateral efforts at the World Trade Organization, US Trade Representative Michael Froman said on Thursday.

“On the basis of this breakthrough with India, we now look forward to working with all WTO Members and with Director-General Roberto Azevedo to reach a consensus that enables full implementation of all elements of the landmark Bali Package, including the Trade Facilitation Agreement,” Froman said in a statement.

USTR said the US-India agreement meant the trade facilitation agreement should be implemented without conditions. It made clear that WTO members would not challenge food security programs under WTO dispute settlement procedures until a permanent solution had been agreed and adopted.

With inputs from agencies