India Turns Down WTO’s Trade Facilitation Agreement

On August 1, the United States of America Secretary of State, John Kerry met the Indian Prime Minister, Narendra Modi for the fifth India-US strategic dialogue. Kerry appreciated Modi’s agenda of Sabka Saath, Sabka Vikas (cooperation of all,  development for all) but the forty-minutes meeting didn’t turn out the way it was expected.

India vetoed from the World Trade Organisation’s (WTO) Trade Facilitation Agreement (TFA), fearing that the country might have to compromise on its food security. Modi said that the developed countries should understand the problems faced by the developing nations. For instance, India has a challenge of feeding a huge population.
The US secretary of State responded by saying that faliure in signing the agreement has undermined India’s image and it sends a confusing signal.
In December, 2013 a trade agreement, called the Bali Package, was signed among all the WTO members (159 countries) in Bali, Indonesia aiming at lowering global trade barriers.
TFA, which is a part of the Bali Package, aims at reducing the bureaucratic obligations in import-export of goods among the signatories. But the problem with the TFA arises with the clause that restricts the agricultural subsidies to 10 percent of the total agricultural production. If the limit is crossed then other nations can impose a trade penalty for disobeying the rule. This clause is likely to have an adverse effect on food security in developing countries, as there are major issues like that of poverty and over-population.
India’s agreement to the TFA was based on the premise that developing nations would be provided with relief and no tax or penalty would be imposed till 2017. A permanent solution, according to the agreement, was to be later worked out.
India is now against the TFA because the 10 percent limit on subsidy is based on 1986-88 prices when the cost of food grains were much lower. This magnifies the already existing problem of limited subsidy. Also developed countries like US provide huge subsidies to its farmers, but developing countries like India have got restricted permission.
India now demands a permanent solution to the restricted subsidy issue, its stand being supported by China and some southern African countries as well. Whereas according to the WTO, subsidies that require the recipient to meet certain export targets, or to use domestic goods instead of imported good distort the international trade and affect the farmers of other signing countries.
It is well taken that the concerns of the developing nations is a valid one, but they are still forced by developed giants like the US. With India’s initiative of turning down the TFA, other developing countries might also join hands with India in its opposition to the agreement.