The Pulse

India Wins Big With Global Trade Deal

The WTO’s first global trade deal saw India accomplish an important diplomatic objective.

India Wins Big With Global Trade Deal
Credit: Wikimedia Commons

On Saturday, the World Trade Organization (WTO) concluded its first global trade deal since its founding in 1995, after nearly two decades of negotiation (a side effect of consensus-based deal-making). The deal, known as the “Bali package,” was approved by the 159 members of the WTO and brought momentum to broader talks of a global free trade regime. India had long been perceived as an obstacle to the conclusion of a deal due to its vociferous refusal to yield on any measures that would challenge its grain subsidies, a non-starter politically in a country that continues to wrangle with the world’s largest population living below the poverty line. Indian trade negotiators managed to stave off the issue of subsidy limits for another day, allowing the agreement to pass without any provisions it found disagreeable. The deal reinvigorates hopes that international multilateral trade negotiations can be productive.

The WTO accord was reveled over the weekend in Bali, Indonesia and generally reduces the barriers for cross-border commerce among member states, while safeguarding food security in developing nations such as India. The deal additionally targets bureaucratic delays among its member states and aims to dramatically reduce red trap in global trade and commerce.

India’s voice on food subsidies at the WTO was in diametric opposition to the United States’ policy preferences in the trade deal. In April 2013, U.S. Ambassador to the World Trade Organisation, Michael Punke, called out India’s price-distorting subsidies: “The G20 proposal last fall related to TRQ administration represents the type of initiative that is calibrated to our current context. We remain ready to address this proposal. While not perfect, its scope does not call into question fundamental balances in the agriculture sector, and it aims to promote trade. Nor is it technically difficult to negotiate. … The G33 proposal on stockholding of food put forward by India is exactly the opposite. Many in Geneva have expressed concerns about this proposal from the beginning, while also expressing willingness to consider the proposal with an open mind. For four months the United States and others have engaged extensively to learn more, even in the face of incomplete information. But unfortunately these intensive discussions of the proposal have revealed more causes for concern, not fewer.”

India led the G33 group of developing countries in submitting a proposal that countered the U.S.-led G20 proposal. The G33 group notably includes India, China, Pakistan, Indonesia, the Philippines, Turkey, several southeast African states, and certain Latin American countries. For India, the Bali package represents not only a major diplomatic and commercial triumph, but a step forward in navigating global multilateral fora. In effect, India’s WTO triumph speaks to its improved bargaining power. The WTO victory is by no means a panacea to India’s food provision problems — something the current UPA coalition government has tried to combat with a slew of populist measures. The onus remains on New Delhi to craft the public policies that will benefit India’s poor in the long-term.

India recently took steps to legislate a “right to food” for around 800 million of its citizens. Its grain subsidy programs have been a near-constant since independence and continue to be emphasized by the incumbent Congress Party-led government. As the WTO negotiations marched on, India showed no signs of easing on its subsidies. India’s National Food Security Act was signed into law in September 2013 and all but guaranteed that Indian negotiators would not concede on the subsidy issue at multilateral trade talks.

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India’s food security measures have several critics, domestic and internationally. The United States, which continues to be frustrated by India’s resistance to free trade, had made its opposition clear at the WTO. Several Indian commentators and critics of the ruling Congress party have pegged the food security measures as fiscally irresponsible demagoguery ahead of the general elections in 2014.

One fears that the hard-won battle at the WTO might inspire a degree of complacency in India over its agricultural policy. Instead, India can take concrete measures to combat hunger and poverty within the Bali package rubric by investing in improved agricultural facilities and directing its resources towards improving the efficiency of Indian farms. Declining crop yields and drops in productivity jeopardize the ambitions of India’s food security measures. The seemingly insurmountable problem of food distribution — getting food to those who need it most — will demand the full attention of the national and local governments.

The WTO’s coteries of developed and developing countries are expected to revisit the issue of food subsidies at a later date. The organization’s ultimate goal — a robust and comprehensive global trade regime — will necessitate resolving the issue. For the moment, India appears to be in the clear, but it can expect to revisit the issue on the world stage in the future.