The World Trade Organisation has been around for almost two decades now, yet last year’s Bali package agreement, aimed at streamlining global trade, was the first comprehensive agreement that its members have agreed upon. The package, a legally binding commitment to simplify and standardise port procedures, was expected to have impact valued at $1 trillion on the global economy. Now the Bali package is on the rocks – and India is responsible.
India signed on to the package, as did 158 other WTO nations, after much debate and wrangling over its exact provisions. Yet on Thursday last week the National Democratic Alliance government explicity stated that it cannot trust the United States and the European Union’s promise of promoting free trade while safeguarding its own developmental objectives – particularly food security – at the same time. India now accuses those countries of hastily pushing through the trade facilitation agreement, while paying lip-service to food security assurances that will later be junked.
“There is growing disenchantment, anguish and anger in [our] domestic constituencies and a sense of deja vu as once again they see the interests of developing countries being subordinated to the might of the developed world,” India said, in a statement at a WTO meeting in Geneva earlier this month. “In round after round, developing countries have been called upon to concede more and more, with little being offered in return. But hope springs eternal and it was that which has spurred developing countries to set the past aside time after time and continue to negotiate in good faith.”
The protocol for the Bali package was supposed to be finalised by the end of July, but as India had made its opposition clear, other emerging nations have begun to register their objections.
Skewed Growth
The conflict has two fault lines. The first is the very idea of trade facilitation. Putting in place such a system would undoubtedly liberate trade and spur growth, but this is likely to be unevenly skewed in favour of the developed world. Poorer countries will have to spend a great deal of money to upgrade their ports and customs facilities to bring them up to US and EU standards, and then prepare for their internal markets to be substantially rocked by the introduction of outside goods.
“This means that while we still don’t have binding international rules on, say, the right to water, corporations would have the ‘right’ to have their products exported into developing countries quickly, easily, and cheaply,” wrote Deborah James, director of international programs at the Centre for Economic and Policy Research.
The WTO has promised to set aside money to help poor countries, particularly some African nations, upgrade their facilities. At present they have pledged only $30 million, a tiny figure, but the WTO is expected to announce a larger corpus of funds for developing nations this week. Additionally, the G-20, a group of 20 major economies, argues that the trade facilitation agreement would be the basis of up to $1 trillion in economic activity. It would also create 21 million jobs, 18 million of which would be distributed between the signatory developing nations.
Not Just Trade
The Bali package has two other pillars beyond trade facilitation: agriculture and the needs of the least developed countries. These three pillars were supposed to be taken forward equally when coming to an agreement, but the talks have focused almost solely on trade facilitation. Since last year’s Bali declaration there have been 20 meetings on trade facilitation and just two on agriculture.
This is crucial because India and other developing countries believe that the only way of ensuring they benefit from the Bali package is if development and agriculture are linked to free trade. Once trade facilitation is legally binding India and other developing countries would lose the leverage they have in their own spheres of direct interest.
“The pace of implementation of the Bali decisions has been heavily skewed in favour of trade facilitation and virtually all other decisions have been relegated to the background. This is unacceptable,” said India’s statement in Geneva.
Food Security
While India is championing the cause of the least-developed countries, its primary focus is an agricultural agreement on food security. WTO rules mandate that countries cannot subsidise more than 10% of agriculture because it would distort the market, and the organisation has various other rules on minimum support prices for farmers and stock holding limits for grains. Simply the Food Security Act ensures that India’s agricultural subsidies could exceed these limits.
The Bali agreement sought to give India some leeway on this matter by putting its food security programme in an Amber Box – which means that other countries agree to a “peace clause” and will not legally challenge India subsidies even if they do breach WTO limits for the moment. This gives the organisation four years to work on a broader agricultural resolution.
Double Standard
India would like to put the entire programme into what in WTO parlance is known as the Green Box, making food security programmes completely legal rather than just permissible. China has also supported this position. It has also been convincingly argued that the position taken by the developed world – that this would distort the market – is a double standard. Agricultural economist Jacques Berthelot has argued for some time now that the United States has placed most of its hefty subsidies in the Green Box, while also under-notifying the amount of agriculture it subsidises.
Desperate negotiations are now on at the G-20 summit to get India to back down from its demand for a concrete declaration on food security, but New Delhi seems confident of its position. For the moment, this means the WTO’s signature agreement – the Bali Package – is not going to be delivered any time soon.
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India signed on to the package, as did 158 other WTO nations, after much debate and wrangling over its exact provisions. Yet on Thursday last week the National Democratic Alliance government explicity stated that it cannot trust the United States and the European Union’s promise of promoting free trade while safeguarding its own developmental objectives – particularly food security – at the same time. India now accuses those countries of hastily pushing through the trade facilitation agreement, while paying lip-service to food security assurances that will later be junked.
“There is growing disenchantment, anguish and anger in [our] domestic constituencies and a sense of deja vu as once again they see the interests of developing countries being subordinated to the might of the developed world,” India said, in a statement at a WTO meeting in Geneva earlier this month. “In round after round, developing countries have been called upon to concede more and more, with little being offered in return. But hope springs eternal and it was that which has spurred developing countries to set the past aside time after time and continue to negotiate in good faith.”
The protocol for the Bali package was supposed to be finalised by the end of July, but as India had made its opposition clear, other emerging nations have begun to register their objections.
Skewed Growth
The conflict has two fault lines. The first is the very idea of trade facilitation. Putting in place such a system would undoubtedly liberate trade and spur growth, but this is likely to be unevenly skewed in favour of the developed world. Poorer countries will have to spend a great deal of money to upgrade their ports and customs facilities to bring them up to US and EU standards, and then prepare for their internal markets to be substantially rocked by the introduction of outside goods.
“This means that while we still don’t have binding international rules on, say, the right to water, corporations would have the ‘right’ to have their products exported into developing countries quickly, easily, and cheaply,” wrote Deborah James, director of international programs at the Centre for Economic and Policy Research.
The WTO has promised to set aside money to help poor countries, particularly some African nations, upgrade their facilities. At present they have pledged only $30 million, a tiny figure, but the WTO is expected to announce a larger corpus of funds for developing nations this week. Additionally, the G-20, a group of 20 major economies, argues that the trade facilitation agreement would be the basis of up to $1 trillion in economic activity. It would also create 21 million jobs, 18 million of which would be distributed between the signatory developing nations.
Not Just Trade
The Bali package has two other pillars beyond trade facilitation: agriculture and the needs of the least developed countries. These three pillars were supposed to be taken forward equally when coming to an agreement, but the talks have focused almost solely on trade facilitation. Since last year’s Bali declaration there have been 20 meetings on trade facilitation and just two on agriculture.
This is crucial because India and other developing countries believe that the only way of ensuring they benefit from the Bali package is if development and agriculture are linked to free trade. Once trade facilitation is legally binding India and other developing countries would lose the leverage they have in their own spheres of direct interest.
“The pace of implementation of the Bali decisions has been heavily skewed in favour of trade facilitation and virtually all other decisions have been relegated to the background. This is unacceptable,” said India’s statement in Geneva.
Food Security
While India is championing the cause of the least-developed countries, its primary focus is an agricultural agreement on food security. WTO rules mandate that countries cannot subsidise more than 10% of agriculture because it would distort the market, and the organisation has various other rules on minimum support prices for farmers and stock holding limits for grains. Simply the Food Security Act ensures that India’s agricultural subsidies could exceed these limits.
The Bali agreement sought to give India some leeway on this matter by putting its food security programme in an Amber Box – which means that other countries agree to a “peace clause” and will not legally challenge India subsidies even if they do breach WTO limits for the moment. This gives the organisation four years to work on a broader agricultural resolution.
Double Standard
India would like to put the entire programme into what in WTO parlance is known as the Green Box, making food security programmes completely legal rather than just permissible. China has also supported this position. It has also been convincingly argued that the position taken by the developed world – that this would distort the market – is a double standard. Agricultural economist Jacques Berthelot has argued for some time now that the United States has placed most of its hefty subsidies in the Green Box, while also under-notifying the amount of agriculture it subsidises.
Desperate negotiations are now on at the G-20 summit to get India to back down from its demand for a concrete declaration on food security, but New Delhi seems confident of its position. For the moment, this means the WTO’s signature agreement – the Bali Package – is not going to be delivered any time soon.
