Inflexible stand

Inflexible stand

India was wrong to block the long-awaited  trade facilitation agreement (TFA) at the World Trade Organisation (WTO) meeting in Geneva last week. It was caught between two genuine needs and unfortunately it plumped for the populist one. 

The TFA,  which had a deadline of July 31,  aimed at simplification of customs rules and procedures and improvement of infrastructure to give a big boost to international trade. India has in fact fully supported the TFA, as it will be greatly beneficial to the country. The issue on which India vetoed the TFA is also of great importance to the country.

It involves price support for farmers and supply of food grains to poor people at affordable prices. Both call for subsidy from the government and it has become particularly important in the context of the implementation of the food security act.

The WTO’s 1988 Agreement on Agriculture, to which India is a party, does not approve of subsidies which can distort trade, and by some interpretations, the Indian subsidy regime would be adversely affected by the agreement. India raised the issue in the WTO’s Bali ministerial  meeting last December and it was agreed that a permanent solution  would be found in the next four years.

Therefore it was unnecessary for India to link the two issues at Geneva and it was unwise to scuttle the TFA on that ground. Brinkmanship is a part of negotiation strategy but it should not be taken beyond reasonable lengths. India need not have insisted on resolving the subsidy issue now itself before the TFA is signed. It had succeeded in highlighting its commitment to protecting the interests of poor farmers and poor consumers but should have stepped back from the brink.

The TFA is the result of 19 years of difficult negotiations among all countries and it would have benefitted all. The failure to bring it into force would call into question the relevance and perhaps even the future of the WTO.

The alternative to multilateral trade agreements is narrow pacts among groups of countries. India is not a member of any such major pact and even if it is the country would not get any more favourable terms from them than from the WTO. 

There is time and there are alternatives to ensure that farmers and poor consumers are protected. Therefore India should drop its inflexible stand and pave way to an agreement at the next WTO meet, possibly next month.