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The ninth ministerial conference of the WTO held in Bali is projected in the Indian media as a triumph of India's food security needs. The view, however, could be misplaced on two counts. First, here's what India negotiated at Bali: An interim 'peace clause' (with no guarantee of successful closure after December 2017) that bars the WTO member-states from raising disputes with India vis-à-vis its food subsidies, in return for a legally-binding agreement on trade facilitation.
The agreed upon package includes binding commitments, though with flexible timeframes, which would require significant investment, which could be a heavy burden for less robust economies to bear. The package therefore includes " special and differential treatment provisions" for developing countries LDC's, which pledge to provide support for capacity building and staggering of objectives based on their individual circumstances, which dovetails with the WTO's 'Aid for Trade' initiative.
Second, on the Agreement of Agriculture (AoA), the crucial differentiation between consumer subsidies and producer subsidies is often missed. Producer subsidies are the real bone of contention in world trade dialogue. While India's National Food Security Bill 2013 does not mention raising minimum support prices (MSP) per se, MSPs are periodically revised and amount to producer subsidies. It protects the farmer and was last revised upwards in 2013 for paddy, maize and a host of other crops. Commerce Minister Anand Sharma has reiterated that MSP will continue to rise in future as well. Indian farmers also receive subsidized seed, electricity and fertilizers in order for them to produce at a lower cost. Given all of that, India's subsidies in the coming days perhaps risk breaching the prescribed limits of WTO. Of course, for four years now, India has saved itself from being challenged at WTO. This also makes for good domestic electoral strategy on UPAs part but that's another story.
In the context of India's food security, the National Food Security Bill 2013 which was passed by the LokSabha is largely about providing food grains to those below the poverty line at an immensely concessional rate, which is a good thing for the undernourished. But Bali has little to do with the consumer subsidy portion of the law. However, there are riders which on closer inspection might lead to a slightly gloomier conclusion. For instance, by agreeing to the peace clause, India has also opened up its food grain stockpiling and subsidies for international monitoring - a somewhat humiliating loss of sovereignty, some would argue. Again, the agreement means that India would not be in a position to add more nutritious foods (like lentils) to its subsidy list. Thus, if India were to think of providing nutritional support to India's poor with a bid to say counter malnutrition-related health issues, it would have foregone its right to do so. The Bali package has little to offer on other fronts too.
A host of issues that were crucial to the interests of developing countries, and to a large extent India's, were off the table. For instance, rich country farm subsidies. The US has still not budged from its position vis-à-vis farm subsidies, despite years of push from poor countries, including in Africa. As of today, US farmers get roughly $20 billion in direct subsidies every year. The US provides cotton subsidies to the tune of $3bn per annum resulting in a situation where US cotton exports regularly outcompete African produce, as also India's. As a large producer of cotton, India's stakes are high. But while nothing substantial has been extracted from the developed countries, the rich countries seem to have extracted a victory in the true sense of the term by tying India and other developing countries into a legally binding agreement on trade facilitation. The US and EU have long lobbied for the same. The trade facilitation agreement entails upgrading port infrastructure and cutting down on paperwork - both of which are already realities in developed countries; thus much of the onus now is on the emerging economies and LDCs. And since this is a legally binding agreement, India needs to pull up its socks in order not to face action. It was anyway high time that India beefed up its infrastructure. In fact the government estimates the need of $1 trillion worth of investments to develop India's crumbling infrastructure. So, now that India is legally bound to act, it could prove to be a good thing in a way. But then again, much of the estimated $1 trillion boost to world trade that this agreement would bring in, would potentially accrue to the developed world, simply because of the fact that they represent a huge share of global trade. India's industry bodies like FICCI welcomed the deal hoping that it would boost India's exports.
While that remains to be seen, in terms of the broad structure of global trade, the Bali round is indeed a step in the right direction. The Bali package, and the fact that consensus was reached after long years of stalemate, not only restored some credibility to the WTO but also in a way injected lifeblood into the concept of multilateralism at a time when exclusive regional agreements like the TTIP & TPP threaten massive trade diversion. The WTO is the only international forum where all the 159 of its member states have an equal say. Such an inclusive consensus building mechanism is not just favourable to India but to developing countries at large. But to be relevant, the WTO cannot keep postponing handling the major sticking points. It has to fulfill its agenda of ending rich country farm subsidies and tackle issues like rules governing intellectual property rights - things that regional FTAs are already dealing with. Since the WTO's inception in 1995, the Bali package remains one of its more significant achievements, and while much work will be needed in the coming years to see it to fruition, it shall remain an important milestone in global trade. Clearly, we have not heard the last of the Bali declaration yet.
By Special Arrangement with : Observer Research Foundation (www.orfonline.org)