Harsha Vardhana Singh: Moving beyond the WTO deadlock

How Narendra Modi should explain India's stand on trade to Barack Obama in September, and how Indo-US cooperation could take the trade agenda forward

India and the United States have a good chance of energising world trade negotiations. Several who were deeply disappointed with the breakdown of the Doha Round discussions on July 31 would strongly disagree with such a proposition. Nonetheless, the September meeting of Prime Minister Narendra Modi and President Barack Obama provides a major opportunity. Both these leaders need to contribute for converting this opportunity into effective progress. India has to succinctly explain the substance, scope and direction of its new reform policies, and take some steps in the Doha negotiations. The United States has to understand how India's political position on food security is combined with steps to reform both economic policies and the domestic food security system. There is a danger however that, instead of substantive issues, the focus of the talks may be on India's statements on its stand at the WTO.

On August 9, at the Bharatiya Janata Party's national council meeting, Mr Modi strongly re-iterated India's WTO stand on food security, and also criticised the previous position taken at the WTO's Bali meeting in December 2013. This could make political discourse more difficult, and raise additional concerns for many WTO members critical of India's negotiating stand on the Trade Facilitation Agreement. This could also have a bearing on the conversation of Prime Minister Modi and President Obama in September. At a time when the Indian government's reform programme should be appreciated and supported, the tenor of that conversation may include elements of discord which arise more on account of a focus on the political message rather than the substantive steps taken by the government on the ground.

What could be some of the key points that Prime Minister Modi should make to President Obama, emphasising the reality on the ground? He should point out that India has begun reforming both economic policies and the food security system. Another important point is that especially after the major economic decline of 2008, it is clear that economic policy reforms need to be implemented together with safety nets which meet social objectives, such as food security and health. This reflects an understanding that both economic reform and social policies are two essential parts of the same reform package. The success of each one depends on the success of the other, and they need to be taken forward together. Just as President Obama has emphasised health policy, food security is a crucial objective for India. Without addressing the concerns of the farmers and consumers below the poverty line who form a significant portion of India's population, economic reforms will be seen as lop-sided and unduly favouring industry. That will make them unsustainable. Similarly, achieving social objectives will be very difficult without economic policy reform which is required for enhancing efficiency and growth.

India has begun introducing reform in its economic policy as well as its food security programmes. For instance, the recent Budget speech of India's finance minister shows multiple reform initiatives, including in macro-economic policy, industry, services, infrastructure, foreign direct investment, rural/agriculture development and credit, and rural markets. Regarding food security, the FM said: "The government is committed to reforms in the food sector. Restructuring FCI, reducing transportation and distribution losses and efficacy of PDS would be taken up on priority." Such reform is continuing, as shown by the policies to ease doing business announced by India's department of industrial policy and promotion, and recent statements on policy reform by India's minister of consumer affairs, food and public distribution.

As is true for any major change, both these types of reform require focused effort, time, and fair and up-to-date systems. Mr Modi should emphasise that India's stance on food security within the WTO is part of a positive reform programme and should be seen as such. Its success is essential, because food security is an objective which will have to be carried forward together with any other process of reform to help India engage effectively with global markets.

In this background, three important points could be made with respect to the WTO. One, that India would like to engage seriously to take forward the work of the multilateral trading system. Second, an essential part of this is a permanent solution for the food security issue at WTO. Third, India has a proposal for a permanent solution on which it would like serious engagement. This proposal is to increase the WTO reference price, which presently is defined in terms of 1986-88 prices, by making adjustments for inflation since the late 1980s.

The second and third points are specific to the present WTO focus of India, and would significantly address India's concern about moving ahead on the Bali package. The first point should address the issue of engaging further in the WTO negotiations, including engagement of India and the United States. Therefore, some thought would need to be given to the content of "India engaging seriously", a content which would help take forward the WTO negotiations and the post-Bali agenda.

Examples include India re-engaging in the non-agriculture market access (NAMA) negotiations, or agreeing to include some new issues such as investment in the discussions. This is important because future progress requires creating trust, especially amongst the bigger members.

One view is that after getting food security, India may not engage further in WTO negotiations; likewise, another view is that after the Trade Facilitation Agreement, the United States may not engage further in negotiations. Removing such mistrust and renewing meaningful engagement can be achieved by the proposal on NAMA negotiations. Flexibilities in terms of a longer transition period or some other form may ease such engagement.

It is noteworthy that India is part of Regional Comprehensive Economic Partnership (RCEP) negotiations with China, the most competitive economy in the world. Thus, with a transition period, it should be possible for India to engage in similar negotiations in the WTO to energise the process.

The writer is a senior associate at the International Centre for Trade and Sustainable Development, and a former deputy director-general of the WTO