Say yes to trade

India must lead in brokering a WTO deal at Bali

How will the recently enacted National Food Security Act impact and be affected by the outcome of the ninth ministerial conference of the World Trade Organisation (WTO), which began in Bali on Tuesday? This seems to have become the focus of the government's negotiating strategy for the crucial meeting that will make or mar the credibility of the WTO as well as the fate of multilateralism in international trade. But the point that many observers have missed is that the real issue is not the provision of subsidised cheap food to the poor, as is intended to be done under the food security law, but the subsidies incurred on food procurement and food stockholding. After all, the original Agreement on Agriculture, signed in 1994, which stands reopened for discussion, does not bar countries from subsidising food for consumption; nor does it put any ceiling on such subsidy. It affects food subsidies only indirectly - by holding food procurement at arbitrarily fixed high prices as a trade-distorting practice. It caps the subsidies on such measures at 10 per cent of the value of total production. India's vulnerability is due chiefly to liberal annual increases in minimum support prices and the policy of open-ended procurement.

The genesis of this susceptibility is traceable to the original blunder in the 1990s, of accepting 1986-88 prices as the basis for calculating subsidies. That reference point suited developed countries, but not developing nations like India. The prices in India have since soared more than six times. Food procurement and government stockpiling, too, have bloated severalfold. There is, therefore, an imminent danger of breaching the 10 per cent limit and attracting penalties. Exports of foodgrain from the government stocks are also contestable as a trade-distorting measure. The current offer from developed countries to extend the "peace clause" that exempts developing countries from the 10 per cent threshold by four more years is far from permanent. New Delhi has correctly sought an extension till the inherent flaw in the Agreement on Agriculture is corrected.

The other contentious issue on the negotiating table at Bali is trade facilitation, which essentially involves simplification of customs clearances. For countries like India, this will entail wide-ranging and necessary amendments in government rules, documentation, tariffs, and systems of goods insurance, storage and transportation. Additionally, it will bar imposition of non-tariff barriers, such as the labelling norms for imported food notified by New Delhi recently. The WTO expects the agreement on this subject to boost global trade by around $1 trillion. Developing countries will gain from this, but many of them may need external assistance and technical expertise for reforming and revamping these procedures. It is vitally important for New Delhi to use its association with groupings like G20 and G30 to broker, rather than hinder, a fair deal - it has done the latter too often, and suffered for it. After all, multilateralism in a global trade regime suits India far better than a plethora of bilateral and regional trade pacts.