In a sudden reversal, the new government has reportedly refused to sign the global accord on trade facilitation agreed to under the Doha round of the World Trade Organization (WTO) talks. Naturally, this has earned India flak from developed and even some developing countries. New Delhi has told the WTO that it won't sign the trade protocol crafted at Bali in December last year unless adequate progress is made in resolving the question of subsidies for food producers. This has evidently marred the prospects of meeting the July-end deadline for ratification of the trade facilitation pact - the first consensus-based multilateral agreement reached by the WTO since the launch of the Doha round of parleys in 2001.
India had, under the previous United Progressive Alliance government, consented to approve this treaty after the developed countries agreed to find a permanent solution within four years to disputes around food procurement and stockholding subsidies. They had also agreed to refrain from challenging any country even if it breached the subsidy limit of 10 per cent of the value of food output till an enduring solution emerged. However, by reneging on its commitment to ratify the trade treaty, India has risked being dubbed a spoiler - as has happened on several occasions in the past. It is virtually isolated in the WTO, with support waning from many African and other countries, including from China and Brazil. The trade facilitation pact aims to smoothen cross-border commerce by binding countries to relax their Customs rules and end red tape. They will need to amend some domestic laws, improve infrastructure at ports, put in place systems for faster Customs clearances, and invest in automation, computerisation and improved documentation processes. This will involve substantial costs. However, the agreement has provisions for international assistance to developing nations to partly offset these expenses. Though the new pact is viewed by many as being tilted towards developed countries, it will, in reality, also enable exporters from underdeveloped nations to enter new markets - which many of them are unable to do currently, because of complicated and costly procedures. Unsurprisingly, therefore, a sizable section of Indian industry has welcomed this accord, and does not want India to block it.
Such an important treaty should not be blocked, especially over an agricultural subsidy issue. The WTO does not permit farm subsidies of more than 10 per cent of the value of production. In foodgrain, India might - with its high procurement prices and the new food security law - breach this ceiling. But the WTO cannot be blamed for this; India needs to look inwards, and revisit its domestic food management policies. Putting hurdles in approval of a multilateral agreement on an unrelated subject will not help much. Excessive food procurement and stockpiling through liberal increases in minimum support prices, or MSPs - topped by bonuses offered by states - and open-ended grain purchases are not good for domestic fiscal health or even for the food economy. This approach has needlessly bloated the government's grain coffers to unmanageable levels and exploded the food subsidy bill. Realistic MSPs and targeted procurement are the need of the hour. Thus, New Delhi would be well-advised to concentrate on reforming its domestic food management policies even while playing an active role in pushing the WTO talks further, rather than thwarting the much-needed global protocol on trade facilitation.
