If World Trade Organisation (WTO) chief Roberto Azevedo's visit to New Delhi was aimed chiefly at enlisting India's support for an agreement, however limited in scope, in the Doha round of trade negotiations at the forthcoming summit in Bali, it did not go wholly in vain. For New Delhi seems to have softened its stand on both the key, although highly contentious, issues on the table - trade facilitation and subsidy on procurement, stocking and distribution of foodgrain. The former is of prime interest to developed countries, which want hassle-free access to markets in countries like India; the latter is of critical concern to developing countries wishing to address the food security problem. Given India's clout among the less developed countries, especially the group of 33 developing countries (G33), its support is deemed vital for making any progress in these talks. The talks began in 2001, but virtually collapsed in 2008 owing chiefly to a stalemate on food production- and stocking-related disputes.
New Delhi's strategy seems clear. It is willing to concede some ground on trade facilitation as a bargaining chip to secure the developed countries' consent for removing or raising the cap on food and agricultural subsidies (also known as "aggregate measure of support", or AMS). At stake is the fate of the recently enacted food security law. Currently at most 10 per cent of the value of domestic produce can be subsidised; the law intends to feed two-thirds of India. There's a clear conflict, and India might face retributive tariffs. Thus, in an attempt to stave off any immediate trouble, India has expressed its willingness to accept the "peace clause", which offers a limited-period exemption from the AMS limits to developing nations. New Delhi has, however, failed to get any firm assurance from Mr Azevedo that striking a deal on food security would be the top priority at the Bali talks.
The issue of trade facilitation is tricky. Talks aim at smoothing cross-border trade by removing red tape. That means countries would harmonise their customs clearance norms, introduce sweeping changes in domestic procedures and expand infrastructure at entry points. Many developing countries may find these conditions hard to meet without external financial assistance, which the well-off nations are reluctant to offer. But, for India, the sticking point is perhaps that it would require an end to the comfortable customs raj that empowers - and enriches - bureaucrats. A discretion-based system would have to be replaced with a disclosure-based system. Business and consumers would benefit. But the government pretends to object to it on their behalf, in order to protect the existing regime's much-abused privileges.
India, like many other countries, has continued to pursue bilateral and group trade agreements. But, in the end, none of these are replacements for a multilateral trade arrangement. The absence of a multilateral agreement on trade facilitation, for example, would expedite the ongoing process in the world's two largest markets, Europe and the US, to sign a customs and regulatory harmonisation agreement. In effect, that would further raise barriers to Indian exports to both these markets. It is in India's interest to compromise as much as it has to, so that it gets multilateral trade talks moving again.
