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Modi image on line after trade torpedo
- India pushes for food security, stalls WTO pact

Aug. 1: India last night “blocked” a landmark world trade treaty despite last-ditch talks to rescue what would have been the first global trade reform since the creation of the World Trade Organisation (WTO) 19 years ago.

Trade diplomats in Geneva have said they are “flabbergasted”, “astonished” and “dismayed” and described India’s position as “hostage-taking” and “suicidal”.

It “sent a confusing signal and undermined the very image Prime Minister (Narendra) Modi is trying to send about India,” a US state department official said.

At the root of the dispute is a WTO rule that bars countries from stockpiling more than 10 per cent of the value of the food produce in a country. The WTO feels that excessive stockpiling artificially skews global food prices.

But India feels such a cap undermines its food security programme as stocks are required to feed millions of poor people. So, last year at Bali, a “peace clause” put in place an exemption till 2017. India wants the “peace clause” to continue until a permanent settlement is reached.

In the absence of an agreement on the indefinite exemption, India refused to play ball last night on a global pact that would have cut red tape in the movement of goods. Some estimates claim the trade deal would have added $1 trillion to the world economy as well as 21 million jobs, 18 million of them in developing countries.

In Geneva, the countries were supposed to incorporate the reforms on customs procedures into the WTO rulebook by the July 31 deadline. But India unveiled its veto last night and stalled the deal.

The following are some of the reasons why the trade diplomats said India’s stance made no sense and New Delhi’s stated position on the issues.

Diplomats: India’s veto may be the beginning of the end for the WTO. Analysts say that if the WTO’s 20-year-old rulebook does not evolve, more and more trade will be governed by new regional agreements such as the Trans-Pacific Partnership, which will have their own rules and systems of resolving disputes. That could lead to a fragmented world of separate trade blocs.

India has been a vocal backer of world trade reform. It has criticised the small clubs of countries, led by the US and European Union, that lost patience and started to discuss faster liberalisation of trade in services and information technology products. India is not in any of these groups.

New Delhi: Ridiculous. The deal is not dead. We have not blocked the deal. WTO had missed many deadlines earlier because of objections by the developed countries. “Nobody said the WTO was ‘blocked’ in 2005, 2006, 2008, 2009 or 2013,” an official said, referring to earlier stand-offs.

US secretary of state John Kerry has apparently signalled willingness to speed up the food security negotiations — a condition set by Prime Minister Narendra Modi to back the customs deal when the two leaders met today in New Delhi. ( )

It was not immediately clear if that would open a window for the customs deal to be resurrected. In Geneva, a trade diplomat from a developing nation said: “The trust that countries have in what India says is going to be significantly diminished.”

Diplomats: The Narendra Modi government was widely seen as being pro-business. Yet, it blocked a deal on “trade facilitation”, a worldwide streamlining of customs rules that would cut container handling times, guarantee standard procedures for getting goods to and from their destinations and kill off vast amounts of paperwork at borders around the world.

New Delhi: Pro-business does not mean anti-poor. “We have been elected to foster social and economic inclusion and not to pander to the self-perpetuating interests of a small cabal of the elite,” a BJP source said.

Diplomats: Nobody else was negotiating. Thursday’s meeting was simply supposed to formally adopt the final trade negotiation text into the WTO rulebook, following its agreement by ministers at a meeting in Bali last December. India’s then commerce minister Anand Sharma had hailed the Bali deal as a landmark in the history of the WTO. India did not hint at any further objection until days before it wielded its veto, and even then it made no concrete demands until the WTO meeting to adopt the new rules was in progress.

New Delhi: After the Bali deal in December last year, BJP leader and current minister Arun Jaitley had written a blog contending that Sharma had compromised the food security programme by agreeing to the “peace clause”. ( )

Diplomats: India did not object to the deal it vetoed. Its objections were unconnected to trade facilitation. It blocked the trade facilitation deal to try to get what it wanted on something else: food security.

New Delhi: No movement has taken place on finding a permanent solution to the food security issue. Once the customs deal is signed, the developed countries may drag their feet further and impose the cap after 2017.

Diplomats: India’s demands reversed its previous position. India blocked the trade facilitation deal because it wanted the WTO to move to a permanent solution more quickly than the four-year timeline. But diplomats say that India was offered a two-year timeframe before Bali but it insisted on four.

New Delhi: If there is no movement till now, how would they have found a permanent solution in two years instead of four? There is no agreement on even the base year for calculating the prices. The West wants the food subsidy to be capped at 10 per cent of the value of farm produce in a country. But the 1986-87 global prices are being taken as the benchmark. India wants the base year to be changed to reflect real prices on the basis of inflation and other influencing factors.

Diplomats: India’s veto could put it in legal danger. As part of the Bali deal, India won a pledge that nobody would bring a trade dispute to challenge its food stockpiling programme, which is widely thought to have broken the WTO rules. However, diplomats say that Bali was a “package” of 10 agreements, and the only legally binding part was trade facilitation. If that fails, the package unravels, and India may lose its protection.

New Delhi: This is not the end of the world. The negotiations can resume in September. The customs deal is to be implemented only from July 2015. What was stalled last night was the protocol of the deal.

Diplomats: India was isolated. Cuba, Venezuela and Bolivia voiced support, but diplomats say other big developing countries such as Russia, China and Brazil, as well as India’s neighbour Pakistan, were among the chief opponents of its veto. Poorer countries stand to lose most, WTO chief Roberto Azevedo told the WTO meeting after the deal collapsed.

New Delhi: Our information is Russia, China and Brazil are with us. The interests of millions of poor Indians cannot be compromised.