The Telegraph
Sunday , July 27 , 2014
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Trade cloud on US talks

New Delhi, July 26: The Narendra Modi government’s threat to block a key World Trade Organisation pact has injected early tension into its ties with the US and could cloud crucial talks with secretary of state John Kerry next week.

Kerry will be accompanied by commerce secretary Penny Pritzker for the Indo-US strategic dialogue here on July 31, and the divide between the two nations on the WTO trade facilitation agreement would be a key component of the bilateral talks, senior Indian and American officials have told The Telegraph.

The US had expected the Modi government that came to power with the promise of economic reforms and subsidy cuts to soften India’s demand for an indefinite exemption from WTO rules against stocking up more than 10 per cent of a nation’s grain production, American officials said.

The American officials, who spoke on strict condition of anonymity, pointed to testimonies by senior representatives of the Barack Obama administration before the US Congress in recent days as evidence that Washington had expected a subtle shift in India’s economic approach with the change in government.

Instead, India yesterday reasserted its opposition to any trade deal at the WTO that does not address its concerns over food security, rooted in the food security law the UPA government had piloted and which the Modi government has indicated it plans to implement.

“It’s definitely something we expect to figure prominently in the talks next week and it’s not something on which we expect a breakthrough that will make both sides equally happy,” an Indian official said. “But this should serve as a reality check to all those who expect drastic changes in national policy with changes in government. Our allies need to understand that on key economic and strategic issues, there is a broad bilateral consensus.”

Kerry, who lands in New Delhi on July 30, will lead the bilateral talks with external affairs minister Sushma Swaraj. Pritzker will arrive here after a visit to Mumbai where she will meet Indian industry leaders. Kerry and Pritzker will also meet Modi.

The discussions are critical as they would dictate the agenda for summit-level talks between Modi and Obama when the Indian Prime Minister visits the White House on September 30 after being boycotted by the US for nine years over allegations of human rights violations.

But the deep differences over the WTO pact — aimed at laying down global rules on trade and tariffs — have altered the tone of officials from both sides in the lead-up to next week’s meetings.

“My delegation is of the view that the adoption of the TF (trade facilitation) Protocol be postponed till a permanent solution on public stockholding for food security is found,” Indian ambassador to the WTO Anjali Prasad said at Friday’s Geneva meet.

Although India’s position won support from most African and Latin American countries, it provoked a swift reaction from the US, which effectively accused New Delhi and its allies at the WTO of violating their commitments made at a meeting in Bali late last year.

“It is no use to sugar coat the consequences of such action or to pretend that there would be business as usual in the aftermath,” US ambassador at the WTO Michael Punke said in a statement. “Today we are extremely discouraged that a small handful of members in this organisation are ready to walk away from their commitments at Bali, to kill the Bali agreement, to kill the power of that good faith and goodwill we all shared, to flip the lights in this building back to dark.”

The trade facilitation agreement the WTO members are negotiating is expected to add over 20 million new jobs globally, many of them in emerging economies like India. But an agreement that does not incorporate India’s demands could expose New Delhi to the risk of violating WTO rules through the food security law, for which the Modi government has allocated Rs 1.15 lakh crore in its first budget unveiled earlier this month.

The extent of the US surprise at India’s position yesterday, officials said, can be gauged from testimonies of senior American government officials before the US Congress twice in the past 10 days. These testimonies don’t specifically refer to the WTO negotiations, but point to expectations that the Modi government would adopt economic policies encouraging trade liberalisation more than its predecessor administration under Manmohan Singh.

“While India is still ranked 134 out of 189 countries in the World Bank’s Ease of Doing Business ranking, the new government is already taking decisive steps to make India more open to the foreign businesses and investment that can help stimulate greater growth,” assistant secretary of state for South and Central Asia Nisha Desai Biswal told the US Senate Foreign Relations Committee on July 16 at a special hearing on the impact of Modi’s victory on Indo-US relations, in the context of Kerry’s upcoming visit to India and Modi’s scheduled trip to Washington. “There is much for us to take note of.”

In preparation for Pritzker’s visit, the US had sent deputy assistant secretary of commerce Arun Kumar to India a fortnight back to hold talks with officials from multiple Indian ministries.

On returning to Washington, Kumar had deposed before the US House of Representatives Foreign Relations Committee on July 24 — just a day before India’s threat to veto the WTO pact — on “US-India relations under the Modi government”.

“With a new government in charge, the timing may be right to materially improve our bilateral trade relationship, which could translate into greater opportunities for US businesses,” Kumar said in his testimony.