India challenges international trade agreement over food security

While the world remains fixated, and probably rightly so, on the carnage across the Middle East (ISIS, Syria, Lebanon, Iran, Iraq, Libya, and now once again Hamas and Israel), another meeting occurred in the past two days that nevertheless deserves more attention.

Last Friday at a meeting in Geneva, Switzerland, a reasonably low key meeting of the World Trade Organization (WTO) erupted in anger when India refused to go along with a slide towards greater trade liberalization understandings. Called the Trade Facilitation Agreement (TFA), India signaled it would not sign the document as its food security concerns had not been adequately addressed.

Grain being loaded into ocean going vessel. Grain reserves and ability to move volumes from areas of surplus to areas of need is important, but not to the point of stifling the vitality of local agricultural sectors. Photo from www.telestack.com

In uncharacteristic fashion, India's stance provoked angry rhetoric from the US. "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," U.S. Ambassador Michael Punke said in a statement.

In addition, the EU and Australia also sent India a letter stating their concern that the reluctance of India would bring further trade liberalization to a crawl.

What's the issue?

India in the past several rounds of WTO meetings has requested a satisfactory set of guarantees that food security for its millions of poorer citizens would not be jeopardized by further liberalization of food trade. As an article from the www.dnaindia.com describes it in detail:

"The TFA aims to fast track any movement of goods among countries by cutting down bureaucratic obligations. The problem with TFA runs in a clause that says farm subsidies cannot be more than 10 percent of the value of agricultural production. If the cap is breached, other members can challenge it and also go on to impose trade sanctions on the country.

The developing countries would have a problem with the solutions offered by the developed countries as without the subsidies the food security of the developing nations could be seriously harmed. India agreed to the TFA in Bali only under the condition that interim relief would be provided to the developing nations. It said no legal actions or sanctions would be imposed on the developing nations till 2017, by which time a solution would be worked out among the nations. However, this interim relief would not be applicable if such subsidies would lead to trade distortions, by which one means, that prices of exports and imports cannot be affected by this.

India's Food Security Act, which is binding on the government by law now, implies that the government will provide very cheap food to the most vulnerable part of the population at extremely low prices. Apart from providing subsidies to the consumers, through the public distribution system, it also provides subsidies to the producers of food grains. So it buys food grains from farmers at a minimum support price, and subsidizes inputs like electricity and fertilizer.

The first problem is with the 10% cap on subsidies which will not be possible for India to achieve. Adding to the woes is the fact that the 10% cap is calculated based on 1986-88 prices when the prices of food grains were much lower. So the cap has to be updated taking into account the present prices of foodgrains.

The second problem is that even for providing subsidized food, India will have to open up its own stockpiling to international monitoring. It will not be able to add protein heavy grains like say, lentils, if it wants to, due to riders in the peace clause.

Third, it might seem unfair to developing countries to not crack down on farm subsidies that the United States provides to its farmers to the tune of more than $20 billion per year. While the WTO is binding the developing countries to protocols, the issue of subsidies by developed giants like US seems to be off the table."

Observations

India's new prime minister Modi is bringing some backbone to the world stage. Good for him.

India's new Prime Minister, Narendra Modi. Photo from www.thenews.com.pk

US Ambassador Punke is sounding like a punk. When one of the countries objecting to the TFA happens to be the 2nd most populous nation on earth, his description of "small handful of members" mis-characterizes the size and importance of the objection.

Michael Punke serves as Deputy United States Trade Representative and U.S. Ambassador and Permanent Representative to the World Trade Organization (WTO) in Geneva, Switzerland. (Teatree has no idea whether Punke is a punk, he might be a nice guy. But the criticism stands ...) Photo from en.mercopress.com

New leader of the WTO, Brazilian diplomat Roberto Carvalho de Azevedo, now has some serious work cut out for him. Teatree sincerely wishes him success in satisfying that "small member" India, while moving trade liberalization forward.

Azevedo leads the WTO, and his diplomatic skills are about to be called upon. Photo from inspirerende.wordpress.com

Western countries do subsidize their agricultural systems heavily, and don't like anyone pointing that out. Food security for any nation should be high priority. Subsidies - such as cheap bread in Egypt and several other countries - may not be efficient, but Teatree is all for supporting local home grown food programs and resisting cheap grain by the ship from nations which have industrialized their own food growing sector.

Food production in India may be outdated and inefficient, but there is a fine line between pulling the rug out from under a vital rural lifestyle and substituting efficient large farm systems leaving significant segments of poor rural citizens with little skills for other work. Photo from www.rural.nic.in

This is ALWAYS an under-the-radar issue for the West which works best when kept low key. Hear, hear for India to bring it to the surface.

The World Trade Organization announces progress ...

There are these global institutions out there that we tend to lose track of, yet provide frameworks within which the nations on our small globe interact. One we hear about a lot - the UN with its headquarters in New York - has many forums dealing with security, peacekeeping, development, women and children's rights, etc.

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In front of the UN headquarters in New York, a gift from Luxemborg. Photo from visit.un.org

The World Bank, the International Monetary Fund (IMF) and the World Trade Organization (WTO) are more obscure in what they do. The World Bank, according to its website, "provide[s] low-interest loans, interest-free credits, and grants to developing countries. These support a wide array of investments in such areas as education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. Some of our projects are co-financed with governments, other multilateral institutions, commercial banks, export credit agencies, and private sector investors."

The IMF is, according to its website, "an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world."

The WTO, according to its website, develops agreements between groups of nations, that "cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries’ commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets."

All three institutions have their critics, and examples abound where agreements or sets of principles have hurt or hindered development and prosperity as much as foster it. Developing nations often charge that these institutions are oriented to serve the developed nations interests as much if not more than those without political or economic clout. Prosperous Asian nations in the past decade have also been asking when they will have a turn at leadership positions, and capitalism is clearly the economic approach favored over other models (though one might ask what is the alternative... certainly communism was not a success story).

Indeed, it has been customary for the IMF to be led by a Western European (currently France's Christine Legard), while the World Bank has from its 1944 beginning been led by an American (currently Dr. Jim Yong Kim). Both headquarters are in Washington D.C.

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>Christine Legard, President of the IMF, photo by Adam Sage Paris, The Times

World Bank President Dr. Jim Yong Kim, photo from World Bank website

The World Trade Organization, however, is a slightly different animal. Though also headquartered in the developed nation and storied city of Geneva, Switzerland, the leadership has rotated much more globally, especially in the past decade. (From 1948, WTO - formerly GATT - leadership has come from the UK, Switzerland, Spain, Italy, New Zealand, Thailand, France, and now Brazil).

Brazilian Roberto Azevêdo, has taken on the WTO leadership position since September 2013, photo from www.valor.com.br

The buried lead

If the reader is still here (ha ha), this context brings us to the most recent announcement of a successful round of trade talks that took place this week in Bali, Indonesia. WTO member nations debated a variety of arcane issues around growing trade among themselves, but India made the headlines by championing the rights of developing nations to "protect" their food growing sectors, in the face of developed nations' push of additional opportunities for their own agricultural industries to export grain and other food commodities.

From the Washington Post before a final agreement was reached, "A possible World Trade Organization deal moved closer to approval Friday after a row over food subsidies was set aside following hours of global negotiations that went late into the night. Trade ministers had come to the four-day WTO meetings on Indonesia’s resort island of Bali with little hope that a slimmed-down agreement would be reached, with India refusing to budge on a provision that could endanger subsidies for grains under a policy to feed its poor. ... The meetings in Bali were seen as crucial after more than a decade of inertia, with failure possibly signaling an end to WTO’s relevance as a forum for multilateral trade negotiations among its 159 member economies."

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WTO chief Avezedo shakes hands with Indonesian Trade Minister Gita Wirjawan (hosting the conference), AFP photo from Sonny Tumblekaka

The bottom line is that India's stance to protect national food growing sectors was accepted (for now), streamlined customs guidelines reached, and global trade could increase up to $1 trillion from its current level in the near future. And for the WTO, broad international agreements were highlighted compared to an increasing number of regional trade pacts that had been growing as alternatives to international understandings. In Teatree's opinion, it is refreshing to see an important developing nation, India, standing up to business as usual, as well as a Brazilian leader injecting a personal urgency into often comatose negotiations at these events. (Food security - always behind the scenes of world trade talks.)