India and WTO’s deadlock: The Stockpiling Row

Much has been said and written about the standoff between India and the WTO. Narendra Modi and his cabinet ministers have been in the eye of the storm since July 2014. It was then that Narendra Modi decided to pull on the plug on a trade facilitation deal that was struck in Bali the previous year linking it to rural poverty of 1.25 billion people. New Delhi’s blockade has plunged the WTO into its worst crisis in the last two decades. Leading Director General even suggested abandoning the consensus principle on which the 160-member group operates.

What is the deadlock all about?

What lies at the heart of the matter for India though? Why does India continue to defy the world despite being isolated in the WTO row? In essence, India is fighting to retain a peace clause that protects its huge state food purchases until the WTO can ink a definitive deal on public stockpiling for food security. As originally agreed upon in Bali, the clause will expire in four years.

According to the peace clause, a WTO member would not brought to task by another member-country if it breached 10% of the total output for a particular produce. The misunderstanding surrounding this much-publicised clause is that while the developed countries consider it as a four-year moratorium, countries like India interpreted it as an open-ended relief until a permanent solution was found. The settlement of the food stock holding issue and the peace clause must continue to coexist. As there exists a constant fear of India being taken to the dispute redressal mechanism.

To do so, the WTO will have tweak the norms for calculating agriculture subsidies so that the country can continue to purchase foodgrains from farmers at a minimum support price and sell them to poor at discounted prices without violating the norms. Critics opposed to this move claim that food stockpiling reeks of corruption and that the surplus stocked food will eventually get dumped on world markets.

Is a compromise being arrived at?

As this impasse continues, we need to remember that the dispute is not with regards to trade facilitation. Arun Jaitley recently went onto deny allegations that the country was fundamentally opposed to trade facilitation which would entail easing port and customs procedures. “India’s position on trade facilitation has been completely misunderstood because of unreasonable positioning by some of the developed countries,” the Finance Minister told at a World Economic Forum conference in New Delhi yesterday.

Backroom efforts are being undertaken by India to break the deadlock. A top trade ministry official recently jetted to Geneva to hold talks with Azevedo and core WTO members. There has been no hint however of a compromise. No WTO deal on trade facilitation means countries could simply tack the draft agreement onto their existing membership terms. This will put the onus on India to object and explain why its interests had been damaged. Experts claim that the WTO will probably not move on without India’s nod, demonstrating the country’s importance in the global trading community. 

Note – India-US agreement on food stockholding has finally paved the way for the implementation of the global trade facilitation agreement. Read our latest blog post on the same.

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