WTO Reaches Food Security Agreement with India

December 16, 2013 Posted by India Briefing Reading Time: 3 minutes

By Kavita Patel

Dec. 16 – The World Trade Organization’s 159 member states came to a momentous agreement on December 7th to lower global trade barriers. The Bali Package marks the first major WTO deal since its establishment in 1995. The package’s most significant achievement is its decision on trade facilitation, which will increase global commerce by cutting red tape and expediting port clearances.

In the context of seemingly unattainable multilateral agreements, the deal marked a revival for the WTO as a multilateral organization. It revitalized the WTO in its purpose to support growth and development, and marked progress in selected issues taken from the 12-year-old Doha Round of negotiations. WTO director general Roberto Azevedo declared, “We have put the world back into the World Trade Organization…For the first time in our history, the WTO has truly delivered.”

This legally binding agreement will reduce trade costs by 10 to 15 percent, and increase global trade by US$400 billion to US$1 trillion, with increases aimed at benefiting poorer countries. It includes provisions for goods in transit, allowing landlocked countries to trade by using ports in other countries. It also provides infrastructure and training assistance for developing countries to implement the agreement. These strategies will create stable business environments, increase trade flows, and increase revenue collection, which will attract foreign investment.

Food Security
India stalled the negotiations, as it pushed to change WTO guidelines on government food subsidy programs. Last summer, the Indian government passed a bill guaranteeing 70 percent of its 1.3 billion population cheap food programs. However, this goes against current WTO guidelines on food security prices and quotas. By subsidizing its purchases from farmers and selling it below market prices to hundreds of millions of poor, the excess production will distort prices on the world market.

As Indian elections are coming up in May, this issue has become a sensitive political topic for the country. Indian farm groups and several political parties had been pressuring New Delhi to stand firm in its opposition. However, it was in India’s interest to see the meeting in Bali through, to restore the credibility of the institution. India needs the WTO, along with many other developing countries. In the end, India’s proposed text was adopted, allowing the WTO four more years to agree on rules for farm subsidies and prices paid by the government for food staples distributed to the poor. India’s Food Security Law can push its minimum support prices above WTO limits until further discussion.

The Bali Package agreement sets a precedent for how the rules of globalization and international commerce can be both inclusive and effective. It also determines the future of the WTO, which plans to spend the next year preparing a clearly defined work program to fulfill the rest of the Doha Development Agenda. This exponentially more ambitious plan calls for sweeping changes in regulations, taxes and subsidies that benefit low-income countries.

It will be challenging for the WTO to come to a multilateral consensus on more divisive issues in the Doha Round negotiations, such as agriculture, intellectual property, and services trade. In addition, as countries like India, China and Brazil grow richer, developed nations such as the US have pushed these emerging global powers to open their markets to foreign goods. This will prevent them from reaping the benefits that the status of “developing country” provides, such as duty and quota-free access for exported goods.

Despite the immense hurdles that lie ahead, the agreement was welcomed by business groups and politicians alike. Jake Colvin of the Washington-based business lobby National Foreign Trade Council said, “Companies are multi-lateralists at heart, and we’re rooting for the WTO to deliver.”

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