Cap or uncap subsidies

PM Modi’s opposition to WTO’s diktat in global trade, besides eliciting a few surprises, bears some good news for the poor

Hardnews Bureau Delhi 

During the BJP national council meeting, Prime Minister Narendra Modi likened India opposing the World Trade Organization’s (WTO’s) Trade Facilitation Agreement (TFA) to the nuclear explosion test conducted by former PM AtalBehari Vajpayee. He made it clear that his government was standing up to international pressure to sign the TFA in order to protect food security and public stock holding, important for the poor as well as the farming community.

The Modi govenrment’s opposition to TFA took the world by surprise, since the earlier UPA government voiced its commitment in December 2013 to sign the TFA by July 15, 2014. This calibrated rejection of the WTO deal positioned Modi as a high-stakes player, and if he does not blink soon, the world had better be prepared for more shocks.  

Resistance to the TFA, which was projected to add 21 million jobs and increase world trade by a value of $1 trillion, stems from India’s reluctance to accede to subsidies capped at 10 per cent (1986–87 rates) and international supervision over stock piling. The Government of India has categorically stated that it wants inflation since 1986 to be factored in to raise India’s true assessment of subsidy if WTO wants the deal to go through.

At the moment, India is isolated on TFA, but there is talk that Modi will veer around to signing the agreement after WTO negotiators assemble in September. It is unlikely that Modi will buckle under pressure unless some key demands are met. Reared during the days when Indian nuclear weapons tests led to the imposition of Western sanctions, the new BJP government could use this square-off with the West to whip up nationalism before the August–September assembly elections. The BJP-led State could assert that it chose to fight with the West rather than compromise the interests of the poor and the farming communities.

WTO used the TFA to revive the stalled Doha round, as it was considered to be the easiest means to kick-start global trade once again. The agreement was meant to speed up customs procedures; make trade easier, faster and cheaper; provide clarity, efficiency, transparency; reduce bureaucracy and corruption; and use technological advances. It also has provisions on goods in transit, an issue of particular interest to landlocked countries seeking to trade through ports in neighbouring countries. Western countries were to benefit hugely from TFA.

Besides these easy-to-agree-to provisions pertaining to customs laws, a few nettlesome points arose in Bali concerning the issue of development, including food security in developing countries, cotton, and a number of stipulations for least-developed countries. The package also included a political commitment to reduce export subsidies in agriculture and reduce obstacles to trade when agricultural products are imported through quotas. This was the part that made India see red.

During the meeting in Sydney on July 19, India’s Commerce Minister Nirmala Seetharaman threw protocol to the wind and objected to Australian Trade and Investment Minister Andrew Rob’s lack of cognisance about India’s trenchant rejection of the deal. The Australian minister tried to show that India was getting isolated on this deal. Did the new government really bother? Surely not!

Later, US Secretary of State John Kerry and Secretary of Commerce Penny Pritzker tried to counsel India on the need to go along with the world community on the trade deal, writing: “India must decide where it fits in the global trading system. Its commitment to a rules-based trading order and its willingness to fulfil its obligation will be a key indication.”

By taking such a strong position, Modi has stolen an issue usually a preserve of the Left parties. He has also taken a position against WTO policies, which are mostly dictated by the industrialised West and multi-national corporations, and are inimical to national sovereignty. It will be interesting to see whether Modi and the BJP government—mostly inward looking—can use their domestic concerns to build a powerful argument for why WTO’s agreement has to wait till the concerns of the poor and needy are adequately met.

This story is from the print issue of Hardnews: AUGUST 2014