WTO Members Weigh Options as India Pushes Food Security Link on Trade Facilitation Deal

24 July 2014

Indian officials indicated late on Wednesday that they would not be able to support the implementation of the WTO’s Trade Facilitation Agreement (TFA) unless they see their concerns on food security addressed, according to multiple media reports. The news, coming just ahead of a key WTO meeting, has reignited old tensions among the global trade body’s members while leaving the next steps for the TFA unclear.

Thursday’s meeting of the WTO General Council, which is set to be its last before the annual August break, had been expected to serve as a check-in point for members to discuss progress on a planned work programme for eventually concluding the Doha Round trade talks. Members have until the end of this year to negotiate such a programme.

The spotlight, however, has now shifted back to the already-agreed TFA, which aims to ease customs procedures and reduce red tape at the border.

The TFA was one of the main deliverables from the WTO’s Ninth Ministerial Conference in Bali, Indonesia last December, and marked the organisation’s first global trade deal since opening its doors in the mid-1990s.

31 July deadline

Trade ministers had agreed in Bali that the General Council – the WTO’s highest decision-making body outside of ministerial conferences – would have until 31 July of this year to adopt the Protocol of Amendment that would bring the Trade Facilitation Agreement into the organisation’s legal framework.

By that date, WTO members would also annex Category A notifications – in other words, those commitments developing countries will implement immediately upon the deal’s entry into force – and open the pact for ratification by the membership over a one-year period, ending on 31 July 2015.

Once the deal is ratified by two-thirds of the membership, the TFA will take effect for those members. The agreement would then take effect for those remaining members once they ratify it themselves.

However, questions emerged earlier this month over whether India might block the next step in the implementation of the TFA, when its representative told a meeting of the Preparatory Committee on Trade Facilitation that it would not be able to back the adoption of the Protocol until it saw more movement on addressing New Delhi’s concerns on public food stockholding.

Back to Bali

The Indian statement has essentially restarted a fight that had dominated most of the Bali ministerial last December. Ahead of the conference, the G-33 coalition, led by India, had called for WTO rules to be updated in order to grant developing countries greater flexibility for food purchased at administered prices when building stocks for food security purposes.

New Delhi had adopted in 2013 a multi-billion dollar food security scheme, and had been concerned that under current WTO rules it could face a dispute settlement challenge for breaching the global trade body’s subsidy limits.

At the ministerial conference, India’s then-Commerce Minister, Anand Sharma, had initially insisted that his country would not back down on its demand for agreeing a permanent solution in Bali on food stocks, stressing that his country’s right to food security was “non-negotiable.”

After several days – and nights – of negotiations, the stand-off had appeared resolved when WTO members committed to undertake a work programme that would develop recommendations for a “permanent solution” on the public stockholding subject in time for the organisation’s eleventh ministerial conference, expected in 2017. (See Bridges Daily Update, 7 December 2013)

In the meantime, trade ministers signed off on an interim solution that would provide a “peace clause” preventing members from bringing legal disputes against existing public stockholding programmes in this area. Countries with such programmes would need to ensure that their programmes do not distort trade or “adversely affect” the food security of other members, and are required to provide information on said programmes.

Raising eyebrows

India’s recent decision to re-link trade facilitation with food security had caught many in the international trade community by surprise, given that the subject had appeared settled in Bali.

Some developed country delegates said that it was not clear what exactly India is looking for, given that there is an interim solution in place, and a clear commitment and parameters to talk about a permanent solution.

The lack of concrete requests from India, one said, has been “raising a lot of eyebrows in Geneva,” as has the seemingly late push on the subject.

Furthermore, one source said, an informal meeting on agriculture on Wednesday reportedly saw India back a revised paper from the G-33 developing country coalition that features essentially the same terms as the group’s original proposal on public stockholding from late 2012.

The proposal circulated Wednesday also featured provisions relating to “special products,” where developing countries would be given extra flexibility to make small or no tariff cuts, as well as a special safeguard mechanism (SSM) that would allow developing countries to increase tariffs in certain situations.

G-20 negotiations

Many had hoped that last Saturday’s meeting in Sydney of trade ministers from the G-20 major economies could have yielded a result on the India subject, only for negotiations there failing to lead to a resolution.

Officials familiar with the talks have stressed, both publicly and privately, that India is not against the TFA itself.

“There was no dissent on the significance, the importance, and the timetable that’s laid out in the agreement that everyone said,” Australian Trade Minister Andrew Robb told reporters this weekend, while acknowledging that some countries had concerns over the pace of implementing some of the other Bali decisions. Overall, he noted, “everyone, including India, recommitted publicly to the package.”

The Australian trade official acknowledged, however, that work still remained in the days following the G-20 meeting to “even further satisfy India and maybe other countries.”

The text of the chairman’s summary, issued by Robb’s office on Saturday, said that G-20 members “undertook to show leadership in our support for the full implementation of all elements of the Bali outcome agreed at the 9th WTO Ministerial Conference in December 2013, including the Agreement on Trade Facilitation, consistent with agreed timelines.”

Indian officials, for their part, publicly disagreed with Robb’s summary of the G-20 discussions, telling Reuters that the statement made no mention of India’s food security concerns and some of the questions raised by developing countries.

WTO launches TF facility

In a related development, WTO Director-General Roberto Azevêdo announced earlier this week the launch of a new initiative aimed at ensuring that developing and least developed countries (LDCs) receive the assistance they need to implement the trade facilitation pact.

The new WTO Facility, officials explained, would build upon existing efforts by other stakeholders, such as bilateral donors or multilateral agencies, in the area of technical assistance and capacity-building support.

Functions of the Facility would include, for instance, helping LDCs and developing countries assess their needs and identify potential development partners; providing support to identify sources of implementation assistance; and providing project implementation grants for implementing TFA provisions when efforts to get funding elsewhere have failed.

Officials made clear on Tuesday, however, that the Facility will only begin its work when the Protocol of Amendment inserting the TFA into the WTO Agreement is adopted.

“It is important now that members implement the Trade Facilitation Agreement so that developing countries can receive this technical assistance and so that we can move ahead with the other elements of the Bali package and negotiations on the Doha Development Agenda,” Azevêdo said at the launch.

Experts say the Facility will likely help answer some of the questions developing countries have raised over whether they will have the necessary support to take on some of the TFA’s more costly provisions.

“The launch of the WTO TF Facility should provide some comfort to developing members that the funds and the willingness to support the implementation of the WTO TF Agreement are there,” said Dr. Mohammad Saeed, a senior trade facilitation adviser at the International Trade Centre, in e-mailed comments to Bridges.

“Recent similar initiatives, such as that of the World Bank and the ITC Trade Facilitation Programme which was launched [on 22 July] are also clear signals that international organisations are willing to assist developing countries benefit from the Agreement,” Saeed added.

Several international organisations have also affirmed their commitment toward a coordinated approach in providing assistance to developing, transition, and least developed countries in implementing the TFA.

The co-signers of that latter statement were the ITC, the Organisation for Economic Co-operation and Development, the UN Conference on Trade and Development, the UN Economic Commission for Europe on behalf of various regional commissions, the World Bank Group, and the World Customs Organization. 

South Africa question

The Facility’s launch was announced jointly with the coordinators of the African, Least Developed Country (LDC), and the African, Caribbean and Pacific (ACP) Groups, in what sources say appeared to be a tacit indication that they are likely to back the adoption of the Protocol.

While India’s stance has largely stolen the spotlight over the past few weeks, whether the African and LDC Groups would approve the Protocol had also appeared uncertain until recently, after African Union trade ministers called in April for the implementation of TFA to be done provisionally, pending the conclusion of the Doha Round.

The African Group had appeared to back down from this stance in recent weeks. (See Bridges Weekly, 10 July 2014) However, sources note that South Africa, which has also expressed concerns over a perceived lack of balance in the Bali deal, has continued to call for provisional implementation of the TFA. One developed country source noted that it is unclear what exactly South Africa is looking for, in terms of balance.

Next steps uncertain

Though a cabinet meeting to confirm the Indian position has reportedly been delayed to today, reports indicate that New Delhi is likely to hold firm on its position.

In light of the expected Indian decision, how WTO members will decide to proceed ahead of the 31 July deadline was unclear as Bridges went to press.

For instance, the Preparatory Committee on Trade Facilitation needs to finish its work in drafting both the Protocol itself, and the General Council decision for its adoption, both steps that would need to be completed by the end of this month.

Whether members will try to salvage a consensus in time for the end-July deadline – or instead decide on an extension – was an open question at the time of this writing, with delegates unwilling to speculate ahead of the General Council meeting given the uncertainty surrounding the situation.

Several said, however, that it was unlikely that members would try to negotiate during the Thursday meeting itself.

Many trade sources speaking to Bridges ahead of Thursday’s meeting warned that, should members fail to meet their 31 July deadline for the TFA protocol, it could pose problems for efforts to eventually conclude the broader Doha Round.

“Talking about post-Bali agenda while failing to implement the TFA isn’t just putting the cart before the horse, it’s slaughtering the horse,” said US Trade Representative Michael Froman in a post on social media site Twitter ahead of Saturday’s G-20 meeting.

Other developed country sources commenting to Bridges before Thursday’s General Council meeting echoed that concern, saying that if WTO members cannot even implement what has already been agreed, then trying to negotiate a post-Bali work programme for finishing the Doha talks would be extremely difficult, if not unfeasible.

“If there’s no post-Bali on the implementation side, then there’s no post-Bali at all,” one suggested. “That’s just a statement of fact.”

Another noted that they were not sure how members’ disappointment would manifest itself formally on Thursday. “Certainly informally, people are making it clear that all bets are off,” the official said, noting that some are perceiving it as an attempt to renegotiate the Bali deal.

“It’s hard to see the majors really being comfortable talking about other things… when there is so much uncertainty about the ability to agree anything and make it stick,” the official continued.

ICTSD reporting; “India keeps world guessing ahead of landmark trade deadline,” REUTERS, 22 July 2014; “India will not back WTO protocol unless concerns addressed – sources,” REUTERS, 23 July 2014; “India to block WTO trade facilitation pact,” BUSINESS STANDARD, 23 July 2014.

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