India, US Clinch Deal on WTO Food Stocks, Trade Facilitation Impasse

13 November 2014

India and the US have announced that their stand-off over food stockholding at the WTO has been resolved – potentially paving the way for the implementation of a separate deal on trade facilitation, as well as progress on the broader negotiating agenda at the global trade body.

“We are extremely happy that India and the US have successfully resolved their differences,” said Indian Commerce and Industry Minister Nirmala Sitharaman in a statement on Thursday.

A separate statement from US Trade Representative Michael Froman confirmed that progress had been made. “On the basis of this breakthrough with India, we now look forward to working with all WTO members and with Director-General Roberto Azevêdo to reach a consensus that enables full implementation of all elements of the landmark Bali Package," Froman said.

While specific details about the breakthrough were publicly unavailable, delegates in Geneva viewed it as a positive step, noting that the terms will next need to go to the rest of the membership for review.

Food security and farm subsidy rules

In July, India had refused to approve the adoption of a Protocol of Amendment that would allow the WTO’s new Trade Facilitation Agreement (TFA) to be integrated into the global trade body’s legal framework – a key step in the implementation process.

The reason, New Delhi explained at the time, was the slow progress in devising a “permanent solution” to problems developing countries face under current farm subsidy rules in buying food at government-set prices to stock as part of their food security schemes. (See Bridges Weekly, 31 July 2014)

The veto threatened to unravel the package of agreements that trade ministers had reached in Bali, Indonesia, at the organisation’s ninth ministerial conference last December.

Among other elements, this included a deal not to initiate trade disputes against developing countries’ food stockholding schemes, while a “permanent solution” was being negotiated for adoption in time for the 2017 ministerial conference.

The new US-India agreement clarifies that this “peace clause” mechanism will “remain in place until a permanent solution regarding this issue has been agreed and adopted,” according to a briefing on the US Trade Representative’s website.

The accord also “sets out elements for an intensified programme of work and negotiations” on food stockholding, the summary says, while noting that the TFA should be implemented “without conditions.”

Sticking points resolved

The main aspects of the newly-announced accord had reportedly already been agreed between the two trading powers before talks fell apart just before midnight on 31 July.

However, it remained unclear how the US and India were expecting to resolve what had reportedly been the sticking point at that time: whether an eventual  “peace clause” deal  would take the form of a decision of the WTO’s General Council, as New Delhi wanted – or a statement by its chair, as preferred by Washington.

Sources familiar with the talks told Bridges that, in July, the US had been reluctant to agree to India’s demands on the legal form of the accord, as they feared it would effectively amount to rewriting the agreements reached at Bali.

In contrast, India had feared that the legal value of a statement from the chair of the General Council would not be adequate to protect it later from challenge it needed until a permanent solution was reached.

Sources told Bridges that they were expecting the US to agree to a General Council decision on the issue, along the lines of an outline deal that has been under discussion since September.

High-level maneuvering

The announcement of the bilateral agreement comes only two days before leaders from the G-20 group of major economies are set to meet in Brisbane, Australia.

Over the last three-and-a-half months the food stocks issue has risen to the top of governments’ agendas, with the issue being discussed by US President Barack Obama and Indian Prime Minister Narendra Modi when they met in September. (See Bridges Weekly, 2 October 2014).

With the topic reportedly already having dominated talks among G-20 trade ministers in July, sources speculated that trade officials were probably keen to ensure the issue did not overshadow the upcoming meeting among heads of state and government as well. (See Bridges Weekly, 24 July 2014)

Following a meeting between Modi and senior trade officials in New Delhi, an envoy was sent to Geneva last week – although no confirmation was made at that time of whether a formal accord was forthcoming. (See Bridges Weekly, 6 November 2014)

In the last few weeks India has also sought to address concerns its trading partners have raised about a lack of official data on its food stockholding and farm subsidy schemes. In September, the government notified figures for a seven-year period, up to 2010-11. (See Bridges Weekly, 18 September 2014)

At the same time, projections for food and agricultural markets are already anticipating substantial changes as the government begins to roll out plans to expand the provision of subsidised food to millions of food insecure people. (See Bridges Weekly, 6 November 2014)

Agriculture committee meeting today

Several delegates from other countries told Bridges that they were unaware of the exact details of the US-India agreement.

However, with the WTO’s regular Committee on Agriculture meeting taking place today, trade officials said that the accord would not be discussed until later.

Regular sessions of the committee on agriculture are tasked with reviewing the implementation of existing WTO rules on farm trade, rather than negotiating new agreements.

TF next steps?

A few more steps still remain for implementing the TFA, sources noted. A few explained that the Preparatory Committee on Trade Facilitation – which is tasked with taking the necessary steps to allow the deal to be brought into force – will still need to meet to finalise the text of the Protocol of Amendment and associated General Council decision.

Both are necessary to incorporate the TFA into the WTO’s legal framework so that individual members can then ratify it. While the drafting process had been underway before the stalemate, building on proposed protocol text submitted by Norway, this has since been on hold.

“We still don’t actually have a protocol text,” one source said. “The question will be how that is handled. We don’t know at this stage.”

Delegates familiar with the TFA process generally welcomed the US-India step as a positive sign, while cautioning that some potential difficulties could remain.

While the focus has been in recent months on New Delhi, some other delegations had in the past raised questions over the balance of the Bali package and whether the implementation of the TFA should be made provisional on the conclusion of the Doha Round. While that suggestion was seemingly put to rest in July, sources noted that those concerns still may remain among some members. (See Bridges Weekly, 10 July 2014)

Whether members will meet the target of ratifying the TFA domestically by 31 July 2015 – as indicated by trade ministers in Bali – is another open question. Ratification by two-thirds of the membership is required for the deal to enter into force for those members.

Some sources suggested that the ratification process could take longer, given the length of the domestic legislative process in some countries.

Shifting timeline

One trade source told Bridges that they expected a special General Council meeting to be convened in November, while the December meeting of the same body could be postponed.

The objective would be to allow more time for WTO members to discuss the post-Bali work programme on how to resolve the outstanding Doha issues, the source said.

Many noted that today’s breakthrough was indeed a step in the right direction. However, others cautioned that rebuilding some of the substantial trust lost over the past few months could take time, and that meeting the end-year target for the Doha work programme would be unrealistic.

Another noted that the discussions among negotiating groups before the July breakdown were only just finishing their preliminary stages.

“The Director-General’s vision was modalities, and we’re a long way from that,” one said. “If members want something really substantive, that’s going to take time.

However, negotiators were broadly upbeat about the news of the US-India deal. “It’s positive,” said one, who added that “the WTO is still in business.”

In a statement issued by the global trade body on Thursday, the Director-General welcomed the news, while urging members to “redouble” their efforts in making up for the lost time caused by the delay.

"The post-Bali work programme remains a priority. Members will need to make every effort to get it back on track as quickly as possible," Azevêdo said.

ICTSD reporting.

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