India’s Dispute with the World Trade Organization

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NEW DELHI, India— In December of last year, World Trade Organization talks on the Bali package were brought to a halt when India’s then Trade Minister Anand Sharmer refused to accept the deal unless the broader issue of food security—specifically farm subsidies—was addressed.

The Bali package was the WTO’s first attempt to establish a set of rules to reduce red tape involved in international trade, and estimates by the Peterson Institute for International Economics predicted the agreement could add $1 trillion to the global economy while adding 20 million jobs—18 million of which would be in the developing world.

Eventually, under the leadership of WTO director-general Roberto Azevêdo, India had its concerns addressed, and the WTO agreed to provide immunity to India’s food program until 2017, at which time a permanent solution would be negotiated. Sharmer applauded the deal and all countries agreed. Done deal.

On July, 24 India blocked the world trade treaty, even after agreeing to its provisions just months ago.

India’s new government, under Narendra Modi, contended that the country would not sign the treaty unless a permanent agreement on its food programs was reached sooner than 2017. An impasse led to the treaty not being signed.

What’s puzzling to the world, though, is that India has been decidedly pro-business and a vocal supporter of trade reform. They criticized the U.S. and countries in the European Union for not liberalizing trade in the services and information technology industries not too long ago, yet the Bali agreement does just that.

It’s understandable that India wants to protect the interests of its rural farmers, but its recent quagmire in the WTO is threatening the prospect of adding value to the global economy, especially for those in the developing world that suffer from the most inefficient trading customs. Refusing to accept the WTO treaty on the grounds that India’s separate concerns will not be addressed, even though they will be in 2017, is an ill-advised move.

If Azevêdo cannot broker an agreement between India and the WTO, then progress made on liberalizing international trade will be stalled at best, and millions of jobs that could have been added in the developing world as a result of the agreement will not be created.

If the Indian government wants to take a pro-poor stance in their agreements with the WTO, then they would be wise to voice their concerns on food security in 2017, after agreeing to the Bali package. Under the status quo, they can protect the interests of their rural farmers and gain the added benefits of more liberalized trade through the WTO agreement. With their most recent stance, they are protecting their poor farmers at the expense of the poor elsewhere in the world.

Joseph McAdams

Sources: Reuters, Christian Science Monitor, Forbes, BBC, Peterson Institute for International Economics
Photo: GG2

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