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India ready to sign WTO trade facilitation pact in December
Nov 19, 2014

After ironing out its differences over farm subsidies with the US, India is ready to sign the much-awaited trade facilitation agreement (TFA) during the coming meeting of the World Trade Organization (WTO)'s General Council (GC) meet next month.  “We are ready to sign the TFA protocol, provided the  GC takes a call on the resulting Bali package. Technically, it was only the US that was opposed to our demand. So, we hope there will be a positive movement on both these issues (TFA and farm subsidies) at that time,” a top official told Business Standard on condition of anonymity.

The GC, the highest decision-making body, is going to meet on December 10-11.

It is learnt the government is “not averse” to adopting the protocol to implement TFA, which it blocked in July. However, it will be only on the condition that the GC in its statement explicitly states that the so-called “Peace Clause” that will allow India to provide subsidies, which are now prohibited under WTO rules, until a permanent solution to this issue is agreed upon by all member countries.  The “Peace Clause” also, therefore, grants India an indefinite immunity from all future disputes even if India exceeds the 10 per cent prescribed limit for granting farm subsidies to its poor and marginal farmers.  According to WTO rules, developing countries can offer subsidies on crops based on 10 per cent of their total production. As a result, the December GC meet assumes importance in laying down a road map to arrive at a permanent solution to the food stockholding issue that will require amending its Agreement on Agriculture.

Besides, the WTO now has to also decide on a new deadline for implementing the TFA since the process of converting into a legal and binding agreement got delayed. The earlier deadline to implement TFA, that will ease global Customs norms, was July 2015.  The government believes the developed countries, especially the US, “will now be in a hurry” to seek a permanent solution to the public stockholding issue in the absence of which developing countries following similar food security schemes will not be bound by any limit in offering agricultural subsidies.

"We are not in default now. We have just notified our farm subsidies. We will not be in default in next many years to come. However, even if we do breach the limit, nothing stops us from doing that. So, we are at an advantageous position now. Now, it will be on them to approve our food stockholding programme," the official added.

India has notified its farm subsidies to the WTO at $56 billion over the seven years from 2004-05 till 2010-2011, as a proof that it had not breached the prescribed limit of 10 per cent on such help.

Thus, the WTO will also have to now fine-tune the negotiations that will have to take place as part of the post-Bali work programme. The Bali package, which was signed in December last year, also have to progress on offering an incentive package to the lease developing countries (LDCs).

Minister of state (independent charge) for commerce and industry Nirmala Sitharaman last week announced that India and US have reached an agreement, wherein the latter has decided to support its demand for an indefinite 'Peace Clause' until a permanent solution is achieved.

On November 13, the WTO Agriculture Committee met to examine agriculture support policies of some of the countries, including India. During the meeting, countries such as Australia, Canada, the EU, Japan, Paraguay, Switzerland, Thailand and the US had raised questions on India's minimum price support programmes and calculation of subsidies.

Recently, on the sidelines of the G20 Summit, WTO Director General Roberto Azevêdo said a consensus on the Bali package can be achieved within the next two weeks.