WTO deal: North-South divide rears its head again

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Bikky Khosla | 05 Aug, 2014
The WTO talks have failed. Last year, all the 159 WTO members reached a historic Trade Facilitation Agreement, signaling an erosion of the traditional North-South divide and raising hopes that the deal would inject a whooping $1 trillion into international trade and create some 21 million jobs -- nearly 18 million in developing nations -- by lowering transaction costs and red tape. But the deadline for signing part of the accord expired on July 31, with India refusing to compromise on its demand for a permanent solution to the issue of food stocks and subsidies.

When the deal was signed in December 2013, India agreed on the terms only when it was extended protection for its subsidy programme under a 'peace clause'. Since then, it has been widely expected by the Indian side that the clause would be extended indefinitely. I don't think there is anything wrong in having such expectations -- we still have more than 363 million people living below the poverty line. However, now some developed countries are opposing India's demand for the assurances that no action would be taken against its stockpiling and subsidies till there is a final solution to the food security issue.

There are some other important points which should not be ignored: First, India's support to farmers through Minimum Support Price (MSP) Scheme amounts to around $1.2 billion, well below that of some developed countries such as the US and the EU. According to a report, in 2012 the US and the EU gave about $30 billion and $107 billion worth of subsidies to farmers, respectively. Second, compared to most of the developed countries, India is a small exporter with not enough muscle to distort the global market prices. Third, the 10% cap calculated based on 1986-88 prices in no way seems fair.

A senior US official has reacted that America "regrets that a handful of members have decided not to adhere to their commitment". Even talks are in the air that WTO may move ahead without India. I don't think such views hold much weight. There is no doubt that the Bali package has potential enough to push global trade in a big way, but that should not be at the cost of the millions of poor living in India or in any developing or least developed countries. India's stand is absolutely correct -- the North should try to understand the challenges of poverty faced by the South. I hope, differences would be resolved at the next WTO meet scheduled next month.

I invite your opinions.