Trade Compliance

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Global Trade Facilitation Agreement Running into Trouble Ahead of Deadline?

Posted July 19, 2014

Enthusiasm was high when ministers from nearly 160 countries of the World Trade Organization (WTO) met late last year in Bali, Indonesia and managed to reach a trade facilitation deal aimed at making it easier to move goods around the world by cutting red tape and streamlining customs procedures. India GlobeDespite the narrow limitations of its scope, the International Chamber of Commerce still estimated the Trade Facilitation Agreement (TFA) could boost global exports by $1 trillion and create 18 million jobs in the developing world.

“We have put the world back into the World Trade Organization. For the first time in our history, the WTO has truly delivered,” then WTO Director-General Roberto Azevedo boasted after successfully concluding the only global agreement made since the trade organization was established in 1995.

Of course, when it comes to actually implementing the technical details of such a complex multilateral deal, things are never quite that facile. As they say, there’s many a slip ‘twixt the cup and the lip; or in this case, the deadline to finalize the protocol. Although progress post-Bali has been slow, the TFA is meant to be formally adopted by WTO members by the end of July and scheduled to come into force by July 31, 2015.

As a condition of support for the TFA, India extracted promises from other WTO members that its ongoing concerns related to food security and agricultural subsidies would be addressed. The Indian government routinely pays its farmers above-market prices to create enormous stockpiles of food that millions of its poor depend on, an arrangement that puts it at risk of breaching current WTO rules on farm subsidies.

The WTO rules are designed to prevent domestic policies from distorting the price of food on the international market. India claims the food grains procured for its stockpiles are intended solely for domestic consumption, but critics warn that once those stocks are released into the market, they could well be shipped overseas thereby threatening the livelihood of farmers in other countries, who may suddenly be forced to compete with a flood of cheap, heavily subsidized imports.

Lack of progress on negotiations to achieve a permanent solution to the issue, such as a proposal made by a coalition of developing nations exempting domestic food security policies from being challenged by so-called rich countries, have prompted New Delhi to be increasingly outspoken about its growing frustration at the asymmetrical nature of discussions at the WTO. India is not alone in feeling that developed economies having been putting too much emphasis on trade facilitation at the expense of agriculture and issues concerning least developed countries.

“We are deeply concerned that the ministerial decision on public stockholding for food security purposes is getting sidelined,” India’s WTO representative Anjali Prasad said recently, echoing a stance first made at a WTO meeting in Geneva on July 2. “Till we have an assurance and visible outcomes which convince developing countries that members will engage in negotiations with commitment to finding a permanent solution on public stockholding and other Bali deliverables, India will find it difficult to join the consensus on the protocol of amendment.”

Such statements have led some to fear that India may withhold ratification of the TFA protocol as leverage to get talks on farm subsidies moving faster.

By mid-week however, India’s top trade official Commerce Secretary Rajeev Kher sought to dispel apprehensions that India’s support for the pact was contingent on making progress on food security, saying “the government would not block the world’s first global trade deal over lack of progress on food subsidy talks and further that progress on food stockpiling is not a condition for signing the protocol.”

India is expected to raise its concerns over the slow progress on the WTO’s Bali agreement at the G-20 meeting of trade ministers in Sydney, Australia on Saturday.