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India & U.S. Arrive at “Peace Clause” on Food Security, Paving Way for Trade Facilitation Deal

Posted November 13, 2014

In a week that has already seen momentous breakthroughs on a number of different trade fronts, the United States and India announced today they have managed to resolve an impasse over India’s food-stockpiling program, thereby clearing the way for ratification of an important World Trade Organization (WTO) agreement aimed at facilitating global trade.
US-India Flags
The $1 trillion package of reforms to global customs procedures known as the Trade Facilitation Agreement (TFA) had been derailed by an unrelated dispute over India’s insistence that it be allowed to stockpile food without observing the usual WTO rules on agricultural subsidies. India currently purchases enormous quantities of rice and wheat at above-market prices as part of a national policy to support impoverished farmers and provide a degree of food security to its vast population amid high inflation. The U.S. and a number of other WTO members contend the program encourages overproduction and have been concerned that it could disadvantage their food exporters if a surplus of Indian grain was to flood the world market.

Details of the arrangement, described by the U.S. Trade Representative Michael Froman as a “peace clause,” have not been disclosed, but it is understood that it ends the ambiguity over how other countries react to India’s stockpiling and provides it with greater latitude in dealing with the food security issue past 2017 until a more permanent solution can be found. Both U.S. and Indian officials said they would now work to build consensus at the WTO for the pact.

The European Union’s new trade commissioner, Cecilia Malmström, applauded the breakthrough, which she said would “lead to the full implementation of the landmark Bali package.”