With the fate of the Trade Facilitation Agreement uncertain, LDCs call for ‘early harvest’ Bhagirath Yogi

It was just supposed to be a question of formality. With the ministers agreeing to the ‘Bali Package’ at the WTO’s 9th ministerial meeting in Bali, Indonesia in December 2013, many expected that the 160-member body would finally be able to agree to a major trade deal since the WTO was created19 years ago.

All the member states were expected to endorse the Trade Facilitation Agreement (TFA) by 31July 2014, which would be formally implemented in July 2015. But at the last minute, India refused, insisting that its proposal on food grain stockholding be considered first.

The FTA is supposed to benefit both the rich and poor countries. It was estimated that by removing barriers in global trade, the TFA would add 1 trillion USD to the world economy and create over 21 million new jobs worldwide. But India insisted that, in exchange for signing the TFA, it must see more progress on a parallel pact that gives it more freedom to subsidise and stockpile food grains than is currently allowed by WTO rules.

Commerce Secretary of India, Rajeev Kher, told the PTI news agency, that India was always committed to the TFA.  “We never went back on our commitments with regard to the TFA. We took our proposal (on public stockholding of food grains for poor people) to the WTO Director General in a proper manner. But we have not been able (to reach a consensus),” he said.

During his meeting with President Barack Obama in Washington on 30 September, Indian Prime Minister Narendra Modi also discussed the issue of TFA. “India supports trade facilitation. However, I also expect that we are able to find a solution that takes care of our concern on food security. I believe that it should be possible to do that,” AFP news agency quoted Modi as saying.

The US Trade Representative Michael Froman regretted India’s decision. “The US has been fully committed to implement all elements of the Bali package, including the decision on food stockpiling, and has provided reassurances and clarifications, as requested,” he told reporters in Geneva.

Those disappointed included the Least Developed Countries (LDCs), the world’s 49 poorest countries. Under a separate heading ‘Development and LDC issues,’ the Bali ministerial conference agreed on four-point package for the LDCs including

  1. i) Preferential Rules of Origin for the LDCs, ii) Operationalising the Waiver Concerning Preferential Treatment to LDCs’ Services and Service Suppliers, iii) Duty-Free and Quota-Free Market Access (DFQF) for LDCs and iv) a Monitoring Mechanism on Special and Differential Treatment.

 

(For details, visit http://wto.org/english/thewto_e/minist_e/mc9_e/balipackage_e.htm)

 

“We have been calling for an ‘early harvest’ of the LDC package because if anyone rightfully deserves one, it is the most marginalised and vulnerable LDCs. However, since Bali there has not been the expected progress in achieving a legally binding LDC package, which was only been adopted with ‘best endeavour’ language in Bali,” said Dr Arjun Karki, international coordinator of the LDC Watch—a network of civil society organisations in the LDCs.

Critics say that LDC governments, including those of Nepal and WTO chair Uganda, are trying to block the TFA in order to safeguard the overall development mandate of the Doha round. “It is because the TFA is obviously the developed countries’ agenda and if this gets through, it would be an ‘early harvest’ for them when all other development issues like non-binding package for the LDCs, on agriculture, provision for special and differential treatment etc., are not concluded,” said Dr Karki.

 

Analysts, however, believe that enforcing the TFA would still be in the LDCs’ interest. “The Bali package contained a lot of measures that would have been beneficial for LDCs such as improvements on the Duty Free Quota Free market access—due for review in 2015, assistance on trade facilitation, etc.  With the Bali package now past deadline achieving the LDCs’ interests in the Bali Declaration is in jeopardy,” said Dr Yurendra Basnett, Research Fellow at the Overseas Development Institute (ODI)—a London-based think tank.

 

“This is also not good for the WTO as it further undermines its relevance in setting global trade rules. Developed countries are already actively negotiating free trade agreements outside of the WTO. A strong multilateral trade governance body such as WTO is perhaps very important for LDCs who are not part of these mega-free trade agreements being negotiated by US and EU,” Dr Basnett added.

The main contention is that India’s food subsidy is not WTO-compatible given the increases in food-prices. WTO uses 1986-88 prices to calculate the benchmark for what is allowed. This is codified in the Uruguay Agreement.

Writing in the Guardian newspaper, Professor Jayati Ghosh, an Indian economist, accuses the US – which she says has a food stamp programme amounting to several times the value of India’s total food subsidy – of hypocrisy in accusing India of exceeding its allowed level of support. “This is because India wants to expand a public procurement and distribution programme to support the viability of poor farmers, encourage the production of grain and ensure its distribution to the largely undernourished population. The support prices offered to farmers are only slightly higher than current global trade prices, but obviously much higher than the reference prices of nearly three decades earlier,” she said.

Dr Basnett, too, argues that changing any element of the document will open up the whole text. “From a negotiating procedural point of view this is not feasible. Ideally, these things should have been updated regularly to reflect the present circumstances, but it goes to show how the institution has become logged-jam and rigid,” said Dr Basnett, adding, “India’s other point, it seems, is that it cannot agree to another negotiating agenda while what is important for India gets shelved. This arises from past experiences where issues of importance to developing countries have been put on hold (such as the Uruguay Round), saying it will be dealt later.”

Some developing country officials remain optimistic that the TFA can still be salvaged. Talking to the Inside U.S. Trade magazine in Washington DC early this year, South African Trade Minister Rob Davies argued that WTO members can still salvage the TFA and other elements of the “Bali package” after they return from the August break, but only if they are able to deliver some concrete outcome that addresses the priorities of developing countries.

Davies argued that many developed countries agreed to the package only because of assurances in the Bali Declaration that the issues that had not been addressed in a legally-binding manner would be prioritized under the post-Bali work programme that WTO members are supposed to produce by the end of 2014. “Issues in the Bali Package where legally binding outcomes could not be achieved will be prioritised,” the Declaration states.

In the Hong Kong WTO Ministerial Declaration in 2005, developed countries also committed to DFQF market access on a lasting basis for all products originating from LDCs by 2008, or no later than the start of the implementation period of a completed Doha Round deal.

Almost a decade later, nothing like that has happened.  With the fate of the TFA still uncertain, LDCs now feel that they must raise their voices to get better treatment from the world trade body.

The author is a Nepali journalist based in London and can be reached at bhagirath.yogi@gmail.com

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