Negotiations for the first global trade deal since the beginning of the World Trade Organization failed due to India’s objections regarding agricultural stockpiling. A consensus among the member states is required to conclude the Agreement. However, after accepting its terms in the Bali Conference in December 2013, India refused to agree in time for the deadline on July 31st. This failure drew strong criticism from WTO members and it raises doubts about the future of the multilateral trading system.
The Trade Facilitation Agreement (TFA), which would be binding on all WTO member states, aims to increase trade opportunities by streamlining custom procedures, improving infrastructure and reducing corruption. Currently, burdensome border procedures and excess red tape increase transaction costs for businesses, ultimately leading to higher prices for consumers. Additionally, this delays revenue collection, increasing costs for customs authorities. The improvements resulting from the TFA would speed up the flow of goods, increase the collection of duties, expedite the delivery of products to customers, and lower prices. The Agreement provides assistance to developing countries and least developed countries in the implementation stage. On July 22nd, the WTO unveiled its new TFA Facility, with the aim of providing developing countries and LDCs with technical assistance and capacity-building support.
The TFA contains a clause that caps subsidies at ten percent of the value of agricultural production. India’s Food Security Act aims to provide the most vulnerable part of the population with food at accessible prices. India would be unable to achieve the ten percent cap on subsidies under its current regime. Prior to the Ministerial Conference in Bali, the G-33 coalition, led by India, had requested a change in WTO rules to allow developing countries more flexibility regarding food procurement programs. At the Conference, India agreed to the TFA under the condition that developing nations would be granted an interim measure in respect of public stockholding for food security. Under this “peace clause,” so long as subsidies by developing nations do not lead to trade distortions, no legal actions or sanctions will be imposed. Members agreed to provide this protection to developing nations until 2017, by which time a permanent solution must be reached.
On July 25th, India informed the WTO that it expected its concerns on agricultural subsidies to be addressed before signing the TFA. India claims that since December the Organization has not paid sufficient attention to food security matters. This was a very disappointing move for most members, who were hoping to adopt the Protocol of Amendment that would bring the TFA into the WTO’s legal framework on July 31st. However, when that date came, India refused to accept the current terms of the Agreement.
Although this is not the first missed deadline for the WTO, this Agreement is vital to changing the growing perception that the WTO is an inefficient forum. One solution would be for WTO members to confirm their commitment to food security matters, allowing the TFA to come into force. There have been talks among the interested countries of excluding India from the treaty, and continuing with a plurilateral agreement. However, plurilateral agreements tend to exclude developing and least developed countries, which would be the biggest beneficiaries of this trade reform. This also raises questions regarding the future of the Doha talks, considering that something that had already been agreed on could not be implemented. At this point, the next steps for the TFA are unclear. With summer break approaching, WTO Director-General Roberto Azevêdo asked trade ministers to take the time to reflect on the situation and on a possible solution.
Lillyana Daza Jaller is a law student at American University. She is a Summer Associate in the Barral M Jorge team working in the area of International Trade.