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WTO approves first worldwide trade deal

Livemint:  November 28, 2014

New Delhi: The World Trade Organization (WTO) approved the first worldwide trade deal in its history on Thursday, ending a four-month impasse that had put a question mark on the future of the multilateral body, after India and the US resolved their differences over public stockholding of food.

The deal incorporates India's stand that an interim solution on public stockholding for food security reached at Bali last year will continue indefinitely and not just for four years as agreed earlier if a permanent solution is not reached within the four-year period. The deal also raises the possibility of a permanent solution for the public stockholding of food by the end of next year after the WTO's 160 members agreed to make all efforts to find a permanent solution to the issue.

WTO director general Roberto Azevedo told the general council that by agreeing to these decisions, members have put the WTO back in the game.

Azevedo said that since members have committed to start work on the post-Bali work programme immediately, they must "get to work straight away".

"We should aim, by the time of the general council on the 10th of December, to have a clear sense of what lies ahead-and a plan for taking our work forward in the new year," he added.

"Members shall engage constructively to negotiate and make all concerted efforts to agree and adopt a permanent solution on the issue of public stockholding for food security purposes by 31 December 2015," a statement prepared to be delivered at the WTO general council by its chairman Jonathan Fried said.

Immediately, the deal will open the door for early implementation of the Trade Facilitation Agreement (TFA) that will lead to easier customs rules across the globe. The agreement is expected to add as much as $1 trillion to the global economy and create more than 20 million jobs, according to a study by the Washington-based Peterson Institute for International Economics.

The members agreed to finalize a post-Bali work programme by July that may include part or whole of the remaining issues of the Doha Development Agenda negotiations that started in 2001.

While a deal at Bali in December last year on the least-contentious issues of the Doha negotiations such as trade facilitation and public stockholding seemed to have ended the deadlock at multilateral trade negotiations, Prime Minister Narendra Modi's government opposed the deal, calling it "unbalanced", because it failed to take care of the concerns of developing nations on food security.

Developing countries oppose a WTO rule that caps subsidies to farmers at 10% of the total value of agricultural production based on 1986-88 prices. They point out that the base year is now outdated and they need to be given leeway to stock enough foodgrains to ensure food security for millions of their poor.

The Modi government wanted a permanent solution on the matter in place of a four-year peace clause and blocked the adoption of the TFA by 31 July. Threats from developed countries that this would doom the future of the WTO failed to pressurize India to change its stand. What broke the ice was direct talks between prime minister Modi and the US President Barack Obama in Washington.

India took a risk by blocking the TFA and it paid off at the end, said Abhijit Das, professor and head of the Centre for WTO Studies at the Indian Institute of Foreign Trade. "Given the enormity of the cause, WTO members had no option but to accept India's stand," he said.

The end of the impasse at the WTO provides the last opportunity for concluding a balanced Doha deal and one has to be prepared to seize that opportunity, Das said.

US trade representative Michael Froman, who was in India earlier this week for the ministerial-level trade policy forum meeting between the two countries, said the breakthrough at the WTO would not have been possible without the personal engagement of Obama and Modi.

"They gave our partnership a mantra: Chalein Saath Saath: Forward together we go. That's what we're doing at the WTO. And that's what we're doing in our bilateral trade and investment relationship as well," he said.

The deal at Geneva will create a great deal of optimism about multilateralism, said Biswajit Dhar, a professor of economics at New Delhi-based Jawaharlal Nehru University. Dhar, however, said that one has to wait and watch how the members define the post-Bali work programme and whether it helps in unlocking the long-pending Doha negotiations.

Cecilia Malmström, European Union trade commissioner, said in a statement that "today's (Thursday's) decisions not only implement the landmark Bali agreements, they confirm the WTO's role at the centre of international trade policy".

"In short: the WTO is back in business," she added.

Malmström said all members now need to turn their attention to the rest of the Doha Development Agenda negotiations and preparing a work programme by July.

"It's 13 years since the launch of the negotiations and it's high time that the international community came together to agree on a work programme to put us on a clear, realistic and credible path towards the conclusion of the Doha Development Round," she added.

Thursday's deal had originally been due for agreement on Wednesday, but an objection by Argentina forced its postponement by 24 hours.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.