India had won a substantial victory at Bali. The developed countries had agreed that developing countries might continue to pay high prices for food procured under the minimum support price mechanism and provide subsidised food to the poor for the next four years, provided that in this period a permanent solution to the problem of food subsidies would be found. In return, developing countries had agreed to implement trade facilitation measures, such as computerisation of customs systems and improvement of foreign trade infrastructure such as roads and ports. The developed countries led by the United States were much interested in trade facilitation. They believed that these measures would help them increase their exports to the developing countries. Thus, these were often called ‘import facilitation measures’ by the developing countries. The Bali agreement, therefore, was projected as a happy give-and-take.
Actually, the Bali agreement was mainly in our favour, except for the caveat of finding a permanent solution to the food subsidies. The principle hitherto was that food security for the people should be secured through foreign trade; and not through domestic production. That was good as long as the global prices were low. But this became a curse when global prices spiked. Many developing countries found themselves in trouble.
They had allowed their domestic production
systems, such as canals to fall into disrepair, as they were getting cheaper food via imports. But food prices have spiked in the last few years. Now they have to continue to import expensive food because their domestic production systems have since become dilapidated. This has led to food riots in many countries. This principle was diluted at Bali.
We must accept though that this principle will be equally applicable to the developed countries. They will now have a moral anchor to continue to pay subsidies to their farmers. In turn, this will cancel the possible gains to our farmers that may have occurred from the dismantling of subsidies given by the developed countries to their farmers. We should accept this potential loss. Be that as it may, this agreement spelled the death of global trade in essential food products, which is as it should be. The developed countries are providing huge subsidies to their farmers to ensure their food security. We should demand and get the same.
In return, the developing countries had agreed to implement trade facilitation measures. Immediately, this would be more beneficial for developed countries because the standards are likely to be in line with the practices followed by them. But the picture in the long run will be exactly the opposite. Harmonisation of our customs procedures with global standards will equally benefit our exporters. Our domestic quality standards will become consistent with global standards. Presently our producers face much difficulty in exports because our quality is not on par with the requirements of the global market. These will now get adjusted to these global standards. This will help developing countries push their exports.
The Modi Government appears to have made a fundamental change in its stance recently. India, along with 45 other developing countries, is now demanding that a permanent solution to the problem of food subsidies be found before the trade facilitation agreement would be signed by them. We are effectively backtracking from the Bali accord. It is good that the government has decided to break the Bali accord if a permanent solution to food subsidies is not found upfront. Backtracking from Bali Agreement comes along with the risk of the developed countries also backtracking from the four-year peace clause.
In other words, the food subsidies being given in India will be contra to the WTO agreement and in retaliation, the developed countries will be entitled to impose punitive import duties on our imports. This is a risk we must take. It is better to face the problem of food subsidies without a trade facilitation agreement by rubbishing the Bali Agreement; than facing the problem of food subsidies with a trade facilitation agreement by honouring the Bali Agreement. We shall get some additional bargaining space by denying the developed countries of the trade facilitation agreement.
That said, we must not forget that the main issues for making a better world are easing movement of people and loosening the TRIPS agreement. We should make it clear that if developed countries do not concede to a permanent solution to the problem of food subsidies, then we will raise these issues and seek a fundamental realignment of the WTO. We should immediately launch an offensive against the developed countries on these issues and make efforts to carry other developing countries with us. The breakup of the Bali accord can be a welcome step towards renegotiation of the WTO treaty.