India right in taking on WTO top guns

Full marks to Prime Minister Narendra Modi and Commerce Minister Nirmala Sitharaman for their stand with the World Trading Organisation, informing the latter that there is no deal on trade facilitation if the food security issue is not taken care of.

This issue has been widely reported with predictable reactions in the global media against India. Votaries of free trade in India with stakes in foreign flow of capital into the country have also criticised this stand, concerned that India would lose the favour of investors, although going by the recent announcements of the Japanese and Chinese that does not seem to be the case.

Having pushed back at the WTO, now what? India may have won an argument; now it must win the debate. India needs to play on the front foot, and take the discourse up to another level altogether.

India is willy-nilly placed to take a leadership role on the issue, set the context for the ongoing debate, and take the opportunity to reaffirm some incontrovertible principles to set the tone for the role of the WTO.

At the heart of India’s argument is that the WTO is not playing fair. The key issue relates to the WTO’s Agreement on Agriculture (AoA), which the developed nations put together in their favour in the 1990s. This agreement is now locked away and the developed countries are not interested in re-opening it. Under this, countries such as India have to keep product-specific (rice and wheat are the main products) food subsidy within 10 per cent of the value of total production.

Subsidy is calculated as follows: current market price less the reference price that has been set at 1986-88 levels under the AoA. Yes, the reference price goes back over 25 years!

This is utter nonsense. If the subsidy is exceeded, India faces the risk of litigation and sanctions under WTO rules.

Instead of dealing with this in a straightforward manner, the developed countries offered a peace clause during the Bali discussion in December 2013 which was, unfortunately, accepted by the UPA government.

Under this, they said that India will not face any sanctions till 2017, and a permanent solution is supposed to be found within this period. There is no recourse mentioned in case this deadline is not met (deadlines are frequently missed by the WTO), leaving India vulnerable.

The Modi government has rightly rejected this, asking that this matter be resolved now.

India should clearly articulate the following principle: that a country’s sovereign rights and obligations are paramount and cannot be sacrificed at the altar of free trade or globalisation.

This is a serious issue that every nation is struggling with. By reiterating this, India will take a global leadership stance that will be applauded.

The WTO’s workings are often at loggerheads with sovereign rights. In the current instance, the AoA is restricting India’s right to stockpile foodgrains to ensure the food security of its people.

When pushed back, the developed countries are glibly arguing that India can always import the necessary foodgrains whenever it falls short. While this serves the trading interests of western countries, it leaves India vulnerable. The argument is meaningless since India is growing adequate foodgrains to take care of its needs, and the proposed restriction on subsidy and stockpile is an artificial one.

The WTO has been set up to push the agenda of open global trade, irrespective of the consequences. It is in the nature of such things that trade benefits the strong and the privileged. Indeed, the underprivileged do not even have a seat at the table.

India should reaffirm its commitment to the underprivileged and unequivocally state that it has an obligation to protect their interests even at the cost of alienating the proponents of global trade.

By making this a privileged vs underprivileged issue, India can win over the majority opinion. This argument is closely tied to the human rights issues so close to the hearts of western liberal democracies. Should there be a food crisis in India the country will be accused of violating human rights and not ensuring adequate supply of food.

And yet the very practices of the WTO in the cause of global trade may cause these human rights violations to happen — a situation that will not be acceptable to anyone.

There is another point in the ongoing debate that needs to be addressed. The western nations are saying that the Trade Facilitation Agreement (TFA, designed to streamline customs’ procedures and flow of goods), which India has held up, should be delinked from the issue of food subsidy and food security.

This is a self-serving argument. If the tables were turned the other way, suppose India had its way with a revised AoA and the TFA was pending, there is very little chance that one would be moved ahead without the other.

A contract must be concluded with all pending issues taken together. India is right to insist on this, as otherwise the pending matter which is of vital importance may never get resolved satisfactorily.

If India does not set the discourse, or at least significantly influence the discourse, the narrative will be taken over by interests working against India.

India has taken a bold stand. It must see this through without blinking first.

The writer is the Group CEO of RK Swamy Hansa. The views are personal