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‘Food subsidies will continue until a permanent solution is reached’

business Updated: Nov 19, 2015 23:56 IST
Timsy Jaipuria
Timsy Jaipuria
Hindustan Times
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With only a few weeks remaining for negotiations to conclude the Doha Development Round to push multilateral trade, WTO director-general Roberto Azevêdo has said the rift between developed and developing nations continues to be wide over subsidies on food stockpiling. (Reuters File Photo)

With only a few weeks remaining for negotiations to conclude the Doha Development Round to push multilateral trade, WTO director-general Roberto Azevêdo has said the rift between developed and developing nations continues to be wide over subsidies on food stockpiling.

Azevedo added that the Bali decision on not challenging developing nations on their subsidies at WTO would remain the law until a permanent solution is achieved. In an email interaction with Hindustan Times, he also said India needs to address structural bottlenecks like project delays and ill-targeted subsidies, and to improve on transport and power infrastructure.

Q. India is seeking a “balanced outcome” at the World Trade Organization’s (WTO) tenth ministerial meeting even as it is striving to get a permanent solution to the public stockholding issue for food security purposes. India already took a strong stand to set the Bali accord straight, which was signed and agreed in December 2013. How do you see India’s current stand on the Trade Facilitation Agreement (TFA), in particular, the decision on public stockholding for food security purposes. Do you think India’s stand is justified?

Also what do you expect at the December ministerial in Kenya from the developed nations on the decision of the WTO General Council where it had allowed India and other developing countries to continue to offer subsidies to the farmers under the public stockpiling programmes until a permanent solution is achieved, of which the council had put a deadline of 2015?

Ans: At our Bali Ministerial Conference in December 2013, Ministers took a decision that they would not legally challenge the WTO compliance of the food stockholding programmes in developing countries. Simultaneously, they instructed members to find a permanent solution within a four-year timeframe. In November last year, members clarified this decision. They made it clear that if there was no agreement on a permanent solution within the target four-year time-frame, such eligible programmes in developing countries would remain unchallenged until such a permanent solution was found. At that point members also expressed their commitment to make all concerted efforts to agree and adopt a permanent solution by 31 December 2015.

Members are pursuing these discussions towards finding a permanent solution. However, despite current efforts, positions continue to remain wide apart. In any case, it is important to remember that the Bali Decision as clarified last November is in force, protecting public stockholding programs from being legally challenged at the WTO. That will remain the case until a permanent solution on this matter is found.

Q. Ratification of the Trade Facilitation Agreement (TFA) by the member nations has seen some delay, how do you see this?

Ans: This is a very important agreement, particularly for developing countries which will reap the majority of the economic benefits. The TFA will simplify, standardise and speed up global customs procedures, which can lead to an average cut in trade costs by around 14 per cent— an impact potentially greater than the elimination of all remaining global tariffs. Indeed, our economists project that implementation of the TFA by WTO members could lift global exports by $1 trillion annually.

We knew that it would take some time for the TFA ratifications to start coming in. Some of our members were able to accept the TFA through administrative decisions, but for many members, parliamentary approval is required. This takes time, and we’re now starting to see these efforts bear fruit. In fact, we’ve seen a surge of ratifications since the start of September. Almost half the ratifications needed to bring the TFA into force have now been received. It is important that we maintain this momentum.

Q. India is expected to lead the global economic engine in the years to come and being a strategic member, what do you think India should take as its strategy to help the economies grow along with its own economy?

Ans: India is increasingly playing a leadership role on the global stage. I look forward to seeing this continue in the years to come. I wouldn’t seek to offer any specific advice – however, WTO members carried out a trade policy review of India last year (as they do with all members on a periodic basis) and some interesting points were raised. The report noted India’s continued efforts to liberalize and facilitate trade and steps to relax foreign direct investment restrictions in some sectors. These are positive developments which should help boost economic growth. At the same time the report noted that India’s import regime remains complex, especially its licensing and permit system, and that the simple average tariff rate has increased since the previous review. The report also pointed out that structural bottlenecks such as delays in project approvals, ill-targeted subsidies, and weaknesses in transport and power infrastructure remain barriers to achieving higher growth. Some of these bottlenecks, as identified by other members, are being addressed, which can help the country’s growth prospects.

Q. As the WTO DG what do you think are the future roadblocks for the global trade to grow and how best can they be addressed for better trade projections? Also on multi-lateral pacts such as the recent Trans-Pacific Partnership (TPP), which were lauded as well as criticised. Also in the works are more such agreements for which negotiations are on, how do you see such agreements? Your comments?

Ans: I will take both questions together, as they are linked. First, regional trade agreements are not new and they are not an obstacle to progress in the WTO. The threat to the WTO comes not from other agreements under negotiation, but our own sluggishness in striking deals in Geneva. If countries cannot negotiate in the WTO, they will look for other avenues. The emergence of the major regional trade agreements that we are seeing today such as the TPP and the proposed Regional Comprehensive Economic Partnership (RCEP) may be an illustration of this.

WTO rules provide the basis for many regional agreements. However, regional agreements also go beyond WTO rules in some areas, such as investment, environmental conditions and labour standards. We need to think about the implications of this for the future. A proliferation of different rules and standards could be a drag on business, so this is something WTO Members need to consider. But let’s not overstate the issue. The multilateral trading system has always coexisted with regional agreements — and proved to be mutually reinforcing. Rules and standards have been negotiated outside the GATT or the WTO before. What is important is that the multilateral system continues to updates its own rules.

Besides, there are many issues that can only be properly or fully addressed at the multilateral level, such as farming subsidies. These are issues that need to be discussed collectively, with a multilateral approach. This puts the spotlight back on the WTO – and our capacity to negotiate. Actually we have had some big successes at the WTO in recent years – including the package of decisions which members took at the Bali Ministerial Conference, incorporating the decision on Public Stockholding and the Trade Facilitation Agreement which I have already mentioned. These were delivered on a multilateral basis, but we have also seen some recent progress on other initiatives within the WTO – for example plurilateral initiatives such the Government Procurement Agreement and the expanded Information Technology Agreement. Negotiations are under way on an Environmental Goods Agreement as well. So I hope that we can build on these successes in future – starting with the Nairobi Ministerial Conference this December. This is the first time that the WTO has held a Ministerial Conference in Africa and so there is a great emphasis on delivering positive outcomes for the poorest on that continent – and around the world. I will make every effort to ensure that we do so.

Q. Of late, WTO lowered its estimate for world trade growth by 0.5% and 0.1% for 2015 and 2016 respectively thus clouding the outlook for the world economy in 2015 and beyond. To be precise it said that world merchandise trade volume is expected to rise 2.8% in 2015, down from the previous estimate of 3.3%, and to 3.9% in 2016, down slightly from the last estimate of 4%. what do you think are the reasons to this downgrade and what lies for India according to you in such a scenario?

Ans: The downward revision is due to several factors that weighed on the global economy in the first half of 2015, including falling import demand in China, Brazil and other emerging economies, falling prices for oil and other primary commodities, and significant exchange rate fluctuations. In addition, volatility in financial markets, uncertainty over the changing stance of monetary policy in the United States, and mixed recent economic data have clouded the outlook for the world economy and trade in the second half of the year and beyond. Looking at the Asian region in particular, we have seen a fall in intra-regional trade. In fact, the strongest downward revision to the previous export forecast for 2015 was applied to Asia, where our estimate was lowered to 3.1% from 5.0% in April. So it would seem likely India will be affected, but to what extent we cannot yet say.

Q. On the imports front, the downward revision for Asia was even stronger-- from 5.1% to 2.6%--partly due to lower Chinese imports. The trade volume for exports in Asia in 2016 is projected to go up to 5.4% and for imports to 4.3%. India is the second most important economy in the Asia pack, how do you assess Asian trends for India’s performance?

Ans: The WTO doesn’t produce country-specific forecasts for trade. I would note, however, that in its most recent World Economic Outlook the IMF said that India’s near-term growth prospects remain favourable, with 7.5% GDP growth projected for 2016. Recent policy reforms, a subsequent pickup in investment and lower commodity prices are having a positive impact on economic growth. These developments could help to offset any downturn from slower trade growth within Asia.

Q. International Monetary Fund chief Christine Lagarde in Lima said that Chinese economic transformation could be bumpy, what impact do you see of this on global trade and what would you suggest to be a way out?

Ans: The mix of China’s merchandise imports suggests that some of the recent slowdown in trade there may be related to the country’s ongoing transition from investment to consumption led growth. We saw large year-on-year drops in China’s imports of machinery and metals during the month of August, for example, while imports of agricultural products, especially cereals, increased sharply.

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