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Indo-US WTO pact to give new push to global trade

The United States on Wednesday said the breakthrough bilateral agreement with India on trade facilitation will grant 'new momentum' to multilateral efforts at the World Trade Organization.

business Updated: Nov 14, 2014 10:13 IST
Yashwant Raj
Yashwant Raj
Hindustan Times
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The United States on Wednesday said the breakthrough bilateral agreement with India on trade facilitation will grant “new momentum” to multilateral efforts at the World Trade Organization (WTO).

“We have overcome that delay (caused by India and others) and now have an agreement with India to move forward with full implementation,” US trade representative Mike Froman said.

The first multilateral agreement to be signed under WTO in the 20 years of its birth, it will have no conditions attached to it, something which India wanted to keep the food security issue on the table. This means that food security programmes run by developing countries such as India will not be subject to a sunset arrangement, of 2017, as pushed by the US and other development countries. They will remain in force till a permanent solution is found, as demanded by India.

India’s refusal to sign the Trade Facilitation Agreement (TFA) in July, announced during US secretary of state John Kerry’s visit, had dealt a major setback to its trade relations with the US.

This added, in US view, to a long and growing list of trade issues and concerns about India’s Intellectual Property Rights regime that were threatening to derail bilateral ties.

The Office of the United States Trade Representative is conducting an out-of-cycle review of India’s trade policies to determine if they are harmful for US businesses. A similar probe is underway by the US International Trade Commission, with another on the way.

However, there has been a change in tone and substance of the anti-India rhetoric drummed up in the past by US businesses, led by the powerful US chamber of commerce. Gone are harsh demands for punitive action against India, which have been replaced by distinct signals of a willingness to work with the Narendra Modi-led government, and give the country more time.

India’s refusal to sign the agreement in July, a US official had said, “sent a confusing signal and undermined the very image that Prime Minister Narendra Modi is trying to send about India”.

The issue figured prominently during Modi’s meetings with US President Barack Obama in September. Both instructed their officials to work “urgently” towards a solution.

Negotiations between officials of the two countries picked up “intensively” in recent days, Froman said, and culminated in an agreement, which is likely to give new momentum to multilateral efforts at the WTO.

“In doing so, the US and India reaffirm their joint commitment to the success and credibility of the WTO,” Froman said.

Untangling the trade knot

What’s at stake?
The WTO’s 160 member nations failed to adopt the trade facilitation agreement (TFA) by the July 31 deadline

What’s TFA?
At the Bali Ministerial in December last year, the WTO member countries had agreed to make trade easier, faster and cheaper by making systems transparent and reducing red tape by adopting the TFA by July 31

What had led to the collapse of the talks?
India made it clear that it would not support the TFA if it did not come together with a timeframe for food subsidies

What’s the deal with food subsidies?
·Existing rules place a cap on food subsidies at 10% of the value of production.
·Calculated at a price of the mid-1980s, India and many other countries would breach the permissible limit.
·This could affect India’s food security programme and procurement through the minimum support prices (MSP)

What’s the deal now?
·USA has agreed not to press for penalties even if India’s food subsidy breached the current cap
·Penalties will not be pressed till the WTO members work out a permanent solution of how to calculate food subsidies
·This will allow India unhindered roll out of its welfare schemes including the food security programme
·Earlier the USA was agreeing to a “no penalties” period for only four years
·USA’s support now will enable wider agreement on a food subsidy roadmap in WTO
·India will agree to ratify the TFA to make customs rules easier