by MK Venu Jul 26, 2014 13:40 IST
The Modi government is facing diplomatic embarrassment because of its latest negotiating stand at the WTO which boxes India into a corner with countries like Venezuela, Cuba and Argentina even as some hitherto strong and empathetic partners such as China, Brazil, South Africa and Indonesia have distanced themselves from India by agreeing to move ahead with the new trade facilitation agreement signed at the Bali ministerial meeting last December.
India has ended up creating confusion because it had also agreed to be part of the global trade facilitation agreement (common customs governance mechanism) at Bali on the explicit condition that the developed countries will not interfere with India's massive food procurement programme until a permanent solution was found to some unfair provisions within the WTO in regard to allowing higher minimum support price to farmers.
The patently unfair provision in WTO puts a permanent cap on the procurement price the government can give farmers for its food security programme. India had argued that there can't be a permanent cap on procurement price as annual inflation must be adequately reflected in the higher procurement price. If annual inflation is factored in adequately, then India's procurement price is justified and well within WTO bounds.
India had made this argument in Bali and even had the sympathy and support of the larger grouping of G-33 nations. Based on this argument the West, led by the United States, agreed to find a permanent solution to this problem in the next four years before the next WTO ministerial meeting. This was discussed by the UPA government in Parliament in the presence of opposition members like Arun Jaitley. The BJP agreed to the formulation that we can go ahead and sign the trade facilitation agreement if India is allowed to continue with its food procurement programme till a permanent solution is found by the next ministerial meeting on how price paid to farmers for procurement is fairly determined.
However, the NDA government is seeking to bring about a substantive change in that position by arguing India will sign the trade facilitation agreement only if a permanent solution to food procurement is institutionally initiated simultaneously. Since this is a somewhat new formulation, India's erstwhile friends among the big developing economies like China, Indonesia and Africa have moved away from us.
PM Narendra Modi in this file photo. AFP
The commerce minister Nirmala Sitharam had some unpleasant exchanges with the G-20 Chiarman in Australia last week who was summarising the collective position of various countries on the trade facilitation agreement. The Commerce Minister is believed to have briefed Modi on the matter after her return. Simultaneously India's ambassador at the WTO secretariat in Geneva has also taken the stand that trade facilitation agreement must be notified simultaneously with the announcement of an institutionalised framework to solve the procurement price issue.
Basically, the Modi government now seems to indicate that India can't wait for four years till the next ministerial meeting and wants some concrete assurance now.
This change of stand compared to what the UPA had proposed last December has somewhat isolated India globally. But BJP can sharpen its domestic political rhetoric saying it was acting in the interest of the farmers.
Actually, Modi's explicit promise to Indian farmers in public meetings that the government would ensure a 50 percent profit margin to them over their total costs could be one reason why India is hardening its position at the WTO. The Sangh Parivar could also have intervened to ask Modi not to make any commitment at the WTO at this moment.
Interestingly, Pakistan also had a massive food procurement programme but it pays cash subsidy to farmers. Cash payment is allowed under the WTO rules because it doesn't interfere with the market price mechanism. The NDA can also use cash transfer as a possible bargaining lever at a later stage. This could be another reason why Modi has reiterated his commitment to cash transfer as a form of paying subsidy.
The author is Executive Editor at the Amar Ujala Publications Group
