India can’t afford to be painted the black sheep
When the World Trade Organisation’s General Council meets next week, India would do well to keep in mind this presents it one more chance to set the record straight, to prevent itself from being painted the black sheep in global trade negotiations. India’s decision to block the trade facilitation agreement (TFA) okayed by 160 countries at Bali is being used by diplomats to argue they too need not stick to commitments made in earlier meets. This is unfortunate since, as is well known, India’s best bets lie in a multilateral system—ironically, when the US said India’s IPR laws were not kosher, India pointed out they were WTO compatible. While India’s position on food subsidies is well known, what is positive is prime minister Narendra Modi saying, when he was in the US, that he is hopeful of some solution.
Any final solution will obviously depend on what flexibility other countries show, but the key, as FE has been repeatedly arguing, is in India being realistic about its options. For one, while there is little doubt the 1986-88 reference price of the WTO is discriminatory, it is not as if India has no way out either. As professors Hoda and Gulati have argued in a paper, even the current WTO framework allows for inflation adjustment, and once this is done, India is well within the boundaries of the agreement even at the 1986-88 prices. While looking for a final WTO solution is a good idea, it would be enough if India explored the options this inflation window gives it. Also, as India has shown in its recent WTO filings, a lot also depends on how you interpret the agreement. The government has filed its food subsidies—this was the main reason cited for opposing the TFA—under the ‘green box’ that is non-actionable. If India starts moving—a longer window could be negotiated—towards more cash subsidies for farmers instead of input-based ones like those for fertiliser, as in the case of US and European subsidies, these too will be considered non-actionable. Short point is there are several options to putting the WTO back together, and India needs to show some flexibility while working with other countries.