India stands up to big bullies of business
28 Aug 2014 8:55 PM GMT
It is irony that at a time when India should have been applauded and supported by other developing countries and at least by the Indian media, it is being isolated and criticised for vetoing the adoption of the Trade Facilitation Agreement at the general council meeting of World Trade Organization held at Geneva recently.
With India not signing the TFA protocol by 31 July, 2014, it is being said that an opportunity has been lost in bringing into force an agreement which could have added 1 trillion dollars and 21 million jobs in the world economy by simplifying customs procedure and promoting global trade.
However, before getting swayed by the statement above, it is crucial to take note of some critical points here.
Firstly, the proclaimed benefits which TFA could have brought are highly misleading. The figures which are making headlines show the benefits which mainly the developed countries could have appropriated by entering into the markets of developing countries and especially into India which is a big market, much more effortlessly than before whereas these countries themselves would have seen a severe hit to their domestic manufacturing and huge job losses. Moreover, developing countries under the TFA protocol would have to spend large amounts, on a pressing basis, for appraising the trade infrastructure like modernising ports, airports, computerising custom offices etc.
which is costly enough to put such countries into debt for years. The amount declared by developed countries to assist developing ones for undertaking this exercise was fixed at a miniscule 30 million dollars for 50 such nations.
Secondly, India is not denying the protocol in general. It is just maintaining that it would not adopt the protocol on the TFA until a permanent solution is found on the public stock holding for food security purposes, which is a correct way to make developed countries yield something for the developing nations in this bargaining. Else, there is a fear and rightly so, that if TFA is passed at the WTO there will be no bargaining chips left for India and this could have serious repercussions on the subsidy arrangements in India, thereby hitting the large number of poor in the country.
Moreover, this subsidy issue is grossly imbalanced at the WTO in favour of developed countries since 1992. The huge subsidies in various forms which countries like US and EU provide to their farmers have been put in the ‘green box’ which are permitted under the WTO whereas the form of farm subsidies which developing nations give including the minimum support price programme, have been put under the ‘amber box’ which limit the value of subsidies at 10 per cent of the total value of food grain production. Moreover, this support is being calculated at the prices that are over two-decade old!
India is asking for a change in the base year (1986-88) for calculating the subsidies to take into account inflation and currency fluctuation.
In fact, India with other developing nations supporting it, should attempt for putting their subsidies into the ‘green box,’ as these countries can’t afford to leave their poor at the mercy of an unequal playing field where developed countries give huge subsidies to their already rich and big farmers under the pretext of ‘green box.’ The stand which India was not in a position to take in 1992 when these boxes were being framed, it should now take as it is the second fastest growing economy in the world and a giant market for developed countries.
It is also being said that by not signing on the TFA agreement India will be isolated at the world forum and this act of hers will also create hurdles in trade pacts at bilateral or multilateral levels. It should be noted here that India’s large consumer base i.e. its domestic market is its biggest strength. No country in the world which is looking for a big market to sell its products can afford to snub India. Plus, the WTO Forum itself is losing its appeal as a multilateral trade agency. In its 19 year old history, it has not met even a single deadline to adopt any protocol. Hence, India just needs to focus on building strong ties with its trading partners without worrying for any repercussions of what happened at the WTO Forum and it should maintain its stand at the WTO if it desires any fair dealing for itself and the developing nations.
With India not signing the TFA protocol by 31 July, 2014, it is being said that an opportunity has been lost in bringing into force an agreement which could have added 1 trillion dollars and 21 million jobs in the world economy by simplifying customs procedure and promoting global trade.
However, before getting swayed by the statement above, it is crucial to take note of some critical points here.
Firstly, the proclaimed benefits which TFA could have brought are highly misleading. The figures which are making headlines show the benefits which mainly the developed countries could have appropriated by entering into the markets of developing countries and especially into India which is a big market, much more effortlessly than before whereas these countries themselves would have seen a severe hit to their domestic manufacturing and huge job losses. Moreover, developing countries under the TFA protocol would have to spend large amounts, on a pressing basis, for appraising the trade infrastructure like modernising ports, airports, computerising custom offices etc.
which is costly enough to put such countries into debt for years. The amount declared by developed countries to assist developing ones for undertaking this exercise was fixed at a miniscule 30 million dollars for 50 such nations.
Secondly, India is not denying the protocol in general. It is just maintaining that it would not adopt the protocol on the TFA until a permanent solution is found on the public stock holding for food security purposes, which is a correct way to make developed countries yield something for the developing nations in this bargaining. Else, there is a fear and rightly so, that if TFA is passed at the WTO there will be no bargaining chips left for India and this could have serious repercussions on the subsidy arrangements in India, thereby hitting the large number of poor in the country.
Moreover, this subsidy issue is grossly imbalanced at the WTO in favour of developed countries since 1992. The huge subsidies in various forms which countries like US and EU provide to their farmers have been put in the ‘green box’ which are permitted under the WTO whereas the form of farm subsidies which developing nations give including the minimum support price programme, have been put under the ‘amber box’ which limit the value of subsidies at 10 per cent of the total value of food grain production. Moreover, this support is being calculated at the prices that are over two-decade old!
India is asking for a change in the base year (1986-88) for calculating the subsidies to take into account inflation and currency fluctuation.
In fact, India with other developing nations supporting it, should attempt for putting their subsidies into the ‘green box,’ as these countries can’t afford to leave their poor at the mercy of an unequal playing field where developed countries give huge subsidies to their already rich and big farmers under the pretext of ‘green box.’ The stand which India was not in a position to take in 1992 when these boxes were being framed, it should now take as it is the second fastest growing economy in the world and a giant market for developed countries.
It is also being said that by not signing on the TFA agreement India will be isolated at the world forum and this act of hers will also create hurdles in trade pacts at bilateral or multilateral levels. It should be noted here that India’s large consumer base i.e. its domestic market is its biggest strength. No country in the world which is looking for a big market to sell its products can afford to snub India. Plus, the WTO Forum itself is losing its appeal as a multilateral trade agency. In its 19 year old history, it has not met even a single deadline to adopt any protocol. Hence, India just needs to focus on building strong ties with its trading partners without worrying for any repercussions of what happened at the WTO Forum and it should maintain its stand at the WTO if it desires any fair dealing for itself and the developing nations.
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