Govt takes tough stand in WTO food-stockpiling row

The government defied the world on Wednesday in a row over food stockpiling that has crippled attempts to reach a global trade agreement, raising doubts that backroom talks can reach a compromise before a G20 (Group of 20) summit in November.

At the end of July, Prime Minister Narendra Modi pulled the plug on implementing a trade-facilitation deal struck in Bali in 2013, linking it to the emotive issue of rural poverty in the country.

The government wants to keep a so-called 'peace clause' that protects its huge state food purchases until the World Trade Organization (WTO) can strike a definitive deal on stockpiling. As originally envisaged in Bali, the clause would expire in four years.

Critics say food stockpiling amounts to paying farmers to produce food, building food surpluses that will eventually get dumped on world markets.

The government's blockade has plunged the WTO into its worst crisis in two decades, leading Director General Roberto Azevedo to float the idea of abandoning the consensus principle on which the 160-member group operates.

Modi's tough line jars with the 'Make in India' pitch he has taken to investors abroad in his first five months in charge as Prime Minister. Having failed to make progress on trade when he met United States President Barack Obama in Washington, he could be isolated at his first G20 summit of world leaders in Brisbane, Australia, on November 15-16.

"India's position on trade facilitation has been completely misunderstood because of unreasonable positioning by some of the developed countries," Finance Minister Arun Jaitley said at the India Economic Summit organised by the World Economic Forum in the national capital on Wednesday.

The Finance Minister repudiated suggestions that the government was fundamentally opposed to trade facilitation, which would entail easing port and customs procedures.

A senior US trade official said there was still hope all WTO members would agree but "if we are unable to do so I think there is a lot of interest among countries in exploring alternatives for those countries who at least initially want to move ahead with those obligations."

QUIET DIPLOMACY

The government has begun backroom efforts to break the deadlock, sending a top trade ministry official to Geneva this week for talks with Azevedo and key WTO members.

Trade diplomats said there was no hint, however, that a compromise could be reached on the country's demands, which have been vague and varied in the months since its veto.

On Monday, the Prime Minister held a meeting of trade ministry officials to discuss how the deadlock could be broken without compromising the country's food-security concerns.

"If India has to submit a proposal, it would be presented at the right time," a senior trade ministry official with direct knowledge of the matter told Reuters.

The government refuses to bow to foreign calls to scale back a scheme to buy wheat and rice that it distributes to 850 million people. In a recent disclosure to the WTO, the government said those purchases cost US $13.8 billion in 2010-11, part of the US $56.1 billion it spent in total on farm support.

"All that we are requesting is the settlement of the dispute with regard to the food stock holdings, and the peace clause must continue to co-exist," Jaitley said.

Diplomats say that without a WTO deal on trade facilitation, countries could simply tack the draft agreement onto their existing membership terms. They say this would put the onus on the government to object, and explain why its interests had been damaged.

Yet economists say WTO members lack any effective means to bring pressure to bear against the country, which is also Asia's third-largest economy.

"It's an issue that in India is so politicised; you have hordes of the population living in poverty and depending on food aid," said Shilan Shah, an economist who covers India at Capital Economics in London.

"The WTO hasn't really shown the kind of will to move on without India's agreement. What it demonstrates is how important India is to the global trading community."

(Reuters)