India, US keen to resolve WTO impasse before Modi’s US visit

obama-modi1The forthcoming visit of India’s Prime Minister Narendra Modi to the US will be an opportunity for both the nations to overcome certain hurdles that hamper their bilateral ties from moving into a higher trajectory.

One of the key issues that India and the US are particularly concerned about will be to resolve the dispute over food subsidies that led to a deadlock during discussion over a World Trade Organisation (WTO) deal in July.

India has refused to sign the Trade Facilitation Agreement (TFA) until it is accompanied by a parallel safeguard agreement that enables more freedom to subsidise and stockpile food grains than the prevailing WTO norms.

The TFA would have hit India’s food security programme and food grain procurement through the minimum support prices (MSP) offered to the growers.

India, home to a third of the world’s abjectly poor people, has contended that the TFA is detrimental to its ability to provide food and assorted essential commodities for its needy citizens.

Washington had then reacted by saying New Delhi’s last-moment resistance to the global trade deal would adversely starve the global economy of a trillion dollar stimulus and even hit 21 million jobs.

Existing rules limit the value of food subsidies at 10% of the value of production. However, this yardstick is calculated against prices set in the 1980s which in turn reduce the actual value that can be subsidised by a substantial amount. This clause makes it very difficult for member nations to stay within the WTO mandated limits which attract severe penalties.

In such a scenario, since July, India and the US are working to finalise a deal ahead of Mr Modi’s meeting with US President Barack Obama in Washington on September 29.

Reportedly, New Delhi and Washington are involved in honing nuances of a possible ‘peace clause’ on food security until a permanent solution is worked out. This clause gives member states a legal protection from being challenged under other WTO pacts.

Developing and emerging nations did agree on a temporary ‘peace clause’ at the Bali WTO meet in 2013. Under that agreement this ‘peace clause’ would expire in 2017 leaving the poorest of the poor countries vulnerable and that includes India.

Since then, India has been lobbying for the ‘peace clause’ to be extended beyond four years until a more agreeable and permanent solution is reached to end the stalemate. Many countries have backed India’s stand at WTO.

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