India: Tough Talk and the Bali Trade Facilitation Agreement

Last week India’s top trade negotiators told the World Trade Organization (WTO) that India would not support the package of trade facilitation measures that had been agreed to last December at the Bali ministerial. Because adoption of these measures must be done by consensus among WTO members by July 31, India’s rejection of the agreement now stands to render moot the entire trade facilitation effort. New Delhi’s stance not only puts up a roadblock on global trade, but will effectively halt any efforts to envision a larger ambition for the U.S.-India economic relationship—which badly needs one—by signaling that India at present does not want to stand with the global free and open trading system.

Since the long-running Doha Round of global trade negotiation has accomplished rather little—recall the collapse of talks during July 2008—the Bali agreement had been heralded as an important benchmark to reaffirm that global trade talks can still get something done. The Bali ministerial itself went down to the wire in December 2013, and then across it, with the WTO’s new Brazilian director-general Roberto Azevêdo working overtime to facilitate a compromise acceptable to all members.

The outlines of the compromise involved securing a 2014 agreement on ways to ease trade around the world (such as customs facilitation, advance notification, etc.), coupled with a simultaneous commitment to tackle thorny issues of food security (stockpiling and subsidies) by 2017. Countries whose current stockpiles exceed WTO guidelines would get a reprieve until 2017.

It’s important to remember, especially in light of this week’s trade facilitation crisis, that India was foremost among the dissatisfied countries in the run-up to the Bali ministerial, and it was Azevêdo’s fine work in December that achieved an agreement—to which India concurred. Press reports from early December 2013 all acknowledge India’s food security concerns as the primary hurdle which Azevêdo managed to clear. This headline from the Hindu sums up the Indian media take at the time: “India’s Stand Prevails in Bali” (December 7, 2013).

That’s why the Government of India’s abrupt U-turn on a package it brokered has utterly confounded the world. What’s more, not a few Indian media reports have suggested that New Delhi’s willingness to forego the trade facilitation agreement in order to push for faster progress on food security is a victory for India “against the West.” This is not true; such an interpretation relies on an old opposition, greatly misrepresenting the case. This is not India against the West but against itself and the world, backing away from the terms of a deal it participated in designing as recently as December.

The argument made by India in Geneva is that sufficient attention to food security matters has not occurred in the seven months since December, therefore India cannot in good faith adopt the trade facilitation package. Since the timeline for food security negotiations was explicitly set for the period after 2014, it is very difficult to understand the basis for such a strong objection on lack of progress after seven months.

Meanwhile, back on the bilateral front—what I watch most closely—it’s no secret that Washington and New Delhi hit a rough patch on trade and economics over the last couple of years. One consequence of the turbulence has been difficulty, at least in Washington, to envision a larger and more ambitious economic agenda with India. For example, India is not part of the path-breaking Trans-Pacific Partnership (TPP) trade negotiation—our most significant effort in the rebalance to Asia—nor do there seem to be any pathways to get India within the TPP’s ambit any time soon.

Nor has the United States committed to supporting Indian membership in the Asia-Pacific Economic Cooperation forum (APEC), the premier nonbinding Asia-Pacific grouping promoting free and open trade. At the end of June, I argued that Washington should move with dispatch to work with India on APEC membership. But India’s move to disengage from the trade facilitation agreement will confirm the belief of many that India is simply not ready for larger trade-expanding agreements. Until this week, it was always possible to argue that India upholds the multilateral obligations it commits to; by next week, however, it may cease to be a statement of fact.

There is a path out of this mess, and that is for WTO members, perhaps through Azevêdo’s good offices, to reaffirm their commitment to examining the food security issues India has been raising within the 2017 timeline agreed to in December. With that explicitly renewed assurance, India could then move to adopt the Bali package confident that the questions it wants addressed will be. That would allow the hard-won trade facilitation agreement to come into force as negotiated, and would preserve global attention to food security as designed.

India’s supporters in Washington are hoping for a solution, because without one, it’s going to be a long time out on the econ front.

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