WTO Impasse: Who is Looking out for the Public Good?

Late July is a quiet time for much of the Northern hemisphere: even the United States takes a week or two off work at some point to enjoy the summer. It is a busy time, however, for international trade negotiators--this year more than most. The General Council of the WTO (its primary decision-making body) concluded its last meeting before the summer recess yesterday without signing the trade facilitation agreement (TFA). Director-General Azevedo was not pleased.

WTO members committed to the TFA at the Bali ministerial last year, promising to adopt it before the end of this month. No one knows what comes now: those who most wanted the agreement passed say the multilateral trading system itself is in jeopardy. U.S. trade officials have been busy making dire pronouncements on social media and at press conferences about the loss of credibility of the multilateral trading system, while a joint statement signed by 26 countries, including Australia, Canada, Malaysia, Nigeria and Viet Nam, warned that if the WTO members failed to adopt the TFA, the whole "Bali Package" (three issues on which governments agreed to make commitments at the WTO Ministerial in December 2013) would unravel. India replied, with some support from other countries, that they needed to see progress on all issues, especially on agriculture talks, before any single agreement can become law.

The fight is an echo of last year's negotiations, when the U.S. and others held India responsible for the lack of progress on trade talks before the Bali Ministerial because India was insisting on revisions to the WTO Agreement on Agriculture that would allow developing countries more room to provide domestic support for small-scale producers, particularly in programs linked to food security initiatives. Narendra Modi's new government in India, in place since June, was in part elected on a private sector-friendly platform. There is also considerable support within India's large international business community for the TFA. But the government's resolve has apparently hardened: they are implementing the National Food Security Act, passed by the previous government, and have effectively upped the ante in the fight for India's right to maintain an expanded program of purchasing staple foods from farmers and using the resulting public stocks of these grains in the government's expanded food security program.

India is not alone in this fight, even if it is the most vocal participant. WTO members that have expressed support for India's position include South Africa, China, Cuba, Bolivia and Venezuela. The African Group did not mention the TFA when it made its statement to the General Council last week, but it did express disappointment at the lack of meaningful provisions for development--the ostensible objective of the Doha Agenda that the WTO has been negotiating since 2001--and for Least Developed Countries in particular (a series of measures for LDCs specifically was the third element in the Bali Package).

As in many other parts of the multilateral system, the negotiations are suffering from a profound lack of trust. The U.S. blames India for undermining the multilateral system, yet they are busy negotiating major plurilateral agreements: one with the European Union and another with selected developed and developing countries, in the Trans-Pacific Partnership. Inevitably, this sidelines the multilateral system and diverts time and political energy away from the WTO.

India is claiming the right to do what the U.S. and European Union have been doing all along--protecting some parts of their domestic production while simultaneously promoting the interests of their multinational commodity traders and agri-business firms. The anomalies in the rules that India disputes are real. India's claim to be fighting for the right to support small-scale producers and domestic food systems is an ambition shared by many developing countries, as evidenced in the proposals of the group of developing countries called the G-33 (which has been the most vocal group for developing countries in the agriculture negotiations), the LDCs, the African Group and some of the other configurations of developing countries at the WTO.

Developing countries never liked the Agreement on Agriculture. They felt cheated. The then-European Community and U.S. made a side deal at Blair House that became the basis of the final agreement adopted in 1994. The rules allowed many of the most problematic of the rich countries' agricultural policies to persist, from export subsidies and export dumping to high levels of domestic support for a handful of products. Nothing was done to address the lack of transparency and competition in international commodity markets.

Much has changed since 1995 and there is no doubt the WTO agreements have played their part in initiating those changes. A handful of developing countries have become major agricultural exporters, while Asia has overtaken Europe as the dominant importing region. Yet at the same time many developing countries have increased their dependence on food imports while lacking the purchasing power to feel confident of their place as buyers in the market. Food exporting countries refuse to accept rules that would make their exports predictable and transparent, private commodity trading firms have increased their oligopoly power over international markets, and expanded further into finance and investment, and other markets, such as those for seeds and farm machinery, have also grown more concentrated.

Of course it is frustrating for trade diplomats that India should seem to pull the rug out from under the talks. In some ways, it is also disingenuous of the Indian government to wrap itself in the mantle of support for small-scale farmers. Like any country, India has to deal with powerful domestic politics, and farmers are just one constituency among many (and they are divided among themselves as well). India is a sub-continent, full of competing interests. But if rich countries continue to push the interests of global commodity firms at every opportunity, while continuing to protect a few domestic interests with the exceptions they built in the rules back in 1994, they can hardly expect the multilateral system to work. It's time to take a good hard look at just what rules would support food security for everyone in a rapidly changing global environment. The rethink has to start with those who have the lion's share of the power.