Bleak outlook for WTO deal as rifts widen over food subsidies

Reuters, Thursday 5 Dec 2013

Divisions over food subsidies widened among members of the World Trade Organization on Thursday, making it unlikely a landmark trade deal could be reached with just a day left to the end of talks.

After 12 years of fruitless negotiation, diplomats warned that failure at a meeting this week on Indonesia's resort island of Bali would devastate the body's credibility as developed nations turn towards regional and bilateral trade talks.

A Bali trade deal, already diluted to the "low-hanging fruit" of the moribund Doha round of talks, largely hinges on India and whether the world's second most populous country can find common ground with the United States and other developed countries on food subsidies.

India has repeatedly said it will not compromise on its policy of subsidizing food for hundreds of millions of poor citizens. The tough stance has started to gain backers from developing countries in Asia, Africa and South America, India's trade minister said.

"Countries with maybe more than 75 percent of the world's population stand by India on this issue," Anand Sharma told reporters. "It is better to have no agreement then to have a bad agreement."

Around 20 countries were in favor of India's position, said a diplomat, who asked not to be identified because of the sensitivity of the issue.

India will next year fully implement a welfare program to provide cheap food to 800 million people that it fears will fall afoul of WTO rules curbing farm subsidies to 10 percent of production.

The program, which relies on large-scale stockpiling and purchases at minimum prices, is a central plank of the government's bid to win a third term in office next year.

A proposal led by the United States offered to waive the 10 percent rule until 2017. But India has rejected it, demanding the exemptions continue indefinitely until a solution is found.


The trade talks also involve less contentious issues, such as assistance for the least developed countries and setting standards for handling the cross-border shipment of goods.

Estimates of the value of the Bali deal to the world economy vary, with some as high as $1 trillion. Experts say it would be far more important than abolishing import tariffs globally, since bureaucracy and opaque rules are a bigger brake on trade.

If talks fail, the WTO may see its role as global custodian of the world's trade rules being eroded by regional pacts now being negotiated, such as the U.S.-led 12-nation Trans-Pacific Partnership and a U.S.-EU tie-up known as TTIP.

"Let us not sugar-coat reality: leaving Bali this week without an agreement would deal a debilitating blow to the WTO as a forum for multilateral negotiations," U.S. Trade Representative Michael Froman said on Wednesday.

"And if that happens, the unfortunate truth is that the loss will be felt most heavily by those members who can least afford it."

Yemen, poised to become the body's 160th member next year, remained optimistic for a last-minute deal to help open up much needed investment in the second-poorest Arab state.

"I don't see a complete collapse of the WTO," Yemen's trade minister Saadaldeen Talib told Reuters. "That is not going to happen. Wisdom will prevail."

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