India and the United States reached an agreement on Thursday over food stockpiles, removing a major obstacle to a global trade deal that has been stalled for months.
The pact, which precedes a meeting this weekend of the Group of 20
major economies, allows India to continue its extensive food subsidy
program. In settling the dispute, India returns to the negotiating table on a
broader trade package.
That package, first agreed upon at a World Trade Organization meeting
in December in Bali, Indonesia, is the first significant global trade deal since
the creation of the W.T.O. nearly two decades ago. Aimed at facilitating the
movement of goods across international borders, the agreement focuses on
easing customs procedures, reducing red tape and upgrading border
infrastructure.
Proponents of the deal argue that it would add $1 trillion to the global
economy and create 21 million jobs. Critics, though, have noted that it
would require a substantial investment from developing countries to
upgrade their ports and borders.
But talks on the trade package reached an impasse in July when India
said it would veto the global trade deal unless a dispute over its food
security program was resolved. Since then, India has faced resistance from
other member countries for stalling a critical agreement.
Michael B. Froman, the United States trade representative, said that
President Obama and Prime Minister Narendra Modi of India had discussed
the issue during Mr. Modi’s visit to Washington in September in light of the
“mounting crisis of confidence” facing the W.T.O. after the trade deal was
derailed. “In recent days, officials of both governments worked intensively
and reached an agreement that should give new momentum to multilateral
efforts at the W.T.O.,” Mr. Froman said in a statement.
India views the stockpiling as core to its food security and its efforts to
feed millions of its impoverished citizens.
The Indian government buys food, including grain, from its farmers
and stockpiles it for a public distribution system, where it is sold at
government-run stores at subsidized prices. The food subsidy program,
which has often been criticized as ineffective, is available to 75 percent of
India’s rural population and 50 percent of the urban population, according
the National Food Security Act introduced last year.
W.T.O. rules say that subsidizing more than 10 percent of the grain
produced for food in a country distorts the market for trade. But India
wants to do away with that cap. Countries including the United States and
Pakistan have expressed fears that India was accumulating too much grain
and that it might eventually release the surplus on the world market,
lowering prices for other producers.
In Bali, W.T.O. members had agreed to a temporary solution in which
developing countries would not be penalized for breaching their subsidy
levels until a permanent solution was found by 2017. Indian officials,
though, were concerned that the issue had been sidelined and wanted talks
on the issue to progress.
India and the United States have now agreed on a “peace clause,” which
protects member countries from being legally challenged under W.T.O.
agreements until a permanent solution is found on the stockpiling issue.
The clause will keep India safe from accusations that it subsidizes too much
grain beyond 2017. A timeline for negotiations on stockpiling was also set
giving India the assurance that the issue will be dealt with promptly.
“India and the United States have resolved their differences on public
stockholding of food,” Nirmala Sitharaman, India’s commerce minister, said
on Thursday at a news conference in New Delhi. The move, she said, paves
the way for India to ratify the global trade deal.
“This breakthrough represents a significant step in efforts to get the
Bali package and the multilateral trading system back on track,” Roberto
Azevêdo, the director general of the W.T.O., said in a statement. “It will now
be important to consult with all W.T.O. members so that we can collectively
resolve the current impasse as quickly as possible. Implementation of all
aspects of the Bali package would be a major boost to the W.T.O., enhancing
our ability to deliver beneficial outcomes to all our members.”
Analysts said the agreement with the United States would improve
India’s negotiating position at the G-20 meeting and in other global talks.
“It is a move ahead both for multilateralism at the W.T.O. and for India,
which was being viewed as obstructionist,” said Rajrishi Singhal, a senior
geoeconomics fellow at Gateway House, a foreign policy research group in
Mumbai.
(NYT 11/14/14)
I think that it is interesting that the United States is definitely set on finalizing this trade agreement. The article states that India and the US have reached an agreement over food stockpiles, which had proven to be a major obstacle to the trade agreement. India offers a huge amount of subsidies to its farmers and stockpiling is considered to be the core of its food security. The government buys food, such as grain and stockpiles it for a public distribution. It is only fair that the Indian government protects its food security program by refusing to accept the trade agreement without certain requirements and it should not have faced any resistance from other member countries who would have done the same. I think that the US is smart to have agreed on the “peace clause” so that negotiations on the trade agreement can continue. The trade agreement is supposed to add $1 trillion to the global economy and create 21 million jobs. I am unsure what the effects of such a trade agreement will be but the article does say that critics of the agreement have said that developing countries would be required to invest a substantial amount of money in order to upgrade their ports and borders. My only question is which countries will benefit the most through this $1 trillion addition to the global economy and 21 million jobs that are created by the trade agreement?
ReplyDeleteI can view that India and USA have solved the problems which paralyzed WTO and risked derailing a $1 trillion package of reforms of global custom procedures. The deal of India and USA should be supported by 160 WTO members and it revives the hopes that the trade body can push thanks to these reforms and it may open ways for future negotiations. It is hopeful to think there will be job opportunities for millions of people thanks to this agreement and it will pave way to new agreements and unemployment problem can be solved all over the world. This stockpiling issue becomes very important because India needs to be protected from future accusations. It is ensured with the initiatives of Narendra Modi that 1.25 billion people have enough food to eat despite the possibility of being isolated at his first G20 summit. A food security law passes by India’s last government expanding the number of people who are entitled to receive cheap food grains to 850 million. I think India does well by securing the foods for local people. I would appreciate US to have this peace clause as well. It will be very helpful in terms of global economy. More importantly, it will create new jobs and opportunities. People will see the future positively in other countries by expecting other agreements like that. I think there will be future agreements like that.
ReplyDeleteI think it is imperative that the United States effectively negotiates with India, as it should with China and Brazil. Apart from being an emerging superpower, India is a very sensitive case as much of its food insecurity is derived from inflation, inequality in food distribution, and declining wages, to name a few. Unfortunately the Indian government heavily relies on subsidies to deal with this problem. This agreement between the United States and India allows India to continue its stockpiling food security program without repercussions from the World Trade Organization.
ReplyDeleteWhile the temporary solution will stay enforced until the problem has been completely resolved, this makes me wonder how long will this peace clause be valid?
India is faced with a tough challenge trying to balance its unceasing population growth with that of its food shortage. The key is to develop a productive and efficient approach that will not only produce a sufficient number of crops for the country, but will reduce any food wastage (another problem that India faces). A possible solution to this challenge would be creating innovative products that would, through the agricultural sector, reduce poverty and contribute to a sustainable development (this is especially important when dealing with India's harsh summers and drastic monsoon weather).
As for the United States, either this move will set a precedent for future negotiations or it will it will be criticized; backed by the notion of succumbing to India's adamant demands. However, this agreement will support both economies, especially India's, in creating employment opportunities and injecting funds into the economies. Perhaps India will feel even more inclined to reach a proper solution for its food security problem having been supported by the United States.
I find it quite surprising that the agreement over food stockpiles between America and India is considered “the first significant global trade deal since the creation of the WTO nearly two decades ago” while it would obviously be advantageous by adding $1 trillion to the global economy and create up to 21 million jobs, it will only be successful if developing countries invest in infrastructure to upgrade their trade facilities. India was responsible for stalling agreement talks earlier this year as they wanted the dispute over its food security program to be resolved. However, it is said that India’s current food subsidy program is inefficient, failing to reach half of India’s rural population. The WTO is critical of this as their rules dictate that subsidies greater than 10% of grains produced ‘distorts’ the market for trade. There is the fear that India is stockpiling too much grain and if they were to release its surplus on the world market, it would cut into the profits of other producers. Can India really be blamed for their issue of stockpiling? India has an annual population growth rate of 1.2%, compared to 0.7% of America (with about a quarter of India’s population) and 0.5% in China, with a similar population size. It seems like India new goal should be that of making its food distribution system more efficient so it can rely less on subsidies and be more competitive.
ReplyDeleteI think it is imperative that the United States reach a trade agreement with India that will prove beneficial to both countries, with India's food subsidy being taken into consideration. With poverty, declining wages, and food scarcity reaching an all time high in India, it is essential that negotiations be reached. A peace clause has been reached between the two countries, with talks still being held on the stockpiling issue, which is great until permanent solution can eventually be reached, however the United States should attempt to speed up the process because there are great benefits that can be attained for both sides in the passing of this trade agreement. With expectations of 1 trillion dollars being inserted into the global economy and the creation of 21 million jobs, this trade agreement can help decrease some of the impoverished hunger in India, and eventually lead to better opportunities as well.
ReplyDeleteThis article presents good news for the United States and India. If trade relations can be developed better from this agreement, then it good for the global economy and this can help on more agreements regarding trades, like the TTIP. This will remove the problem that is slowing the relations with other nations and trade agreements. This will help overall development of the economy and create 21 million jobs which is in need at this time. People need this trade agreement that will help creation of jobs. All nations and United States have been heavily impacted with the recession and unemployment and on the other side, India will get food into so many houses and protection from their fear. In my opinion, this is the right way to go for both nations.
ReplyDeleteIt's definitely great to hear that the United States and the World Trade Organization in general have reached a trade agreement with India that will allow for movement on the previous months of stagnant back and forth that was occurring. India is an emerging superpower -they have the land and the population to become / are already becoming a great contender and force to be reckoned with in the world market. Unfortunately, India is plagued by large amounts of poverty and thus it "...views the stockpiling as core to its food security and its efforts to feed millions of its impoverished citizens." Although the food subsidy program has been criticized as being ineffective, the way to make it more effective is not to strong arm India into a global trade agreement with the WTO that punishes them for disputes over its food security program, nor to alienate them by giving them a time-sensitive ultimatum, but rather to allow for this "peace clause" which will remove the barriers for a global trade deal as it is designed to "...keep India safe from accusations that it subsidizes too much grain beyond 2017." Furthermore, it doesn't disregard the issue completely and the says that, "A timeline for negotiations on stockpiling was also set giving India the assurance that the issue will be dealt with promptly." I believe that this was the best course of action, and now instead of back and forth arguments with no progess, we have "...the first significant global trade deal since the creation of the W.T.O. nearly two decades ago."
ReplyDeleteIt is interesting to me that when a developing country has the power to help the international economy at large, they are viewed obstructionist. According to the W.T.O. with its extensive food subsidy program (available to 75 percent of India’s rural population and 50 percent of the urban population), India can distort the market trade. The Indian government stockpiles grain in order to provide food for its citizens, and it is up to them to decide what to do with the remainder of such commodity. The US as well as other developed countries fear that India will release its surplus on the market, and reduce the price for other producers. The U.S. was wise to have a peaceful negotiation, because it is in their interest not to have India influence the market price of a commodity affecting producers. Although there is fear that the pact that eases customs procedures will require significant amount of money from developing countries to upgrade their ports and borders, there is a greater good that can come from this. Millions of jobs can be created and trillions of dollars will be injected into the world economy. Now that developing countries can in turn contribute positive things in the world economy, why is it that there is so much resistance from developed countries? It is only fair that developing countries have a say and look after the well-being of its country. Instead of criticizing India for subsidizing its food supply, the WTO should acknowledge the courage of developing countries for taking initiatives for increasing the wealth of its citizens. Since when did it become a crime to want to stand up for oneself and want to take the lead?
ReplyDeleteSince the creation of the WTO, almost 20 years ago, there have been few agreements made and even fewer that were meaningful. The recent agreement made between India and the United States, has allowed for a much anticipated deal, that is "aimed at facilitating the movement of goods across international borders,easing customs procedures, reducing red tape and upgrading border infrastructure,"to continue forward. They were stuck on the issue of stockpiling food, which was going on in India at a high rate, but were able to move past it. This seems to be a good happening and a step towards, what some say, a more fruitful global economy with $1 trillion in potential growth. The opposition, however, feels that this new agreement will lead to a large investment made by developing countries. I believe that this agreement will beneficial in the long run, but will cause a need for investments now.
ReplyDeleteThe article talks about a temporary solution reached with India dealing with its large food stockpiles. Although it’s a positive thing that the dispute is settled and India can now move forward in negotiations on a broader trade package, there is still concern that there was no permanent solution to this problem. The agriculture industry remains heavily protected throughout both developing and developed countries. The article states “India views the stockpiling as core to its food security and its efforts to feed millions of its impoverished citizens”. This viewpoint makes me skeptical that India will ever end its subsidies on agriculture. From a global market standpoint the heavy subsidies can only distort true market values on food. The WTO rules that “subsidizing more than 10 percent of the grain
ReplyDeleteproduced for food in a country distorts the market for trade”. In the short run this may help the producers of grain, and in India’s case even the consumer surplus; however, in the long run there will be some deadweight cost to taxpayers. Even with the potential deadweight loss, the “peace clause” between the Unites States and India makes sense for now. I do not think the India’s stockpiling of grain is an issue that can be easily resolved because of its connection with longstanding socioeconomic issues with India such as income inequality. I hope that the 2017 deadline gives India enough time to make a permanent decision that still allows its underprivileged citizens access to food and does not distort the global market price.
It seems hopeful that the United States and India are working together towards an agreement. Especially considering how important that new trade package could be if its proponents are right. Also considering how little progress has been made in international trade since the WTO was formed. However, it seems as though this may be one tricky situation. With the United States worrying about the lowering prices, and India demanding a higher subsidy cap. It seems that three years is a short time for this problem to be negotiated, it would be great if they did. The faster they work out a solution, the sooner they can start to focus on improving world trade.
ReplyDeleteThis is very positive news not just for US and India but the entire world, in that now the trade facilitation of WTO can move forward. If only India has agreed to scrap the agricultural land ceiling, it would unleash the farmers from serfdom, and there would not be any need for such stock piling. The root of the whole issue is, there is a limit to agricultural land that a family can hold in India. That limits the income potential of the family doing only agriculture and also takes away the demand for the land, effectively keeping the agricultural land prices not attractive enough to sell it and find another livelihood. Hopefully the next generation does not have to depend on agriculture for livelihood, and then it becomes a subsistence family with no surplus to add to the holding. They are stuck. Buying at higher than market rate and subsidizing both are vote bank promotions.
ReplyDeleteMost obvious and of course important observations have been made before me.
ReplyDeleteHowever, what surprised me the most and is not mentioned in this exact article, is that the meeting between Obama and Modi took place in Nay Pyi Taw, which is a new capitol of Burma. The role of Burma is in my eyes heavily underestimated. I have been there ten years ago and then this spring, and I am convinced that Burma will be the new Asian Tiger economy in near future. The fact that the meeting has taken place there indicates the growing role of Burma.
As the economy of Burma grows, there clearly will be a demand for international trade agreements. There are many commodities to be produced there, for example wood. I did not know of close relationship between Burma and India - but there must be since Modi was there for the meeting. I was rather aware of its connection to neighboring China. Perhaps, in the future Burma may play a great role of a “middleman” among the US, China, and India.
Also, “Proponents of the deal argue that it would add $1 trillion to the global
economy and create 21 million jobs. Critics, though, have noted that it
would require a substantial investment from developing countries to
upgrade their ports and borders.”
This paragraph makes little sense to me. How would be investments into ports or borders a valid criticism? Especially in the era in which investment and increase amount of jobs had inherently positive value. Such investment would be increase in G of the CIG with a clear increase of economic growth, which seems as the main goal of the agreement.
S. Franek
The United States is indeed eager to increase trade with India. There has been a bitter row over food between the two countries and thankfully it has finally subsided. The trade between the two countries stands at around $100 billion. I think it could be said that the Indian and the US breakthrough may have saved the multinational trading system. The deal marked a crucial step towards the implementation of the World Trade Organization agreement that was reached in December 2013, which streamlined global customs procedures. Another benefit of this trade is the millions of jobs that will be created, helping prevent anymore world unemployment that we have been facing over the last few years. The Peace Clause is another agreement that the two countries have made in order to make it easier to trade with each other. Indian officials said they would sign off on the customs deal until the United States and other countries agreed not to challenge its food subsidies through the World Trade Organization’s dispute settlement process. While this deal represents progress, there is still a lot of work that lies ahead.
ReplyDelete