U.S. Pressures India on WTO Trade Agreement -- Update

By Dow Jones Business News, 

By Raymond Zhong

NEW DELHI--U.S. officials pressed India anew Thursday to back away from demands on farm subsidies that risked scuttling a global trade agreement and undermining the World Trade Organization.

"There's been a real effort to try and find a common ground, because going forward is really in the best interest of all the members of the WTO, and particularly for India," U.S. Secretary of Commerce Penny Pritzker told the NDTV network.

She said she was hopeful that India would allow a WTO deal to streamline customs operations to move ahead. The WTO had set Thursday as the deadline for all 160 member governments to ratify the pact, but by late in the day no accord had been reached.

Keith Rockwell, a WTO spokesman, said the group's director-general was "working hard to find a solution that would be acceptable to all members."

Failure to achieve a consensus would deal another blow to the Geneva-based body's credibility, already severely strained after years of stalled talks on tariff reductions.

The latest deal, which members first approved in December in Bali, Indonesia, was viewed as a way to create some momentum. But talks have come down to the wire.

As a raft of regional trade deals moves ahead, the WTO's ability to act as a catalyst for global trade liberalization is in doubt.

India has been insisting for weeks that it won't sign off on the Bali pact unless the group comes to an accord on exempting food-subsidy and stockpiling programs like India's from WTO rules.

The Bali meeting had produced a truce: WTO members agreed not to file complaints against India's food subsidies for the time being, and said a permanent solution would be found by 2017. India now says it wants faster action.

Ms. Pritzker is in India this week with Secretary of State John Kerry and other U.S. officials for an annual strategic dialogue with India.

"The bottom line is that we are very sensitive to, and we care about, and we will work with India," Mr. Kerry told NDTV. "The key is, don't lose the opportunity. Right now, India has a four-year window where it's given a safe harbor. Nothing happens. If they don't sign up and be part of the agreement, they will lose that and then be either out of line or out of compliance with the WTO."

Other U.S. officials close to the WTO negotiations said they were doubtful that compromise could be reached by the deadline. After meeting with Ms. Pritzker on Thursday afternoon, Indian Commerce Minister Nirmala Sitharaman said Delhi's position hadn't changed.

"We had agreed to the deal in December in good faith," a senior Indian trade official said on condition of anonymity. "But things haven't moved even an inch on the food-stockpiling issue or on matters related to developing nations. This raises apprehension."

To maintain government reserves and provide subsidized food to needy households, India buys rice and wheat from farmers in enormous quantities at above-market prices. That has put it at risk of violating WTO rules capping subsidies that affect agricultural prices and production. For developing countries, the yearly ceiling for "trade-distorting" subsidies is 10% of the value of agricultural production.

Economists have estimated that India has exceeded its cap in the last few years as the size of its grain stockpiles has grown rapidly. But the WTO doesn't have current data on the size and nature of Delhi's agricultural subsidies. India hasn't submitted the requisite documentation since 2011, when it reported the assistance it provided to farmers between 1998 and 2004.

An Indian trade official confirmed that New Delhi had not submitted its documents concerning more-recent years, but said it would do so soon. There are "tens of nations" that are behind on their WTO reporting, said the official, who didn't want to be named. "What's the big deal?"

This isn't the first time WTO members have been at loggerheads over agricultural policy and government protections for poor farmers. The Doha Round of trade negotiations broke down in Geneva in 2008 because the U.S. and India couldn't agree on developing countries' rights to ramp up tariffs in the event of a surge in agricultural imports.

The collapse in Geneva proved traumatic. WTO talks on major issues were on hold for years.

December's talks in Bali also came close to falling apart. Then as now, Indian negotiators portrayed the food- security standoff as one between developing countries seeking to provide for their poor and developed ones privileging freer trade over the lives of millions of vulnerable people.

A coalition of developing countries initially backed India's proposal to uncap farm subsidies provided as part of food-security programs. But in this month's showdown, India has been supported only by Cuba, Bolivia and Venezuela.

Meanwhile, China, Thailand, and Mexico, among other large emerging markets, have publicly criticized India. Pakistan--poorer per capita than India and also a major rice-grower--has quizzed India about its rice subsidies at WTO meetings.

"The world has changed," says Lars Brink, an economist who studies global agricultural policy. "India is now a much larger player in international trade in agriculture than it was 10 years ago--five years ago, even."

That means India's compliance with WTO rules and principles is subject to greater scrutiny, including by many fellow developing nations. "What India does in terms of policy settings matters to other countries," Mr. Brink said. " Not necessarily in other large countries, but in small and poor agriculture-producing countries."

William Mauldin, Peter Kenny and Rajesh Roy contributed to this article.

  (END) Dow Jones Newswires
  Copyright (c) 2014 Dow Jones & Company, Inc.

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