European Union deeply disappointed with India’s rigidity on Trade Facilitation Agreement

The Dollar Business Bureau | @TheDollarBiz

The Council of the EU Justus Lipsius building (Source - The Council of the European Union)

  The EU is deeply disappointed with India's decision to block the adoption of the Trade Facilitation Protocol, thereby preventing the 160 WTO member countries to proceed with their ratification procedures and stalling the implementation of an agreement which could have brought tremendous benefits to the global economy and specifically to developing countries, the European Commission told The Dollar Business. It said that the link made by India between the Trade Facilitation Agreement (TFA) and the public stockholding issue is of grave concern to the EU as under the Bali deal, in exchange for the TFA, India obtained a peace clause which prevents its food security programme from being challenged in the WTO and a commitment from all WTO Members to negotiate a permanent solution by 2017. However, the new government has refused to accept the deadline. This is despite the fact that India enjoys the benefit of the peace clause protecting its food security programme. In India Summit of the World Economic Forum held in New Delhi this week, India’s Finance Minister said that India supports Trade Facilitation but wants the peace clause to continue until the dispute is settled. This suggests that the Indian government fears that a permanent solution may not be found by 2017. The reasons are clearly linked to agriculture subsidies and records, but this stand has wider implications. The European Commission says that by derailing the TFA due to the public stockholding issue, India has failed to honour its commitments made in Bali last year. Moreover, it prevents other WTO Members from moving forward with an agreement. “India has led to the freezing of negotiations on the remainder of the Doha Development Agenda, as trust among WTO member countries has disappeared,” the European Commission told The Dollar Business. The WTO deadline for adoption of the TFA was July 31, 2014, but the deadlock continues even after two round of intensive consultations launched by the WTO. According to the WTO chief’s latest remarks, several developing countries, particularly in Africa, are keen for an early implementation of the TFA, and the support is growing stronger. The WTO requires a 2/3 majority to ratify the TFA, but such a step would marginalise India and also against WTO principles. The move could also hurt India’s interests in securing a permanent solution over public stockholding as well. “Contrary to India's stated interest, it (blocking the TFA) hampers the prospects of negotiating a permanent solution on the public stockholding issue, as other WTO Member countries will not want to engage in negotiations with India until it follows up on the original commitments it made in Bali,” the European Commission told The Dollar Business. Under such circumstances, India’s contradictory stand on the TFA raises more questions than answers. For example, is India really serious about its commitments on TFA? Will it prevent implementation of the TFA unilaterally if the WTO goes ahead and adopts it? And the bigger question is: Is India wary of any deadline for finding a permanent solution, 2017 in this case?    

This article was published on November 8, 2014.