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India is not the bad guy, but it can do better

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In Brief

India’s recent veto of the WTO Trade Facilitation Agreement (TFA), agreed at the Bali Ministerial last year, raises several points that speak to its commitment to the multilateral system, the need for agricultural reform and India’s place in the world.

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First, multilateral trade negotiations have always been and continue to be an inherent component of global realpolitik. Countries will always attempt to put pressure on others to achieve their objectives in every deal. India could not be seen to have succumbed to external pressure. Prime Minister Narendra Modi had to choose between two kinds of headlines: one which said that India stood in the way of a deal which might have boosted global output by US$1 trillion, or one that said that the Modi government had surrendered to external pressure and denied food security to one billion Indians.

Is it any wonder that Modi opted for the former?

In India as in other democracies, international negotiations are more about domestic politics than global welfare gains. Modi would have committed political suicide if he had accepted the TFA without being able to show that he had secured the interests of India’s farmers and safeguarded food security for its poor consumers. Even those of us who have strongly advocated for a robust multilateral trading system under the WTO aegis may be inclined to endorse the Indian government’s stand on this occasion.

With US Secretary of State John Kerry in Delhi at the time that the TFA was approaching its deadline of 31 July, it was clear that the US — while not exactly endorsing India’s stand — also recognised the domestic concerns facing Modi. Kerry and Penny Pritzker, the US Commerce Secretary, clearly did not want the TFA to cast a shadow over Modi’s impending visit to Washington in September. This augurs well for India–US bilateral relations because they can now be built on a clear understanding of each other’s national interests. That is always a preferable starting point, especially for a relationship that needs major effort on both sides.

The WTO’s loss of credibility in this latest development was self-inflicted. For some years now, first under Pascal Lamy and now Roberto Azevêdo, the WTO secretariat has been unable to grasp that the global negotiating configuration has changed and it cannot simply ignore the demands and concerns of emerging economies. If the director-general was able to submit a monthly timetable the day before the deadline, he could have done so six months earlier as well. One hopes that the WTO secretariat will get its act together and put the food security negotiations on an accelerated track.

Azevêdo should actively discourage any attempt to launch the TFA by a group of countries while excluding India. This is neither desirable nor feasible. India should work to prevent such an initiative. India should also learn the lesson that even its BRICS partners will abandon it in global forums if that suits their national interests.

With the US, EU and China more focused on supra-regional trade pacts, it will be up to countries like India to put in the extra effort required to save and resuscitate the WTO. The onus is on India to allocate the necessary expertise and resources for reinventing and reinforcing the multilateral trading system. This, of course, implies that India sees merit in strengthening the system. A clear enunciation of India’s policy stance on the multilateral system would help a great deal.

The Indian government, having asserted its sovereignty, would do well to now recognise that the interests of those below the poverty line and of marginal and small farmers are not best served by the current subsidy regime. The Food Security Bill, though it passed unanimously in the previous Lok Sabha, is not a wise or even a practical piece of policy legislation. If implemented in its current form, it has the potential to destroy the domestic food grain trade and also further ratchet up food prices.

Real food security for the poor will be ensured by raising agricultural yields and increasing output. This requires converting India’s backward agricultural system into a modern technology-driven sector. The sooner the government announces a clear policy framework for achieving a second green revolution, the better.

The government should expedite the implementation of the direct conditional cash transfer to the poor, which will allow them to buy food on the open market. To mitigate the fear of a possible misuse of these cash transfers, these could be done in the form of smart value storage cards that would be biometrically protected and only permit the purchase of food.

Direct conditional cash transfers could also be made to small and marginal farmers who would be able to purchase fertilisers or any other agricultural inputs from the open market. This will eliminate the cornering of the fertiliser subsidy by rich farmers. With these reforms, which would transform the Indian agriculture sector and eliminate leakages and distortions in poverty schemes, India would be far better equipped to play a more effective role in global trade governance.

Finally, one hopes that the government will come up with a far more effective communications strategy that will win it new friends and allies in global forums. In these days of variable strategic geometry and an absence of any set of permanent partners, more effective communication is required to yield the highest returns.

India should not aspire to isolation, but nor should it be made to appear as the villain when it is only pursuing its national interests.

Rajiv Kumar is a Senior Fellow at the Centre for Policy Research. He is the former Director of ICRIER and former Secretary General of FICCI.

This article was originally published here, by India Today.

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