WTO Conundrum: What’s At Stake For India?

The key issues that India will be trying to resolve include :

• Finding a permanent solution for its public food stockholding programme.
• ⁠Ending the existing moratorium on customs duties for electronic transmissions across borders.
• ⁠Safeguarding its informal fisheries sector.
• Reforming the WTO dispute settlement mechanism.

The WTO, in its October 2023 update of the Global Trade Outlook, observed that the world continues to struggle with a deceleration in goods trade. The slowdown started in the fourth quarter of 2022 and has continued to pull down trade projections.

The latest estimates by the WTO expect the volume of world merchandise trade in 2023 to grow by just 0.8 per cent, a downward adjustment from the 1.7 per cent forecast in April.

What aggravates this slowdown is the growing trend of erecting bilateral and plurilateral trade agreements across the globe that are outside the ambit of the WTO. This hinders the progress of the multilateral international trade order. And there lies the significance of the 13th Ministerial Conference (MC13), to be held from February 26-29 in Abu Dhabi, United Arab Emirates.

However, poll-bound India faces a host of burning issues. These issues include an ongoing farmers’ agitation (over higher grain prices) and rising food prices (which could skyrocket if the public holding of food stocks were to be dismantled as sought by some in the developed world). There is also a need for the country to ramp up revenues by taxing cross-border digital trade. Moreover, the government has to be mindful of the large communities depending on fisheries.

What Is The WTO Ministerial Conference?

To understand why this conference is important, one has to realise that the Ministerial Conference (MC) is the highest decision-making body within the governance structure of the WTO. The inaugural MC was held in Singapore in 1996, and it usually meets every two years. All members of the WTO come together in the MC, which has the power to make irreversible decisions on matters under any of the multilateral trade agreements.

What Are The Public Stockholding Programmes?

Different countries, particularly the developing and least developed ones, use public stockholding programmes to purchase, stock and distribute food to people in need. Though the WTO recognises food security as a genuine concern, it also holds the belief that purchasing foodgrains at administered prices distorts international trade in food items.

The 2013 Bali MC agreed, on an interim basis, that public stockholding programmes would not be challenged at the WTO even if a country’s domestic support breaches the fixed threshold. The limit is currently fixed at 5 per cent of the value of agricultural production for the developed countries and at 10 per cent for most developing countries.

Member countries, however, also agreed to negotiate a permanent solution to the issue. The commitment was again reaffirmed at the 2015 Nairobi MC.

The Government Of India currently provides 5 kg of free foodgrains every month to the poor through Pradhan Mantri Garib Kalyan Anna Yojana. This is in addition to the subsidised ration provided under the National Food Security Act. Though this was started during the pandemic, last year the scheme was extended for an additional five years till December 2028.

To continue with this programme, which is beneficial to both poor consumers in India and farmers who sell food at fixed prices to the government, India needs to be at the forefront of pushing for a permanent solution which allows it to continue with its public stockholding programmes at the WTO.

Why Is There A Moratorium On Cross-Border Digital Transactions?

E-commerce was first introduced at the Second MC in 1998 and members adopted a declaration. The WTO General Council was urged to create a Work Programme to examine all trade-related issues emanating from e-commerce. Till the Work Programme is finalised, members agreed to continue the practice of not imposing customs duties on electronic transmissions. This is widely known as the “moratorium on electronic transmissions”.

Supporters of the moratorium argue that it has created a stable and predictable environment for digital trade to thrive. Though there are concerns about the lack of clarity on the scope of the moratorium and the definition of electronic transmissions, the boom in international digital trade is widely attributed to the moratorium.

However, developing countries have of late been protesting that the moratorium has been a loss-making deal for them. This is because they are net buyers of e-commerce and are also losing out on import duties on digital trade, which is rapidly increasing its share in total international trade.

A 2019 UNCTAD research paper by economist Rashmi Banga estimated that the potential tariff revenue loss to developing countries due to the moratorium was US$10 billion in 2017.

India has reservations about continuing the moratorium, but the Indian proposal to the MC13 agenda stops short of explicitly mentioning the moratorium. Instead, it wants to speed up the finalisation of the Work Programme on Electronic Commerce.

However, South Africa, keeping up with its recent record of leading and articulating the voices of emerging and developing countries, has called for an end to the moratorium. The South African proposal also talks about the digital divide across the nations and the need for practical steps to be pursued under the Work Programme, such as the establishment of a fund that can provide targeted support to the less digitally endowed countries.

What Are The Issues Related To Fisheries Subsidies?

In the MC12 in 2022, member countries adopted an Agreement on Fisheries Subsidies, aimed at achieving sustainability by prohibiting government support for (a) illegal, unreported and unregulated fishing, (b) fishing of overfished stocks, (c) fishing on the unregulated high seas.

Fast forward to the MC13, the WTO is working on the issue in two tracks. First, there is an effort to get the agreement finalised, which requires ratification by two-thirds of member countries. The second track involves the “second wave” of negotiations to formulate additional disciplines targeting subsidies that contribute to overcapacity and overfishing.

India’s fishing sector is generally informal and the country does not have a large industrial fishing fleet. Government subsidies in fisheries are also relatively less. However, future subsidies are important for the growth of the sector, given the existing composition.

India argues that the historical presence of large industrial fishing fleets coincides with overfishing. Therefore, strong discipline is needed to control the formal industrial segment of the fisheries. Similar to other environmental issues, India makes a case for more responsibility and costs to be borne by the advanced fishing nations that historically provided subsidies earlier and cumulatively contributed more to fish depletion in the oceans.

There is a clause where a country with a global share of marine catch, not greater than 0.8 per cent, wouldn’t fall under the purview of this agreement. As a result, the developing countries are now divided into two groups – members falling under this exempted threshold category and the remaining others. Most of the developing countries are in the first category. So, India has a difficult job in hand while convincing all the WTO members of the developing world.

India is also advocating for a 25-year transition period for developing countries that are neither covered by the 0.8 per cent threshold nor considered least developed countries. The effort is to safeguard the future of Indian fishermen who are mostly in the highly informal sector.

What Is Wrong With WTO’s Dispute Settlement Mechanism?

The US government repeatedly blocked appointments of members in the dispute settlement body at the WTO, a kind of international court that decides on trade disputes. After successive retirements of judges and the blocking of new appointments by US trade representatives, the dispute settlement system currently is practically defunct.

There is a dominant opinion within the US administration that the judgments delivered by the Appellate Body, particularly those going against the USA, interfere with American sovereignty.

India advocates re-establishing the dispute settlement mechanism to bring back credibility to the WTO as an apex multilateral trade platform. Indian diplomats argue that unless there is a grievance redressal and dispute settlement mechanism with clear implementation, the long-term viability of the WTO may come under threat. However, strong opposition from the USA with tacit support of the EU, is likely to thwart Indian efforts on this count.