Dec. 7 (Bloomberg) -- The first major agreement to update global trade rules in two decades moved nearer after the U.S. and India bridged differences over agriculture subsidies and food security, people familiar with the negotiations said.
World Trade Organization Director-General Roberto Azevedo late yesterday circulated a draft text of an accord for the 159-member group to consider as the talks continued through the night in Bali, Indonesia, said people involved in the discussions who requested anonymity.
The draft’s provisions include measures to help smooth customs procedures and “allow developing countries more options for providing food security,” the Geneva-based WTO said in a statement on its website.
Success in reaching an agreement that supporters say could add $1 trillion to the world economy may help extend talks on the Doha trade negotiations, which have have dragged on for 12 years. Failure in Indonesia would diminish confidence in the arbiter of trade disputes, WTO and U.S. officials have said.
“Smoothing customs procedures would help democratize access to the global marketplace, while the package would provide a long-overdue signal that the WTO can serve as a negotiating forum among its broad membership,” Jake Colvin, vice president for global trade issues at the Washington-based National Foreign Trade Council, said by e-mail from Bali as the late-night talks got underway.
An accord in Bali would be the first major agreement among the entire WTO membership since the organization’s inception. The last significant deal among members was the Uruguay Round, settled in 1993, Colvin said.
The deal, if approved, would let India and other developing nations continue to subsidize their crops to bolster food security without having to worry about legal challenges, so long as the practice doesn’t distort trade, according to the draft.
The U.S. and other WTO members would retain the right to file a complaint if the subsidized goods are sold in global markets and depress prices or harm competitors.
The WTO draft calls for the establishment of an “interim mechanism” that would be in place until members reach a permanent solution. India is still seeking changes to WTO agriculture rules that would exempt its food program altogether from limits on subsidies.
Susan Ariel Aaronson, professor of international affairs who specializes in trade policy at George Washington University in Washington, said the compromise was a trade-off that keeps in place protectionist agricultural policies for the sake of the larger trading system.
“You always have to buy trade liberalization with some protectionism” at the international level, she said in a phone interview. If that allows the WTO to achieve some success in opening trade, it’s a good thing, she said.
The draft includes provisions to cut red tape at borders, a step sought by shippers including FedEx Corp. of Memphis, Tennessee, and United Parcel Service Inc. of Atlanta.
Public Citizen, a Washington-based consumer organization, was skeptical of the effectiveness of a potential accord, saying the draft includes watered-down provisions that simply let the WTO save face after years of stalled talks.
“Reviewing the actual text of the agreement, it appears that the biggest ‘breakthrough’ was simply that yet another WTO Ministerial meeting did not melt down altogether,” Lori Wallach, director of Public Citizen’s Global Trade Watch program, said in a statement.
Anti-poverty campaign group War on Want said the Bali talks hadn’t resulted in universal rights to food.
“The negotiations have failed to secure permanent protection for countries to safeguard the food rights of their peoples, exposing hundreds of millions to the prospect of hunger and starvation,” John Hilary, the London-based group’s executive director, said by e-mail yesterday.
Others were more sanguine.
“This is a victory for India over the short term,” said K.M. Gopakumar, a legal adviser to the Third World Network, a New Delhi-based policy research group that advises the government on trade agreements. “It will allow India to set its own prices for certain subsidized foods instead of being forced to use lower international benchmarks.”
A deal originally looked unlikely this week as India’s Commerce Minister Anand Sharma said the country’s food security was non-negotiable. India had sought to exempt food-security plans from being counted under subsidy spending caps, while the U.S. was concerned that a surplus from India’s food program may get dumped onto world markets.
“India speaks for the vast majority of poor people in the developing countries and the poor countries,” Sharma told reporters in Bali this week.
India Prime Minister Manmohan Singh’s Congress-led coalition allocated 900 billion rupees ($15 billion) in food subsidies in the fiscal year ending March 31, up 6 percent from last year. His party has championed rural programs in a nation with 1.2 billion people that is home to a third of the world’s poor, according to the World Bank.
Singh’s government, facing elections due by May 2014, has seen its popularity fall because of graft scandals, the weakest economic growth in a decade and consumer inflation that has exceeded 9 percent for 20 months.
The talks in Bali may put the focus back on regional trade deals, said Alan Bollard, executive director of the 21-member Asia-Pacific Economic Cooperation grouping, whose leaders also met in Bali this year.
“The WTO negotiations have got so complex with 159 different countries involved that we are really wondering whether there is a future for these very big, complete, comprehensive agreements,” Bollard told Bloomberg TV Indonesia in an interview in Bali Dec. 5.
U.S. Trade Representative Michael Froman said in a Dec. 4 speech in Bali that failure to reach an agreement “would deal a debilitating blow to the WTO as a forum for multilateral negotiations.”
After the discussions conclude, Froman and ministers from some Asia-Pacific countries will head to Singapore for talks on the 12-nation Trans-Pacific Partnership trade accord, with the goal of reaching an agreement before Jan. 1. The leak last month of a document purported to be part of the draft text dented optimism that those negotiations can be concluded by that date, Mustapa Mohamed, Malaysia’s international trade minister, said in a Nov. 20 interview with Bloomberg.