July 31 (Bloomberg) -- U.S. Secretary of State John Kerry is pressing India to agree to a global trade deal before a midnight deadline as part of talks today to expand ties between the world’s largest democracies.
Kerry and Commerce Secretary Penny Pritzker are in New Delhi for a “strategic dialogue” today to identify ways to cooperate on trade, investment and security. The U.S. remains optimistic a deal will be reached today, Pritzker told India’s NDTV television channel in a joint interview with Kerry.
“The key is don’t lose the opportunity,” Kerry said. “The bottom line is we are very sensitive to, and we care about, and we will work with India.”
The U.S. is pushing to revive relations with India after Prime Minister Narendra Modi took power in May with the country’s biggest mandate in 30 years. American officials see the WTO agreement as an early test of Modi’s intent on taking steps to boost growth in Asia’s third-biggest economy, which has slowed in recent years.
India is seeking to renegotiate part of a breakthrough WTO agreement reached in Bali last year under Modi’s predecessor unless it receives further assurances that it can expand food subsidies without penalty. As leverage, it’s blocking a Trade Facilitation Agreement set to be passed today.
The Bali agreement lets India and other developing countries subsidize food staples such as rice without the risk of legal challenges so long as they don’t distort trade, according to a text on the WTO’s website. Members also agreed to negotiate a permanent solution for adoption at a meeting scheduled for 2017, the text says.
Indian negotiators are seeking to change the WTO text to ensure that the interim agreement on food subsidies reached in Bali extends beyond 2017 if no permanent solution is reached, according to two senior officials in Modi’s government who asked not to be identified because the discussions are private.
The language in the present draft is vague and doesn’t explicitly say the interim agreement will continue beyond a 2017 deadline, the officials said. India also wants the base year for calculating public food stocks to be changed to an average of the last three years, instead of 1986 to 1988, the officials said.
“We have offered them our solution,” Trade Secretary Rajiv Kher told reporters after Pritzker met Indian counterpart Nirmala Sitharaman in Delhi, without providing details. “Now the decision will be made in Geneva.”
Kerry said the deal struck in Bali includes food security, and said India would miss an opportunity if it doesn’t agree to the terms.
“Right now India has a four-year window where it is given a safe harbor, nothing happens,” Kerry told NDTV. “If they don’t sign up and be part of the agreement, they will lose that and then be out of line or out of compliance with the WTO.”
India last year allocated 1.25 trillion rupees ($20.8 billion) for its public food distribution system, the world’s largest. More than two-thirds of its 1.2 billion people eat less than the minimum target set by the government, leading to the highest rate of malnourished children in the world after East Timor, according to the 2013 Global Hunger Index published by the International Food Policy Research Institute in Washington.
WTO Director-General Roberto Azevedo was working to find a solution to the impasse and asked representatives to stay close to the group’s headquarters so he could convene them “on very short notice” if necessary, the trade body said in a statement.
The fate of the TFA has put a cloud over what U.S. officials have said they want to be showcase talks that could help expand the economic and security relationship as well as pave the way for a successful late September meeting at the White House between Modi and President Barack Obama.
In a speech before leaving Washington, Kerry had said the Obama administration wants to create greater opportunities for U.S. and Indian businesses, as well as expanded cooperation on investment, climate change and security issues.
The areas of particular focus are manufacturing, infrastructure, clean energy, environmental projects, education, and counterterrorism cooperation, according to a State Department official who asked not to be identified to discuss diplomatic matters.
Kerry will also discuss with Modi and others some regional issues, including India-Pakistan relations, Afghanistan, and China’s growing assertiveness, according to the official.
Annual U.S.-India two-way trade in goods and services reached almost $100 billion in 2013, up 61 percent from 2009 and a fivefold increase since 2000, according to the State Department.
Defense Secretary Chuck Hagel is due to lead a delegation to the Indian capital in early August to discuss expanding defense ties. India is now the U.S.’s largest foreign defense market, importing $1.9 billion of U.S. weapons last year, according to IHS Jane’s, a defense and security analysis company.