Food Subsidies Challenge WTO Ability to Keep Trade Deal on Table

Negotiators are seeking to salvage the credibility of the World Trade Organization at a meeting in Bali this week, as the lack of agreement over farm subsidies threatens to end 12 years of talks on a global trade pact.

The 159-member World Trade Organization has made more progress on the Doha round of talks in the last few months than in the past five years, spokesman Keith Rockwell told Bloomberg TV Indonesia yesterday. Yet negotiators didn’t nail down a package of agreements for ministers to ratify in Bali, WTO Director-General Roberto Azevedo said in Geneva ahead of this week’s meeting.

Failure to agree on a pact, which supporters estimate could boost the world economy by as much as $1 trillion, will call into question the effectiveness of the WTO and may mean the end of the Doha process, Azevedo said. India is opposing the current proposals on farm subsidies as a risk to its food security.

“If we cannot deliver here it sends a very bad message about the ability of the WTO as a negotiating forum,” Rockwell said in Bali.

Trade facilitation and agriculture remain contentious topics, with India looking to subsidize up to 10 percent of certain food staples and the U.S. against such a move, Indonesia’s Trade Minister Gita Wirjawan said. An agreement that amounted to even 5 percent of what Doha initially aimed for would be better than nothing, he told reporters in Bali yesterday.

Farm Subsidies

Negotiators in Geneva produced a compromise deal on Nov. 13 to be agreed in Bali to give India a four-year reprieve from legal challenges over its farm subsidies, according to Daniel Pruzin, an analyst at Bloomberg BNA. Still, India wants a permanent solution to its demands for amendments to WTO rules that would exempt food security programs from being counted under subsidy spending caps, Pruzin said.

The group’s rules for determining farm subsidies are outdated and subsidizing the agricultural industry in developed countries is not even a subject of discussion, India’s Commerce Minister Anand Sharma said in Bali on Dec. 2. The world’s second-most populous nation won’t compromise on its food security at the talks, he said.

“We cannot continue to have rhetoric of a development agenda without even a reasonable attempt to address the issues which are of primary concern to developing economies,” Sharma said in a speech.

‘Tangible Result’

Host Indonesia, keen for a positive outcome as President Susilo Bambang Yudhoyono heads toward the last six months of his government, has itself come under criticism by the Organisation for Economic Co-operation and Development for import curbs on foods to promote local industry. The government this year backtracked on rules restricting beef and soybean imports after prices soared.

Wirjawan said last week that there was a good chance of a package out of Bali, including on areas such as quota-free cotton, and called on his counterparts to find middle ground.

“We must not forget that the importance of coming out from Bali with some tangible result is important for the longevity and the sustenance of our belief in the multilateral trading system,” he told reporters yesterday.

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