The World Trade Organization (WTO) seems on the verge of approving an agreement with India to allow the Trade Facilitation Agreement (TFA) to move forward. The TFA is to be applauded. It will make a useful contribution toward helping goods move across borders more efficiently, which will tend to increase trade and promote economic growth.
The problem is not with the TFA, but rather with the high price that the global community seems ready to pay for it. India has asked that it be allowed to exceed the level of domestic agricultural subsidies to which it agreed twenty years ago in the Uruguay Round negotiations. For the first time in history, those talks led to limits on the ability of countries to use trade distorting agricultural supports. Those subsidies had been rampant, often leading to surplus production that depressed crop prices in global markets. Farmers who were being subsidized generally were happy enough with that arrangement, but it was a very different story for unprotected farmers in other countries. Many of the world’s farmers are quite poor to start with. Government-driven decreases in commodity prices make them even poorer.
A teachable moment is slipping away because no WTO member has been willing to stand up and explain what’s going on. India sanctimoniously declares that it needs to promote food security through use of a robust public stockholding program, and would like the world to believe that existing WTO rules prohibit them from doing so. This is simply not correct. The Uruguay Round includes specific provisions detailing how public stockholding may be used for food security purposes. A great deal of time, effort and tough negotiating went into developing those provisions. There is no limit on government expenditures to provide food – including free or reduced-price food – to low-income people. However, there is a clear requirement that purchases of commodities for public stocks must be made at open-market prices. It is not allowable to purchase commodities at above-market prices in order to provide a subsidy to farmers.