The WTO vote was another subtle blow to the US

a slightly edited version of the following appeared on firstpost on aug 3, 2014, at http://firstbiz.firstpost.com/corporate/international/wto-india-really-villain-another-rap-knuckles-americans-92583.html

WTO: India is not really the villain, and it’s another rap on the knuckles to the Americans

Rajeev Srinivasan on why the WTO stand by India is justified

The fact that the Narendra Modi government stood firm in the wake of arm-twisting by the Americans, and refused to back down from its position on food subsidies, is generally a good thing – although on a given day, one could argue the opposite, too. The reason to agree with the Indian government is that, despite the idiocy of the UPA’s Food Security Bill, the subsidies provided by the West to their own farmers are far more obscene than India’s, and distort trade far more.

The charge against the Modi government, and in particular against its Commerce Minister, Nirmala Sitharaman, is that a general agreement on cost reduction was blocked because of India’s objections on the unrelated area of subsidies. By not allowing the easing of trade through a Trade Facilitation Agreement, the West suggests, India has prevented the saving of up to $1 trillion in trade-related costs, and may even have mortally wounded the World Trade Organization (WTO).

That last charge demands scrutiny. The WTO, the successor to the GATT (General Agreements on Tariffs and Trade), has been beneficial to India – it is under its aegis, for instance, that India is able to win cases against such habitual offenders as China and the US. The former is prone to ‘dumping’, ie. selling goods below cost through invisible subsidies; the latter is prone to unfair non-tariff barriers to protect its own manufacturers. So it is not in India’s interests for WTO to fade away, and missing the July 31 deadline for the TFA will not cause it to do so.

However, the WTO has found it particularly hard to get the consensus required under its charter. The consensus requirement is the reason that a single member like India is able to hold it up. The WTO’s so-called Doha Round has been going for 14 years with no discernible progress, and it is not necessarily because of India’s obstinacy: trade agreement is hard to get. That is the reason a number of regional groupings, for instance Trans-Pacific and Trans-Atlantic, have also risen.

It is true that reducing the cost of trade would help India improve its trade position (although at the moment it is a relatively minor player in world trade). But it would also have the undesirable effect of further opening India’s growing markets to efficient Western suppliers and their products as Ajit Ranade suggests in “Why India is not WTO villain” (Mumbai Mirror, Aug 2) (and with no corresponding benefit to India in the movement of its people to Western markets, as they are getting increasingly tight on visas).

So it must have been a hard decision, which required hard negotiation from Nirmala Sitharaman. I am reminded of another Indian negotiator, Arundhati Ghose, similarly holding firm to her position in the view of sustained Western pressure, in the nuclear arena some years ago. Kudos to these strong ladies!

The issue with agriculture is that Europe has a ‘wine lake’ and a ‘butter mountain’ from over-production based on farm subsidies. The US’s 2014 Farm Bill allocates $956 billion over 10 years, and that includes some $20 billion in subsidies every year to five crops: wheat, rice, soy, corn and cotton. The resultant output is sometimes dumped in world markets, leading directly, for example, to the suicides of cotton farmers in India whose costs are greater than the heavily-subsidized costs to American farmers.

Other rich countries do the same thing. It is said that each Japanese cow is subsidized to the tune of $7/day. Thus, many countries treat their (often rich, corporate) farmers as so many sacred cows, and provide pork-barrel monies to them. India’s effort to subsidize food for its poor (India has something like half the world’s desperately poor people) is no more wicked than these subsidies, so there’s a moral argument in there somewhere: it is more justifiable.

Lost in the fuss is also a small fact: it is not as if the July 31 deadline is the end of the TFA matter. The negotiations will resume in September, hardly a month away, and the issue can be revisited. Given the inordinate delays in the Doha Round, this matter of a month is minor, not as though an opportunity has been lost for ever, as some in the West pretend.

Besides, I think there’s something else at play here. There have been three big international events in which the Modi government has been involved, and in each of them, India has acted against the interests of the US. I imagine this means Narendra Modi has not forgotten the shabby treatment meted out to him by the US under the guise of ‘religious freedom’.

For, consider: the BRICS Bank announcement in effect suggested that the Bretton Woods agreement, the Washington Consensus, and thereby America’s free ride as the owner of the world’s reserve currency, were on the way out.

The Indian vote at the UNHRC against Israel, an American ally, was in effect pushback against the US, which, incidentally, cast the only vote supporting Israel.

Then, finally, comes this WTO imbroglio.

In all three of these, Modi has paid scant attention American interests. I hope this was deliberate: instead of the traditional empty bravado, this Prime Minister takes action. That is one of his trademarks: decisive action, not talk.

It was particularly sweet in the WTO vote, because just a day or two before John Kerry arrived in India to attempt to browbeat the Indians into acceding to the Western line, the US tried it usual tactic: it released a report by the US Council on International Religious Freedom (USCIRF) that paints India as a veritable hell for non-Hindus. (This reminds me of China invading Vietnam exactly when the Indian foreign minister was visiting China: a clear signal of contempt).

This was an insult: the USCIRF is infamous for being a biased entity driven by Christian fundamentalists and their conversion agendas, but in the past, India has caved in, ashamed. But this time that nice little recipe did not work. Instead, Kerry had to return empty-handed, after enduring a lecture regarding US snooping on India, about which Foreign Minister Sushma Swaraj wagged an admonishing finger at him.

I think the tea leaves are pretty clear. Narendra Modi is telling the Americans that they are not as important to him as they think they are, and that in any case, he is not going to be taken in by either bluster or honeyed words, which worked so well with previous Prime Ministers.

1100 words, 2 aug 2014