At the end of July, the General Council of the World Trade Organization (WTO) was on the verge of concluding the first WTO trade agreement in 20 years. It was a modest agreement dealing with, among other things, rules to speed up the clearance of imports through customs.
Outside observers were hopeful; it was just a small agreement, but maybe it was a sign that the world’s nations could still make agreements for the common good. After all, many bigger and more urgent issues, like climate change, will depend on their ability to work together.
It wasn’t to be. India, the world’s second largest nation, stood firm in blocking the agreement, despite the fact that India actually agreed with the new rules. The Indian trade negotiators did so because they wanted a final agreement permitting India to purchase grain – mostly wheat and rice – from its farmers at set prices.
This had been discussed earlier, and agreement was reached to settle the matter by 2017. But India insisted that the matter be settled at the same time as the trade facilitation agreement.
India had half a point. The WTO had agreed twelve years ago to give priority to issues that were important to developing countries, including agriculture. But many rich countries, including Canada, have resisted most of the proposals brought by developing countries.
India also claims that the changes they want are necessary for their new food security strategy. With the largest number of food insecure people of any country in the world, this is an important goal.
But many argue that the solution they are pursuing will lead to the creation of huge stocks of grain. And, with limited grain storage facilities, India will be forced to get rid of some of this grain.
Exporting is the most attractive option for India. But if the quality has deteriorated in storage— which is likely–it will have to be sold at a price- much lower than the price the government paid for it.
And that’s the problem. India is a very large country. The amounts of grain it can sell can be huge – tens of millions of tonnes. And the effect of these sales is to depress the prices for other exporters, including Canada.
Agricultural dumping – the selling of farm products at less than it cost to produce them – has been a huge problem for the world’s farmers. Ending dumping was one of the key goals of the WTO when it was formed.
What will happen next? Will the WTO fade into obscurity for its lack of common agreement on trade issues? Or will India rethink its ‘brinkmanship’ strategy and help restore credibility to the process of finding global agreements?
It was just a small agreement that failed. But it is a worrisome sign for farmers, including poor farmers, and for the whole world. The fate of the World Trade Organization matters to all of us.
