U.S.-India compromise allows trade deal to hobble forward at WTO

In April, U.S. World Trade Organization Ambassador Michael Punke issued what in the polite world of trade diplomacy amounted to a kidney punch — a blow meant to hurt — when he took public aim at India’s extensive agricultural subsidies.

They distorted prices, he said, didn’t help India’s poorest, damaged the fortunes of farmers in the region — and, drawing a line in the sand, could not be accepted by the United States even if that meant scuttling a large global trade deal.

But as that deal was completed, the United States confronts this fact: India’s subsidies are still in place and probably will remain so for years to come, as a working group negotiates whether and how the country will conform with world trade standards for agricultural products.

The outcome of the meeting is being hailed as a triumph by participants — the WTO’s first successful effort to change some aspects of global trade law. “For the first time in our history, the WTO has truly delivered,” WTO chief Roberto Azevedo was quoted by Reuters as saying. However, its chief achievement may be that negotiators managed to avoid an outright meltdown.

They didn’t walk away with much. But at least they didn’t walk away mad.

“Failure would have been an unmitigated disaster,” said Kati Suominen, an adjunct fellow at the Center for Strategic and International Studies and trade analyst who attended the meetings in Indonesia. But given the outcome, “I don’t see why the U.S. or any other country’s private sector would want to keep driving at multilateral deals that take forever.”

The limited outcome in Bali, she and others suggested, may add even more importance to efforts by the United States and other large trading nations to cobble together regional agreements that — in the absence of an effective WTO — will become the effective arbiters of international trade in the future.

The Geneva-based WTO was set up in the mid-1990s, as globalization expanded, to serve a dual role as an arbiter of trade disputes and a negotiating forum for nations to expand common rules for importing and exporting goods and services.

Its judicial role has become an important if slow-moving way for nations such as the United States and China to iron out disputes. But its diplomatic mission has not gone so well. The current Doha Round of discussions has dragged on for 12 years in a continual rerun of what Punke called “the same movie” — developing countries arguing for special rights to protect sensitive industries; the developed world arguing that nations such as India and China are big and rich enough to stand on their own two feet.

The quandary for the organization is that the benefits of compromise only become apparent over time, while the costs — in terms of the political backlash at home — can be immediate.

In the current negotiations, for example, studies sponsored by the International Chamber of Commerce estimated that a simple “trade facilitation” agreement to ease the passage of goods across borders could boost worldwide exports by about $1 trillion – a small bump to world economic output of more than $60 trillion but evidence of how important logistical, supply chain and delivery issues have become to global business.

But an abstract future benefit spread across all nations wasn’t enough for India to back down from a program important to its domestic politics. India and the United States eventually reached a compromise — the Indian subsidies will remain, subject to future negotiations, and a trade facilitation effort will move forward.

Yet even that did not guarantee success: By Friday night, a meeting already forced into overtime had to extend into Saturday after Cuba raised objections, then dropped them, as part of its long-standing demand that the United States end its 50-year-old economic embargo.

In the premier global trade body, any of the 159 members can stop the world, and no dispute is too old to ignore.

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