Trade Facilitation Agreement: Civil Services Mentor Magazine - January - 2015

Trade Facilitation Agreement

The World Trade Organization (WTO) is the only global international organization which deals with the rules of trade between nations. The organization officially commenced on 1 January 1995 under the Marrakech Agreement, signed by 123 nations on 1994, replacing the General Agreement on Tariffs and Trade (GATT). The goal of WTO is to help producers of goods and services, exporters, and importers conduct their business.
Bali conference has broadly came out with these outcomes- Trade Facilitation agreement- Agreement will attempt to reduce red-tape and streamline customs. It will help in faster clearance of goods which are perishable in nature. It will be legally binding agreement and also have coordinating bodies at national and international level. This agreement needs a upgradtion of technology to reduce the redtape. Least Developed Countries will receive the support to build the capacities to implement the changes.

Development and LDC issues- Least developed countries (LDCs) and developing countries would be given preferential treatment and market access. Least-Developed Countries will be given Duty-Free and Quota-Free (DFQF) Market Access. Operationalization of the Waiver Concerning Preferential Treatment to Services and Service Suppliers of Least-Developed Countries - allows preferential treatment to be given to LDCs for 15 years from date of agreement adoption.

Agriculture- Covers food security in developing countries which includes public Stockholding for Food Security Purposes, Export Competition etc.

Agriculture issue has become a problem area for the negotiations between the developed countries and India. As per the original Agreement on agriculture (AoA), agriculture subsidies were divided into three categories-

1. Green Box Subsidy
2. Amber box Subsidy
3. Blue box Subsidy

Out of all three only Amber box subsidies are considered as subsidy which disrupts the trade balance. Subsidy on fertilizers, power etc. comes under this kind of subsidy. It was agreed in original Agreement-on-Agriculture that the developed and developing countries will have to keep their Amber box subsidies within 5% and 10% of their agriculture production in 1986-88 respectively. India has strongly opposed to this clause because subsidies are calculated on the basis of prices of 1987-88. Input costs have skyrocketed in these decades. But, De-minimus doesn’t consider inflation factor. As a temporary relief to India’s demand a “peace clause” was agreed in Bali summit. Therefore, as a measure of temporary relief, Bali summit enacted a “peace clause” for the AoA. Peace clause has certain provisions which provide temporary relief to India. According to this clause no member, can drag any developing country to Dispute settlement mechanism of WTO for violation of De-minimus limits in AoA. But developing countries should also fulfill some criteria like-

1. Subsidy is provided only for staple food crops .
2. Subsidy is used program which is related to public stockholding.
3. And also for the purpose of any program related to food security.

But “peace clause” provides only temporary solution till 2017 and developed countries might not accept this clause as permanent solution.

In this context India refused to accept the Bali package until a permanent solution for agriculture subsidy is provided. Indian government has a legally binding food security act, 2013. Under this act Indian government has to provide subsidies food for around 82 crore population. Right to food is one of the fundamental human rights even united nation charter for human rights accepts this right. Millennium development goals which talks about nutrition and reduction in mortality can never be fulfilled if food security is not provided to poor population of the country. And also subsidy given by developed countries are much higher than that of developing countries e. g. India provide 12 billion dollars subsidy for 500 million farmers and US provide 120 billion dollars to 2 million farmers. The G33, a group of developing countries that coordinate on trade and economic issues also supported India’s stand. At the end India has been able to convince that it contentions are valid. India and the US settled the dispute that had paralyzed the WTO, and given the way to reforms that are seen adding about $ 1 trillion to global trade.

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