The World Trade Organization was designed to increase trade and lower prices globally. For better or worse, however, the organization’s relevance to setting standards for global trade is coming under fire as a small group of nations led by India threaten to hold up a trade deal. At the center of the political battle is the right for nations to subsidize crops for the poor.
The deal also highlights differences between rich and poor nations. In wealthier nations basic food staples are comparably cheap compared to other costs, such as rent. In poor nations, purchasing even basic foods, such as rise, can be expensive for poorer individuals. Cutting subsidizes for such food staples can lead to civic unrest, so many poorer countries choose to run subsidy programs, even if they are costly and inefficient.
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WTO’s ‘one size fits all’ policy questionable
India, along with other nations, has asked for an exemption to a food subsidizes rule that would prevent countries from subsidizing food for the poor. India has requested permission to continue with its rapidly expanding food subsidy program and has so far been blocking a WTO deal that doesn’t include exemptions. If India moves forward with its subsidy program without permission from the WTO, it could face trade sanctions because subsides would be above the level allowed by the WTO.
While India is leading the charge, numerous other developing countries have backed them. Food security is a major issue for many countries, but WTO’s “one size fits all” rules often make it difficult for countries to protect their interests. India is now pushing for an agreement that will make it easier to address and allow for custom procedures. This would make it easier for countries such as India to protect their interests.
Key issue for WTO to set the trend for future role
Reaching an agreement in the coming weeks is seen as essential by many analysts for the long term credibility of the WTO. The international trade organization has suffered numerous setbacks in recent years as emerging and developed countries have disagreed widely on various policies. Decisions in the WTO are generally made by consensus, so a lone country can ground negotiations to a halt.
With India’s economy struggling and unlikely to break the 5% growth mark this year, securing a trade deal with the WTO and undergoing another round of reform may be essential. At the same time, if India is unable to provide subsidized crops for the country’s poor, the country could face large scale unrest. Costs and inflation have been growing rapidly in India and a sharp increase in food prices could lead to widespread unrest. Now, both India and the WTO find themselves at odds and caught between a rock and a hard place.