Bali WTO Deal Doubtful as Rifts Widen Over Food Subsidies

Ongoing world trade talks in Indonesia, part of a 12 year-old drive to expand multilateral free trade in sensitive areas such as agriculture, teetered on the brink of collapse following differences among members over food subsidies.

A Bali trade deal hinges on how India goes about implementing its multi-billion dollar food subsidy programme.

India, the world's second most populous country, refused to make changes to a $24bn plan to provide subsidised food to almost two-thirds of its population.

The Indian programme, when implemented, would run afoul of WTO rules that cap farm subsidies to 10% of production.

Diplomats from the US suggested that the 10% rule could be put aside until 2017. However, India rejected the offer, demanding the exemptions continue indefinitely until a solution was found, reported Reuters.

Experts have estimated that the value of the Bali deal to the world economy could be as high as $1tr.

Failure to strike a multilateral deal at Bali could undermine the WTO's credibility and set off regional or bilateral trade negotiations among members, such as the US-led 12-nation Trans-Pacific Partnership or a US-EU alliance known as TTIP.

India has repeatedly said it will not compromise on its policy of subsidising food for hundreds of millions of poor citizens. The tough stance has the support of developing countries in Asia, Africa and South America, India's trade minister Anand Sharma said on 5 December.

While Sharma refused to name the countries supporting India, an unnamed diplomat pegged that number at 20 countries, the news agency reported.

"Countries with maybe more than 75% of the world's population stand by India on [the food subsidy] issue," Sharma said.

"It is better to have no agreement then to have a bad agreement," he added.

"Let us not sugar-coat reality: leaving Bali this week without an agreement would deal a debilitating blow to the WTO as a forum for multilateral negotiations," US Trade Representative Michael Froman said on 4 December.

"And if that happens, the unfortunate truth is that the loss will be felt most heavily by those members who can least afford it," Froman added

In September, the Indian government signed into law the $24bn Food Security Bill, which demands purchases at minimum prices and large-scale stockpiling of grain.

The food subsidy programme is part of the Congress Party-led coalition government's strategy to woo voters, to win a third term in office in 2014.