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India Compromises on Food Subsidies to Allow the Trade Facilitation Agreement to Go Through

Image via Flickr by babbagecabbage

After lengthy negotiations, India and the U.S. have finally reached an agreement on food subsidies and the trade facilitation agreement doesn’t have any more roadblocks before it can go into effect. However, the World Trade Organization negotiations ended in a compromise with India and must be addressed at a future time.Back in July, India refused to sign the trade facilitation agreement because it would not endorse them to stockpile food. Indian officials stated they needed concessions to stockpile provisions for poor people in their country. The U.S. and other western countries did not think this was fair because that food could potentially be leaked into the market and distort the price of trading and there was no way of tracking it.

Under World Trade Organization rules, countries cannot have food subsidies above 10 percent of the value of their production. India is approaching this amount with 9 percent. Indian officials wants the World Trade Organization’s formula for calculating food subsidies to be reset with new benchmarks to allow for inflation.

India faced lots of pressure from World Trade Organization members to make a decision. The U.S. finally agreed that India’s food stockpiles would not be touched until they could come up with a permanent solution. So, the trade facilitation agreement can go through, but India’s subsidies could cause problems in the future. There is no obvious solution to the problem, either.

The trade facilitation agreement is supposed to boost global trade by lowering import tariffs and creating standardized customs. It is a plan that has been in the works for several months, but delayed by India. The compromise did not specify a timeframe for renegotiating India’s food subsidies, but it will probably be brought up by World Trade Organization members in late November and early December.

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