World Trade Organization aims to increase global trade
An agreement has been reached between India and the United States in the matter of food stockpiling in India, just days before the G-20 meeting hosted in Australia. The World Trade Organization (WTO) had previously met in Bali, Indonesia to reach the first real deal since their inception 17 years ago.
The deal aims to get goods moving across international borders by easing customs procedures, reducing red tape, and upgrading border infrastructure. The installation of this deal would add an estimated $1 trillion to the global economy and create upwards of 21 million jobs. Currently, however, the biggest criticism on the deal is the need for large investments in infrastructure that many developing countries may not be able to contribute without incurring a large debt burden.
In July of 2014, the WTO deal came to an impasse when India vetoed moving forward unless the dispute over food security was resolved. The Indian government buys food from its farmers and stockpiles it for a public distribution system, where it is sold at government-run stores at subsidized prices. The food subsidy program is available to 75 per cent of India’s rural population, and 50 per cent of the urban population.
The WTO, however, has a rule that limits countries to stockpiles of less than 10 per cent of a country’s . This is because stockpiles distort the market and allow the country in possession of the stockpile the ability to flood the market with product and drop prices around the world. An agreement was recently reached, allowing countries in violation of this rule until 2017 to solve such problems; however, India feared legal issues if they could not resolve their stockpiling issues.
During Indian Prime Minister Narendra Modi’s recent visit to the United States, President Obama and Modi discussed the issue in light of the mounting crisis of confidence facing the WTO. A new deal has now been reached, known as the “peace clause”, which promises that no legal action will be taken against India nor any other country that exceeds the 10 per cent stockpiles approved by the WTO until an official solution for the issue can be found.
With the deals like this and the US-China tech deal that is set to create $4 trillion in annual trade through the elimination of duties on products, the WTO’s deals are beginning to gain traction, leading to much speculation about what is to come to the stage of international trade and the world economy.