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WTO Endorses its First Trade Deal in 20 Years
Dec 05, 2014

World Trade Organisation (WTO) members agreed to the first global trade deal in its 20-year history by endorsing a move to roll out easier customs rules, while giving flexibility to developing countries such as India to pay minimum support price to their farmers, without fearing about breaching the prescribed ceiling.

WTO will prepare a work programme by July 2015 to provide a thrust to multilateral trade agreements that cover all 160 members and will make an attempt to reduce the proliferation of free trade agreements that are being pushed by countries such as the US. The West, which has been pursuing an aggressive FTA agenda, has blamed the lack of progress at WTO to look at other options.

To ensure easier movement of cargo through customs at ports and airports across the globe, The Trade Facilitation Agreement is expected to restore some confidence in WTO, which has been pursuing the stalled Doha Development Agenda for over 13 years now. Some studies have estimated that the gains from the new agreement may be as high as $1 trillion, although a majority of the gains through higher exports are likely to accrue to the developed countries and large exporters such as China.

While the government will have to upgrade some of the infrastructure and rework the rules, it is unlikely to result in heavy investment or major changes in regulations.

The deal endorsed by the WTO General Council in Geneva has been in the pipeline for a year but could not go through due Indian government's objection to the formula on piling up food stocks, which was agreed in Bali last December. But, now the member countries have agreed to decide on a new formula for calculating the level of food subsidies by next December but avoid any penal action at the WTO until the mechanism is tweaked to address the concerns of developing countries. According to government, current food subsidy formula flawed as the calculation is linked to 1986 prices.

Although India is still away from breaching the subsidy cap of 10 percent of value of production, the government fears that the rise in global prices of grains, especially rice, and higher procurement may result in higher support to farmers. As a result, it has been arguing for a safety valve against what it terms as a mistake from the Uruguay Round.


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