Amit Dave / Courtesy Reuters Farm laborers in the western Indian state of Gujarat, October 2012.

Modi Bets the Farm

Why Indian Agricultural Policy Might Unravel the WTO

A trade spat with India is threatening to push the World Trade Organization, already suffering from flagging credibility thanks to a lack of concrete results, into irrelevance. At the end of July, in a move that startled the WTO’s 160 members, India blocked a landmark international agreement that would have streamlined trade across the world. India had already approved the deal, which was struck at a WTO summit in Bali last December, but suddenly refused to live up to the deal’s first step -- signing a one-paragraph accession protocol -- without simultaneous progress on another matter -- food security, specifically greater concessions that would enable India to continue to subsidize its poor farmers.

India’s decision was a disappointing blow for a vast majority of WTO countries. The Bali deal was meant to be a crucial breakthrough, simplifying customs rules and potentially expanding the global economy by as much as $1 trillion. It would have also given a new boost to multilateralism at a time when most key players (including the United States and the EU) are increasingly focused on negotiating more specialized trade agreements in smaller groups. And if implemented, it would become the first unanimous agreement to be carried out by the WTO’s members in its two decades of existence. Although the clash with India does not spell the end of the WTO -- it has missed deadlines before and has so far carried on with its negotiations -- it marks a new low in the perennial WTO debate on agriculture while raising the risk of isolating India abroad.

India’s decision to link its approval of the pact to an unresolved WTO disagreement on food security might appear to defy strategic logic. After all, its newly elected prime minister, Narendra Modi, rose to power as a pro-market reformer. And New Delhi’s position has historically favored multilateralism -- lending support to trade liberalization since 1991 and campaigning for freer trade in services -- a consensus that even the

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