India's blockage of the WTO Trade Facilitation Agreement, even after having won a hard-fought battle for a peace clause on food security at Bali, has not only threatened further progress toward renewing the World Trade Organization; it is also a story replete with political posturing on many sides, tendentious readings of legal documents, false rumors, and mutual distrust and suspicion between India and some of its trading partners. With the agreement between the US and India concluded a few days ago, this sorry saga may well have been brought to an end. And this is a happy ending. As I shall explain, neither India nor the US had to concede anything to agree to this deal, and both Obama and Modi can take real credit for international economic statecraft of a high order. But the media reporting of this impasse-breaking accord has replicated, unfortunately, some of the misunderstanding and confusion that led to the fuss in the first place. And I hasten to add, this is not only the Indian media-it also includes the New York Times.
To understand the developments in recent days, we have to go back to the Bali Ministerial. India had made a peace clause blocking WTO litigation related to subsidies programs for food security an essential condition of its acceptance of the Bali package; until the last hours of the negotiations, some of India's trading partners, above all the US, were prepared only to offer a four-year peace clause, with no guarantee that there would be a permanent agreement on food security responding to India's concerns at the end of that period. Finally, at the end, the US and others conceded to India a peace clause the validity of which would last until a permanent settlement was found. So here's what the final peace clause agreed at Bali says, in relevant part: "until a permanent solution is found, and provided that the conditions set out
below are met, Members shall refrain from challenging through the WTO Dispute Settlement
Mechanism, compliance of a developing Member with its obligations under Articles 6.3 and 7.2 (b)
of the Agreement on Agriculture (AoA) in relation to support provided for traditional staple food
crops [footnote omitted] in pursuance of public stockholding programmes for food security purposes". You will note that the period of validity of the peace clause is stated with complete clarity-"until a permanent solution is found." You will also note the use of the word "shall" which indicates a legally binding obligation, not a political or "gentleman's" agreement. Even if this undertaking could not be viewed as an amendment to the DSU, and thus not alter the jurisdiction of the dispute settlement organs under the DSU or the Agreement on Agriculture, it was without ambiguity a binding determination by which WTO Members agreed that certain claims are inadmissable before the dispute settlement organs (while the distinction between jurisdiction and admissability may not be so familiar to WTO lawyers, it is one that is well established in general public international law, including international investment law).
So it doubtless came as an unpleasant surprise to those of India's trading partners who had bent over backwards to provide this legal security regarding food stockpiling programs that, when WTO Members moved to finalize within the understood time frame the Trade Facilitation Agreement, India pronounced itself dissatisfied with progress on the food security issue. Was India really playing up the ante, or some base political game, holding the WTO hostage for the sake of domestic politics? True, India had a point that WTO Members were dragging their feet on setting up a structure and timetable for serious negotiations toward a permanent solution on food security. But wasn't it precisely because that could take some time that India had asked for, and eventually got, a peace clause that extended until the permanent solution was found?
After posting on this blog to explain why the text of the peace clause and its relation to the WTO legal framework were such that India had indeed received the legal security it was seeking, I eventually had the opportunity to speak directly with someone close to the Indian government about what was going on. I was particularly concerned about stories in the Indian press that in fact the Bali peace clause lasted only 4 years, which was a straightforward inaccuracy, it seemed to me.
Finally, I learned where this conceit was coming from. It was based on a highly twisted reading of the first paragraph of the Bali food security deal, in relation to the second. The first paragraph states: "1. Members agree to put in place an interim mechanism as set out below, and to negotiate on an
agreement for a permanent solution [footnote omitted], for the issue of public stockholding for food security
purposes for adoption by the 11th Ministerial Conference." Basically paragraph 1 sets a target or aspirational deadline of the 11th Ministerial Conference for negotating a permanent solution on food security. The twisted reading is that, due to this target, if no permanent solution were found by then, the peace clause set out in paragraph 2 would expire! But of course paragraph 2 doesn't say that the peace clause will only be valid until the 11th Ministerial Conference, it says it will be valid until a permanent solution is found. And this makes total sense, because India wanted the eventuality covered that there would be no such solution by the hoped-for time of the 11th Ministerial Conference. But there is further reason why it would make no sense to read paragraphs 1 and 2 together as implying that the peace clause only lasts until the 11th Ministerial Conference. Even if a permanent agreement on food security were adopted at the 11th Minsiterial Conference its entry into force would doubtless be later in time, once the requisite signitures and ratificatins of WTO Members to the agreement had been procured. On the twisted interpretation, India would have lost the legal security of the peace clause at the 11th Ministerial Conference without being protected by a permanent agreement until some later date. This makes no sense and is contrary to the object and purpose of the peace clause.
The second concern, it seemed, related to the notion put about most notoriously by Christian Haeberli that an agreement of this kind could not have the legal effect of restraining the WTO dispute settlement organs from adjudicating a claim under the Agreement on Agriculture. If one bought this argument it would have the collossal consequence that it would never be possible to come to agreed solutions of WTO disputes, because an out of court settlement would not be worth the paper it was printed on; if one of the parties violated its agreement and commenced proceedings, there would be no choice but for the dispute settelment organs to adjudicate the claim. Such a view seems directly at odds with numerous provisions of the DSU, such as 3.7, which indicates the preference for mutually agreed solutions, and 3.10, which requires "good faith" in the use of the dispute settlement proceedures. Where a party brought a claim in clear violation of its commitment not to do so under the peace clause, this would be an obvious violation of the obligation of good faith in 3.10, and the solution would be to find the claim inadmissable. There is no indication that the jurisdictional or comprommisory clauses of the DSU represent a contracting out of the general international law noton of abuse of rights (abus de droit). To the contrary, the explicit reference to good faith in 3.10 makes absence of abus de droit a condition of the invocation of the jurisdiction of the WTO dispute settlement organs.
Now let's fast forward to a few days ago. Many of the reports of the US-India deal suggest that the US has agreed to a rewrite of the peace clause to make it last til a permanent solution is found (including in the New York Times). These reports simply duplicate the original misunderstanding that the Bali food security text was somehow limited to four years. The most detailed account so far of the deal reached this week between Washington and New Delhi is a USTR fact sheet. http://1.usa.gov/1xk2onM Far from refering to rewriting of the Bali decision on food security, the fact sheet refers to what has been agreed on as "an understanding on implementation" of the decision. Assuming the fact sheet has been prepared accurately, and I have a good impression of the competence of the attornies at USTR, this makes pretty clear that the nature of the US India deal is that of an interpretative understanding of what is required for the peace clause to be implemented, not a pact to reopen the one negotiated in Bali.
On its own, the bilateral deal has the following impact: India is assured that the US will not attempt to operate on the twisted reading of the peace clause discussed above. While that interpretation is so implausible that I doubt that India really needs such an assurance, the fact is that the US statement that the peace clause will last until a permanent settlement is found would be binding even if it were a unilateral declaration of the United States (such a unilateral declaration was the basis of the panel's disposition of a claim of the EU against the United States in the S. 337 dispute). But what of other WTO Members? If they want to reinforce the breakthrough that occured this week, they might well join the US and make unilateral declarations that the understanding between the US and India corresponds to their own view of the commitment of restraint they have undertaken by virtue of the Bali food security decision. A number of such declarations should build even further India's confidence that the peace clause means what it says-without a single comma having to be rewritten, or a single concession being made by anybody. Besides, with the US-India agreement that the plain language of the peace clause must be honored, it becomes even more implausble-even wildly so-that the Appellate Body would want to take the rap for destabilizing the WTO through adopting a perverse reading of the peace clause at odds with the plain language of paragraph 2.
But by presenting the accord this week as proposing an actual renegotiation of the Bali food security deal, there is a danger of creating false expectations, and a backlash (again I am assuming here that the USTR fact sheet conveys a correct impression). Of course, putting out that the peace clause will be rewritten might be good politically in India, because it suggests that Modi won a major concession from Obama. But, as I suggest, that could backfire. Based on the best public information so far, the US and India have simply agreed that the Bali peace clause means what it says, on any reasonable reading of the text. With luck this may be one of those rare moments in diplomacy where a breakthrough is achieved with no side having to concede or lose anything. We will see soon enough.
