How India Disrupts and Navigates the WTO

This memo is a part of CFR Expert Manjari Chatterjee Miller's project on India and the liberal international order published by the China Strategy Initiative's China 360° program. 

Introduction

India is a contradiction in the World Trade Organization (WTO): both a norm-breaker and a dealmaker. When the WTO was established in 1995, India had already begun a series of economic reforms to help it take advantage of the benefits of global trade and grow into a force to be reckoned with in international institutions. However, India has both resisted and embraced multilateralism depending on the balance of its offensive and defensive trade interests. As reforms slowed down in the 2000s and the multilateral trade negotiations called the Doha round failed in 2011, India became a force for obstruction, partnering with different groups of countries to lead by disrupting the WTO. Furthermore, the notable decline of U.S. power in the organization and disinterest in the multilateral trading system has left a substantial governance gap and increased India’s influence.

In three important normative areas of WTO discussion—plurilaterals, agricultural negotiations, and special and differential treatment (SDT)—India has tried to carve out an ostensibly principled position as the voice of Global South nations. However, its actions have undermined progress at the WTO and weakened India’s own potential to reap, in the long run, further benefits from the international trading system.

The Plurilateral Game in Town That India Does Not Want to Play

Plurilateral deals have become an important component of the WTO’s rulebook, a normative practice India opposes.^[1] Plurilateral deals allow a subset of members to pursue talks on a specific subject, provided they meet a critical mass or sufficient portion of members. Plurilateralism arose in response to criticism that the WTO had become irrelevant due to its principle of decision by consensus—that is, when negotiating new high-standard trade rules to keep up with changing times, all members had to sign off on deals whether or not they were part of negotiations.^[2] With 166 WTO members it is increasingly difficult to conclude multilateral talks among all. Furthermore, some members do not have the capacity to negotiate or have not established a presence in the market under consideration.

Plurilaterals, like multilaterals, can extend benefits to all members even if they are not part of negotiations, or they can discriminate against members not party to the deal.^[3] Some plurilaterals create new rules; others do not.^[4] Overall, they have become crucial to the WTO architecture.

India, alongside South Africa, has objected to all plurilateral deals, claiming erroneously that they are illegal in the WTO.^[5] For example, India opposes the Investment Facilitation for Development (IFD) Agreement, a deal reached by 125 (mostly developing country) members to improve transparency and good governance in domestic investment procedures, in order to create a sound investment climate and attract foreign direct investment. Some estimates suggest that deal could generate global welfare gains between $250 billion and $1,120 billion, primarily benefiting poorer countries.^[6] Yet, India, while publicly stating a desire for increasing foreign investment, has vehemently opposed it.^[7]

India’s opposition references a decision by the General Council (the WTO’s highest-level decision-making body)—that negotiations on the “Relationship Between Trade and Investment, Interaction Between Trade and Competition Policy and Transparency in Government Procurement” would not be part of the Doha round of negotiations—as evidence there is no mandate to discuss trade-related investment issues.^[8] But India has similarly opposed other recent plurilaterals on the basis that there is no express mandate to negotiate them.

However, the Government Procurement Agreement (a plurilateral only extending benefits to signatories) entered into force in 1994 and has been subsequently modified, with no similar objection made. Few WTO members support a return to multilateral negotiating rounds covering a broad range of issues, often referred to as a single undertaking. Furthermore, any mandate the WTO has is decided by its membership, and therefore, a decision by the General Council is not law but a guiding framework subject to change by members if they find an alternative way forward. In citing the General Council’s statement as evidence and opposing plurilaterals, which nearly all members support, India largely stands alone as a norm-breaker. Unfortunately, it also holds the key to closing any deal other members want to undertake, because India can effectively block a deal’s adoption unless it receives something in return.

India’s Objections to Agricultural Negotiations

India also disrupts changing norms in agricultural negotiations. Distortions in agricultural markets and the entry of new major players have caused norms to evolve, as has the need to address modern, emerging concerns such as climate change. India is committed to the Doha work program, which emphasized the specific challenges that developing countries faced in implementing WTO commitments and has joined a group of developing countries in resisting both exploration of a new agenda and “fresh thinking” in agriculture.^[9]

The new agenda on agriculture goes beyond old debates over reducing space for trade-distorting agricultural support.^[10] It also includes balancing members’ domestic agricultural concerns related to  food security and repurposing subsidies to enable them to address climate change.^[11] Members providing domestic support to their own agricultural sectors is one of the most contentious ongoing debates at the WTO, despite the fact that the Agreement on Agriculture strikes a fine balance between giving members space to address domestic agricultural concerns, while at the same time ensuring that trade distorting practices are limited.

WTO rules divide agricultural support into four categories, the first of which is subject to imposed limits: the “amber box,” which has a more than minimal trade distorting effect; the “blue box,” which addresses distortion of amber subsidies with a production curb; the “green box,” which have no or minimal distortive effect on trade; and the “development box,” or Article 6.2, which gives special flexibilities to developing countries.^[12]

Domestic support measures can increase production and could help improve productivity (e.g., by inducing the use of improved seeds), but they can also introduce new inefficiencies or amplify old ones.^[13] Importantly, support is concentrated among a handful of countries because few have the resources to invest heavily in their agricultural sectors, and even those that do usually aid only their largest producers. Furthermore, although some supports—such as research-and-development investments in creating improved seeds—have improved productivity, providing trade-distorting support to inefficient producers keeps them in the market longer than they should be. Higher prices due to price supports also impact consumers or government fiscal expenditures. The former creates greater inequalities in the market, while the latter stresses government budgets.

Trade-distorting agricultural domestic support notified to the WTO has decreased over time in nominal value and as a percentage of the value of agricultural production, while support that has no (or a minimally trade-distorting) effect has seen notable growth.^[14] However, that decrease has not meant distorting support is no longer a problem. Pandemic disruptions and post-pandemic tensions fueled some recent spikes in support: for example, between 2021 and 2023, total agricultural subsidies and price support of fifty-four countries reached historic highs of nearly $850 billion a year.^[15] According to the Organisation for Economic Co-operation and Development (OECD), agricultural price support and input subsidies are potentially the most distorting forms of support.

Just five to ten WTO members provide the bulk of domestic support to their agricultural sectors. The United States, China, India, Japan, and the European Union account for nearly 90 percent of all notified support.^[16] That is because WTO rules in the Agreement on Agriculture have not been sufficiently updated, reflecting market conditions and support levels from a time when China and India did not play as large a role in global agricultural markets, and also provided less support to their own sectors than the major developed economies. The shift in conditions without a corresponding change in the WTO rules now makes adjusting global inequities produced by that domestic support more difficult.  

Today, India has banded with China and some other developing countries to resist reductions in, and even expand, their space for domestic support measures. India’s primary concern has been to address food security needs and support its farmers, a large and politically powerful constituency of 260 million people (about 1 in 5 Indians).^[17] Recent figures put India’s support measures at $48 billion, the highest in the WTO.^[18]

India also maintains significant price support for rice and wheat through “public stockholding.” That practice involves acquiring stock from farmers at set prices, retaining those stocks to maintain steady prices and supply on the production side, and providing those food grains to low-income households at subsidized cost. Estimates suggest China and India together hold two-thirds of global grain stocks.^[19] Simultaneously, India is the leading global exporter of rice, raising concerns over how its subsidies could be supporting its export growth in this market.^[20]

The table below provides an overview of current support levels by the largest support-providing WTO members. Notably, because of its stockholding-related market-price support, India continues to be the only member in breach of its support limits, which has frustrated other members and revitalized the debate on how support limits are calculated.^[21]

India Preserves Power Through Special and Differential Treatment

India has also worked with China, South Africa, and Venezuela to strongly object to attempts to reform special and differential treatment (SDT) for developing country members. How best to address the unique needs of developing countries has long institutional roots in the WTO. The preamble of the WTO founding document is clear about the commitment to development “that there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development.”^[22] With 166 members, many of them developing countries, the WTO needs to integrate a diverse set of countries into its rule framework.

However, the WTO faces a unique challenge: unlike other international organizations, it has no objective measures of development but instead relies on members to self-declare whether they are developing countries and need SDT. It allows developing country members greater flexibility in their commitments, including longer phase-in periods for their obligations, carve-outs, and technical support.^[23] Yet, this approach does not allow for differentiation among developing country members, and instead lumps them all together (with the exception of the Least Developed Countries).^[24] The result is a failure to deliver tailored support reflecting members’ specific needs.

In 2019, a new approach to SDT gained support. It called for more granular differentiation to prevent larger developing country members from free-riding on benefits that should not accrue to them. The United States led the reshaping of the accepted norm, though it failed to achieve wholesale reforms.^[25] The U.S. proposal called for limiting access to SDT if members are part of OECD or have begun the accession process to become so, are part of the Group of Twenty, are classified as high-income countries by the World Bank, or account for 0.5 percent or more of global merchandise trade (imports and exports). At the time of the proposal, more than thirty WTO members that consider themselves to be developing countries, including India, would fall under at least one of those criteria.^[26]

India strongly objected to any changes, arguing not only that SDT was a treaty-given right but also that significant development gaps persist that warrant preserving the status quo.^[27] Most WTO members disagreed. Many were developing country members who complained that some developing countries with a significantly greater presence in global markets, such as India, were silencing attempts to generate more targeted developing country support in order to preserve maximum levels of flexibility for themselves.^[28]

Despite broad agreement that SDT has failed to help countries meet their commitments, India continues to push for greater flexibility. For example, India is largely responsible for the inability to conclude a comprehensive agreement to rein in harmful fisheries subsidies: it demanded phase-in periods for developing countries that were so long as to render its commitments meaningless.^[29] In the final, pared-back deal, India quickly declared victory, noting it was able to preserve subsidies for its own fishermen.^[30] A deal on the second phase of harmful fisheries subsidies remains elusive due to India’s continued opposition to high-standard disciplines.^[31]

India does not acknowledge that its unwillingness to take on obligations matching its level of development and economic needs is causing long-term self-harm. Preservation of the status quo, which India also dislikes, therefore becomes a better outcome than any substantive change requiring the country to step up and take on greater responsibility to shape a fairer trading system.

The Way Forward for the United States and the WTO

A discussion of how India navigates three issues at the WTO—plurilaterals, agriculture talks, and SDT—shows how the country has willingly disrupted the rules-based trading system through its consistent norm breaking, as well as how it effectively vetoes progress in fashioning itself a dealmaker in different groupings. What is striking is India’s opposition not just to established norms but also to changing norms and emerging consensuses. India’s strategy is driven by two goals. First, in opposing plurilaterals it is ensuring that compromises are struck on the lowest common denominator, which means India aims to oppose high-standard rules so that its own discriminatory trade practices will go untouched. It is also ensuring no new rules will be developed on modern issues of importance. In fact, Indian Minister Piyush Goyal has also gone on record opposing discussions on gender, climate change, and labor.^[32] Second, in categorizing itself as part of a vulnerable group without actually sharing its vulnerabilities, India preserves a high degree of flexibility in the domestic actions it can pursue. For example, statistically speaking, the levels of domestic supports in agriculture that India can provide exceed those of most developing countries.

The primary problem in getting India to play a more constructive role is that the chief architect of that system, the United States, has been asking for additional flexibilities for itself and has openly flouted the rules.  To be fair, the United States has pushed back on India in some cases, if in limited form. Notably, the United States, which is not part of the IFD agreement, reacted firmly to India’s objection during a December 2023 General Council meeting. The U.S. delegate stated, “We disagree with . . . South Africa, India and Namibia; we do believe that the WTO system does provide for and can sustain plurilateral initiatives.”^[33] However, when U.S. Trade Representative (USTR) Katherine Tai visited India the following month, the readout provided little indication that the issue was ever discussed, missing an opportunity to raise the topic bilaterally and convey U.S. concerns to India.^[34]

Building consensus would require the United States to convince India to drop its objection to plurilaterals.^[35] Alternatively, discussions could move out of the WTO, but members would lose institutional provisions, such as secretariat support, transparency through a committee, and dispute settlement. Until then, WTO negotiations remain at a virtual standstill as India refuses to let modern issues progress while failing to flexibly address long-standing concerns.

In November 2024, the United States, along with Argentina, Australia, Canada, and Ukraine, accused India of “providing significant market price support . . . for rice and wheat,” claiming India’s market price supports of 87 percent for rice and 67 to 75 percent for wheat vastly exceeded its allowable levels of 10 percent (see table 1).^[36] Still, the United States needs to push India and the WTO at large to rethink domestic support to account for growing WTO membership and changes in the agricultural trade landscape. Economists Lars Brink and David Orden outline a few suggestions for reform, including making the WTO rules more consistent across members, improving how price support is measured, and modifying rules to more effectively address modern priorities such as biosecurity, biodiversity, and climate change.^[37]

For a fairer trading system, the United States should not decrease its own commitments but ask others to increase theirs. That means completing the WTO reform discussions and making progress on the three areas highlighted above. Crafting new high-standard rules on digital trade and convincing India to drop its opposition will send a strong signal to China and other nonmarket economies that a free and open internet is an essential component of the trading system and healthy societies. Breaking the deadlock on agriculture negotiations will also help the United States curb abuses of agricultural support measures and ensure legitimate food security concerns receive the attention they deserve. It will also allow for discussions of how to retool existing subsidies to support more efficient farming practices. Finally, agreeing to clearer distinctions between developing country members will help guarantee more targeted and equal treatment in line with development needs, ensuring also that developing countries with significant market shares in specific sectors under negotiation cannot escape high-standard rules.

Inu Manak is a fellow for trade policy at the Council on Foreign Relations.