After a long standoff, India and the US have reached an agreement over India’s program of food stockpiling. The US had argued that the Indian government’s massive procurement of food distorted the market and acted as a barrier to free trade. The stockpiling program intended both to support farmers by paying them above market prices on the one hand, while at the same time supporting the country’s poor though subsidized food supplies.

India’s Food Security Act stipulates that the government must provide food grains at highly subsidized prices to almost 2/3 of the population. This requires acquisition and stockpiling of food on a massive scale, and while it no doubt distorts the market, the Indian government’s stand is that this is what is required in order to achieve food security for its citizens.

When India refused to go along with the WTO Trade Facilitation Agreement (TFA) drawn up in Bali last year because of concerns over food security, it was the sole country holding up the crucial agreement. The WTO functions on consensus, meaning every participating country must agree to the terms of any steps that are taken. The TFA has been widely regarded as a potential turning point in freeing up world trade.

It is estimated that if the measures included in the TFA are implemented, the resulting ease of moving goods across borders could add as much as $1 trillion to the world economy. This would boost growth and employment in both developing and developed economies.

With the issue of food stockpiling put aside for now, India does not have to sacrifice its food security for the economic benefits of freer trade. While its’ stubbornness may have been criticised by some, the refusal to bend seems to have given India the chance to have its cake and eat it too. It remains unclear whether the US extracted any specific concessions in return, but it appears that the success of the TFA was enough of an incentive for it to compromise this time.