The World Trade Organization got a surprise setback on Thursday when India, pushing for concessions on agricultural stockpiling, vetoed plans for universal customs rules. The deal could have added $1 trillion and 21 million jobs to the world economy.
The July 31 deadline on the first proposal for major global economic reform in two decades - a series of customs procedures known as "trade facilitation" – left negotiators empty handed after India refused to sign up to it.
India, with its large number of poor and new nationalist government, had demanded the exclusive right to subsidize and stockpile grains which is not permitted by WTO rules.
The WTO, experiencing what may be its worst setback in its 19-year history, reluctantly admitted defeat.
"We have not been able to find a solution that would allow us to bridge that gap," WTO Director-General Roberto Azevedo told negotiators in Geneva just hours before the deadline was set to lapse.
Some analysts are of the opinion the failure represents the beginning of a new era of trade deals, which will depend more on individual economies forging their own initiatives, as opposed to attempting to force global reform.
"Today’s developments suggest that there is little hope for truly global trade talks to take place," Jake Colvin at the National Foreign Trade Council, a leading US business group, told Reuters.
"The vast majority of countries who understand the importance of modernizing trade rules and keeping their promises will have to pick up the pieces and figure out how to move forward."
Whether or not other countries will pick up the dropped ball and try to move forward despite the loss is not yet clear, but the present mood is noticeably downbeat.
"We're obviously sad and disappointed that a very small handful of countries were unwilling to keep their commitments from the December conference in Bali, and we agree with the Director-General that that action has put this institution on very uncertain new ground," US Ambassador to the WTO Michael Punke told reporters.
Meanwhile, there is speculation that some countries may decide to go ahead with the plan without India’s support.
However, Azevedo said that while the world’s largest economies had choices on how to respond to the failed talks, the poorest economies would suffer the brunt of the fallout.
"If the system fails to function properly then the smallest nations will be the biggest losers," he said. "It would be a tragic outcome for those economies - and therefore a tragic outcome for us all."