India threatened to block a worldwide reform of customs rules, which some estimates say could add US$1 trillion to the global economy and create 21 million jobs, prompting a US warning that its demands could kill global trade reform efforts.
Diplomats from the 160 World Trade Organisation member countries meeting in Geneva had been meant to rubber-stamp a deal on "trade facilitation" that was agreed at talks in Bali last December in the WTO's first global trade agreement.
But India, in an intervention on Friday, demanded a halt to the trade-facilitation timetable until the end of the year and said a permanent WTO deal on food stockpiling must be in place at the same time, well ahead of an agreed 2017 target date.
"My delegation is of the view that the adoption of the TF [trade facilitation] protocol be postponed till a permanent solution on public stockholding for food security is found," Indian Ambassador Anjali Prasad told the WTO meeting.
Many diplomats said Delhi's stance could derail the process of world trade liberalisation.
"It is no use to sugar-coat the consequences of such action or to pretend that there would be business as usual in the aftermath," US Ambassador Michael Punke said.
"Today we are extremely discouraged that a small handful of members in this organisation are ready to walk away from their commitments at Bali, to kill the Bali agreement, to kill the power of that good faith and goodwill we all shared, to flip the lights in this building back to dark."
India won support from Cuba, Venezuela and Bolivia. But an official at the meeting said the "very, very large majority" of WTO members opposed India's stance, which was a replay of the hard line it took in Bali.
India's former commerce minister Anand Sharma, who negotiated the Bali deal, said New Delhi had played a critical role to reach a balanced agreement in Bali but that it had subsequently not secured what it had sought.
"It was expected that TFA would move along with the issue of public stockholding … but it seems it has not happened. That is unacceptable," Sharma said.
However, WTO diplomats said Sharma had agreed in Bali to a four-year timeline for a deal on stockpiling and a much shorter one for trade facilitation.
Many diplomats expressed surprise that India had in effect reopened the Bali negotiation at this time.