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Special Feature: Future of WTO Trade talks – India’s position |
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Union Commerce and Industry Minister Kamal Nath has reaffirmed that “India wants a rule-based multilateral trading system.” Speaking on the sidelines of a series of meetings of regional economic ministers, Mr. Nath also expressed the “hope” that the Doha Round, now in a “pause,” could be completed next year. After discussing the current impasse with Indonesian Minister Mari Pangestu, Chairperson of G-33 in the Doha Round context, Mr. Nath said senior officials from the negotiating countries would meet next week in Geneva to pick up the threads.
The key to the lock of the deadlock is not in the hands of India or the underdeveloped countries, but with the developed countries. Analysts say the issue of Special Safeguard Mechanism is an issue of livelihood security. It is not an issue to service the commercial interests of countries. There can be no trade-off between livelihood security issues and commercial interests. There are other issues which are as important as this — tariff simplification, product-specific caps in subsidies and of course the issue of subsidies itself. The headline issue is subsidies; the headline issue is the product-specific caps.”
India’s position: India wanted to put the cap on US subsidies at its current level. On the other hand, it wanted to have the right to hike its (already high) import duties on sensitive agricultural products (SPs) if imports reach 10 per cent of domestic market for such commodities. The US wanted to set the SSM trigger at 40 per cent of imports. Given these wide gaps in the negotiating positions of the two camps on these two issues, the talks had to collapse. The WTO decision-making relies on consensus and not majority voting of any kind. Hence, if an exception is demanded by a member, no agreement is reached unless the exception is either accommodated or dropped by consensus. This has made WTO negotiations increasingly complex and time-consuming.
It should also be noted that there is a difference in the position taken by US and EU in this connection. The EU is willing to cut back some of its agricultural subsidies provided countries such as India reduce restrictions on imports of industrial products and services. That is easier for India to accept. But the US farm lobby is willing to allow reduction in farm subsidies only if the US agriculture gets additional market access in countries such as India.
Given the livelihood concerns of millions of small farmers and the potential political fallout, it is nearly impossible for the Indian government to liberalise imports in sensitive agricultural products. Thus, the chances of any real breakthrough in Doha talks do not look bright at this moment.
There could still be a breakthrough if the developed countries eventually accept — though grudgingly — the stand of developing countries that though they gave a lot of concessions in the Uruguay Round, the agricultural subsidies in the developed countries have not materially changed (except that some subsidies have been de-linked from production).
It is just appropriate that the developed countries should unilaterally cut farm subsidies without expecting any significant reciprocal reduction in agricultural protection on the part of developing nations.
India has already expressed its willingness to open up more in some service areas such as telecom and financial services provided the developed countries allow additional concessions in the movement of temporary work-related personnel.
The areas of disagreement in the manufacturing sector are mainly over whether the reciprocal tariff reductions would take the form of small cuts on a wide front or larger cuts in some specific sectors, leaving other sensitive areas (like the “infant” automobiles sector for India) unaffected. Such disagreements can be narrowed down with more negotiations.
WTO negotiations do not take place over high moral principles. Ultimately, multilateral trade agreements are the products of hard bargaining. Most countries start with apparently rigid positions which gradually soften after a lot of behind-the-door deal making.
It is clear that no country — especially the poorer and weaker nations — wants the multilateral trade negotiation and dispute settlement mechanism of WTO to break down. In fact, with the signing of more FTAs, the difficulties of enforcement of rules are increasingly coming out in the open.
Future of the deal: Observers note there are several possibilities. First, it would be even more difficult to strike any complex multilateral WTO trade deal for the new US President in the initial years of his presidency. But if the outgoing President Bush can come close to striking a WTO trade deal, it may be easier for the next President to give some finishing touches and get it through the Congress.
Second, without the constraints imposed by the Left partners of the coalition, the Indian Government may now want to strike a more reformist posture. However, with general elections round the corner, this does not seem very likely — specially if it is a question of reducing tariff barriers on agricultural imports, which affects millions of small farmers.
Third, the long-term costs of failed WTO talks could be substantial. Hence, all efforts should be made to bring about even a minimalist agreement to save WTO as an institution of multilateral trade talks. The other option is bilateral or regional trade agreements which have substantially weakened the multilateral negotiations machinery.
Fourth, there could be a stronger case for negotiated multilateral trade liberalisation agreements when the world economic system is in trouble. In times of recession and job loss, there will be more pressures to revert to protectionism and beggar-thy-neighbour policies.
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