Agriculture negotiations hold the key to success

The Financial Express, December 14, 2005

By Pradeep S. Mehta

Commerce and industry minister Kamal Nath appears well in command of the key issues and challenges of the Doha Round. This became evident at his recent parleys with parliamentarians, trade unions and politicians, and the cabinet. It inspires confidence. On the other hand, his continuous refrain on protecting the 600 million farmers of India from any adverse deal, is perhaps more to do with the sentiment than logic. As many of us know, farming in India is a victim of declining investment, internal trade barriers, monsoon vagaries, diminishing water tables etc. These are but domestic issues. At a recent stakeholder consultation organised by the commerce ministry and UNCTAD in Delhi many farmer representatives were crying hoarse on the increasing immiseration of farmers, and in the process even suggesting that India should leave the WTO or at least keep agriculture out of the WTO. Little did they know that agriculture was dragged into the WTO during the Uruguay Round to seek better disciplines on the western subsidies. If it were not in, then the hope to deal with the unfair subsidies would have been a mirage. The Hong Kong meet is another of a series of ministerials, where everything is held hostage to agriculture. Agriculture has always been the either the deal maker or deal breaker in global trade talks. As things stand today, the Hong Kong meeting will be but a stepping stone. In any event, the type of market access that some rich countries want in our farm goods market can always be dealt with under the special safeguard mechanism, which too is on the negotiating block. However, this is but one issue which has been blown out of proportion, even if the circumstances demand it. The more crucial issues are related to the entire economy of the country, and the cost of failure of an unsuccessful Doha Round will be huge.

How? It will lead to increased protectionism, bilateralism and dirty politics through divide-and-rule policies of the rich. In spite of an increasing South-South trade, India cannot afford to ignore the rich country markets. It is this which Mr Kamal Nath will have to keep in mind and not be carried away by sentiments when he is in the green rooms at Hong Kong. Most countries are interested in a success of the Doha Round, because a failure can be very costly, particularly for an ambitious country like India whose economy is growing rapidly. It is therefore a substantial task for Mr Kamal Nath to ensure that the same succeeds. Quite clearly, the Hong Kong ministerial has been designed as work-in-progress rather then a conclusive event, with signals that a Hong Kong-II be organized sometime in the first half of 2006 to wrap up the round. Thus what happens at Hong Kong will largely determine the fate of the second ’special’ ministerial in the series. We cannot hope to have a third meeting. The main culprit of the impasse is European Union, while the US to a lesser extent. The EU too has its internal tensions with half the members wanting its dirty subsidies to stay and the other half wanting them to be reduced. There are two other sound reasons to do so. First, the EU is now under pressure to amend its sugar regime due to a dispute that it lost at the WTO. The second is on the EU’s budget, of which 40% goes to support farms in European Union. While France is the stout defender, UK is the aggressive attacker. UK’s chancellor, Gordon Brown has not minced his words at the recent G-7 finance ministers meeting blaming farm subsidies for the global trade talks impasse. Parroting the lines of the EU’s trade commissioner, Peter Mandelson, Brown too speaks about better deals on services and industrial goods. That is for public consumption. On the other hand, the rich are also not in a mood to give teeth to the commitments on special and differential treatment and on implementation, which too form a part of the tapestry of the Doha Round. No wonder Kamal Nath is strident on these issues, which are a part of the package, and reminding all that this is a ’development round’ and not a ’market access’ round. These views have been echoed soundly in a recent statement by a group of developing countries, suggesting that the rich want this as a ’round for free’. Granted that the rich will push for a better deal for themselves, and continue to exhibit solidarity for the poor. It is a dog-eat-dog world, and mercantilism rules the roost. But brinkmanship will not help either India or the other countries, unless such tactics can lead to some thing which can be achieved in the near future, such as at a possible Hong Kong-II.

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