Debate on India’s Stand at Doha

This debate was appeared in ‘The Economic Times’ on 11th September 2001.
The issues of debate were,

Should India re-think its present position at the WTO?
How important are implementation issues?
Does India stand to lose out on the chance to influence proceedings if she sticks to her present stand?

Will India end up sacrificing its interests?

INDIA’S stance against the new round of WTO talks is seen by some as the righteous action of an independent nation. But the risk is that in defending its principles, India could end up sacrificing its interests.

And if the new round is launched at Doha, many will say that we buckled under US pressure, as they did when we invited the Pakistani dictator, General Pervez Musharraf, to India.

The multilateral trading system under the GATT and WTO has been shaped by rich countries, but these countries have failed to deliver on their commitments and the promised benefits to developing countries have not materialised.

Furthermore, India is one of the few developing countries with the size and influence to attract the attention of the world when it raises the flag. The prospect of new markets in the growing Indian middle-class is making the US and the EU much more sensitive to India’s trade concerns.

But, with a slightly more than half a per cent share of world trade, India is not so powerful that it can put trade liberalisation on hold single-handedly.

Even if we manage to stall the launch of a new round, the rich countries will pour their energies into bilateral and regional agreements. Regionalism will almost certainly be more damaging for India than multilateralism – it diverts trade.

More importantly, these deals are being used as templates to widen the scope for the inclusion on non-trade issues like labour and environmental clauses.

The recent agreement between Jordan and the US, whose trade is less than a decimal of a per cent, is testament to this. In international trade negotiations, other countries are driven by the single-minded pursuit of selfish interests.

India may want to highlight the fundamental injustice in the system, but the risks of taking this path are very real. In the realpolitik of international economic relations, India’s views are much more likely to get heard if we are on the negotiating table as deals are hammered out.

The EU, US and Japan are seasoned participants in multilateral negotiations. They have committed to an ‘ambitious’ new round and have already been trading rewards and concessions for the last few months.

Other developing countries are very unlikely to stand with India when targeted offers are put before them. Looking at past experience, we can see that with the right incentives, even the most vociferous objectors can succumb.

At the 1996 Singapore Ministerial, to take just one example, Malaysia agreed to discuss investment in exchange for an Information Technology Agreement (because of a big and growing IT industry). Similar deals are bound to be struck in the run up to Doha.

Progress on India’s key interest -– the implementation of existing agreements -– may also require negotiations, i.e., trade offs. In these circumstances, India has to be realistic rather than idealistic. If we are to see any progress in the areas that really matter to India, we must acknowledge the need for some reciprocity.

On the contrary, we would only be agreeing to start talking. These talks can be dragged out virtually indefinitely. Witness the performance of the WTO study groups on investment and competition, set up in 1997, which are yet to come up with any concrete proposals.

Arguments for India to participate in a new round are appreciated by many of India’s influential figures. Like me, they are not saying that India has to agree to anything at the WTO, just that she should be prepared to start talking.

This view has been expressed by T N Srinivasan, B K Zutshi, Anwarul Hoda, Jairam Ramesh, T N Ninan, Sanjaya Baru and other experts in a joint statement, with other noted economists like Arvind Panagariya and Jagdish Bhagwati writing on the same lines in newspapers.

Recently in the USA, the leader of the opposition, Sonia Gandhi, has supported such an approach, while even the finance minister Yashwant Sinha has advocated the same.

At a recent conference in New Delhi, our prime minister has showed maturity by not ruling out a new round, but stating that we are open to discussions. Nobody can doubt that these people have India’s interests in their hearts when they call for engagement at the WTO.

Pradeep S Mehta, Secretary General, CUTS, Jaipur

On India’s stand at Doha

THE ONGOING debate on the position India should take in the context of the forthcoming WTO Ministerial Conference to be held in Doha has now assumed a familiar picture.

Various interest groups are working overtime to force the negotiators on to the table which is likely to contain issues that India should not be discussing at this point in time.

Interestingly, the argument that is being put forth in defence of such pressures have been made in such a manner as to project India as a country that is averse to negotiations in the WTO.

India has been among the few countries which has believed in constant engagement. The real issue is whether or not India should agree to an enlargement of the WTO mandate and include new issues like investment, competition policy and government procurement, in the post-Doha negotiations.

Further enlargement of the WTO mandate now may not be in India’s best interests. A comprehensive round should be launched only when the key commitments made at the Uruguay Round have been fulfilled.

It is often forgotten that the developing countries had agreed to participate fully in the Uruguay Round negotiations when they were assured of substantial market access covering areas like textiles and agriculture.

While both these sectors were to be fully integrated in the rules based multilateral trading system, in other areas where developing countries had significant export interests, the barriers to market access in the form of high tariffs and non-tariff barriers, were to be reduced according to an agreed schedule.

However, in the past six years, many of these commitments made by the developed countries have been left unfulfilled. The integration of textile products has failed to meet the targets set by such margins that the eventual elimination of quota trade in textiles by 2005 appears to be a mirage.

Agriculture has also seen the continuation of the market distorting subsidies by the developed countries. As a result, the gains that the low cost producers of agricultural commodities in countries like India were promised during the Uruguay Round negotiations have not been realised.

While its producers have been unable to get any advantage in the global markets, India now finds that its domestic market is being threatened by cheap imports. Besides textiles and clothing and agriculture, in other areas of India’s export interest there are problems of tariff peaks and tariff escalations.

This quite clearly represents a case of discriminatory trade policies practiced by the developed countries. These appear more galling in view of the fact that countries like India have largely fulfilled the commitments that they had taken at the end of the Uruguay Round.

Industrial tariffs in most of the tariff lines for which India had made its offers have been below the bound levels for some time now. In other areas, including agriculture, where the government had decided to phase out the quantitative restrictions on imports over a longer period, the dispute raised by the United States forced their early removal.

The legal structure has also been brought in line with the commitments made by the country and this includes the contentious area of intellectual property rights. What is less appreciated is that most of the domestic laws governing intellectual property rights were made compatible to the Agreement on Trade Related Aspects of Intellectual Property Rights by December 1999.

It is in the context of the non-fulfilment of commitments by the developed countries that the move for an expansion of the WTO mandate needs to be understood.

The larger trading countries seem to be keen to use the new issues like investment, competition policy and government procurement, for extracting further concessions.

A treaty that is already tipped against the interests of the developing countries could thus become even more unbalanced if such trade-offs are pushed through at this juncture.

More than anyone else, it would be countries like India that stand to suffer from this outcome for it could erode the already depleting confidence in the multilateral trading system among the interest groups in these countries.

Biswajit Dhar, Senior Fellow, RIS, New Delhi

Multilateralism is no safeguard against bilateralism

STATEMENTS from various political quarters appear to suggest that India is trying to build a consensus amongst its people for engaging in a new round. The US wants a Punta del Este kind of negotiating mandate which can be changed along the way as in the case of the Uruguay Round.

The EU wants a “permissive and sufficiently open-ended and not restrictive mandate”. Therefore, even if the most limited of rounds is launched, new issues could be included along the way.

India’s position at Doha should be examined against the background of two unalterable facts. First, India’s share of world trade is less than 1 per cent, and in the WTO the political weight of the member depends on its trade weight.

Second, while Geneva slumbers, the battleground has shifted to capitals. With bilateral concessions on market access, aid packages and more technical assistance, it is likely that the resistance to the new round, led by Murasoli Maran, may melt away.

However, as a negotiating strategy given that India is not one of the demandeurs, it should not as yet yield its minimalist position. It’s the demandeurs who should put their minimalist positions on the negotiating table.

This is perhaps already happening as the EU is now talking about a limited and not a comprehensive round. According to the EU such a Round may include implementation concerns, agriculture, anti-dumping and environment. US’s proposals are far more ambitious, but far more ambiguous. Bush is unlikely to get the “fast track” to negotiate a broad new round.

Many members, besides India, feel that though Doha may yield a modest outcome, it could provide clear guidelines and time-lines for progress on some
of the more contentious implementation issues.

India’s maximalist position on implementation issues may be justified, as these issues have now become a necessary and important part of any agenda being developed for the Doha ministerial.

This is a change in the position of the major players who were earlier hesitant to reopen UR issues or felt that implementation concerns were purely of a procedural nature.

On agriculture, India’s interest in accessing export markets should be tempered with the poor health and safety conditions in this sector. Added to all this is a renewed emphasis on food safety issues, which may be much more complicated to challenge than existing subsidies.

Thus trade promotion activities in agriculture would have to essentially focus on niche markets. Delinking tariff concessions on organic from inorganic agriculture and demanding higher tariff concessions for organic agriculture may be useful.

On environment, issues of India’s interest, i.e. TRIPs and market access, appear to be mainstreamed. Other issues, i.e., the use of precautionary principle, eco-labelling and clarification of Article XX to accommodate trade measures for environmental purposes, does not find favour with the US, the Cairns Group and the other Quad members.

Thus negotiations on environment are likely to be political acknowledgements of its importance rather than rebalancing of rights and obligations. Any reference to the precautionary principle in the Ministerial Declaration or elsewhere should be carefully examined.

Similarly on anti-dumping there are issues of commonality between Japan, EU and India and the eventual package is likely to include India’s interests. The US is however unlikely to agree to reopen the anti-dumping agreement.

In conclusion, an important question is whether India would lose out if the multilateral system is replaced by regional and bilateral trade deals and agreements. Multilateralism is no safeguard against bilateralism or regionalism.

The “reality check” meeting of the WTO general council at the end of July saw India’s concerns endorsed by a broad range of WTO’s membership, such as the LMG, the African and the Caribbean group. Stripped of the diplomatese, what is clear from the Mexico Ministerial meet of 16 ministers is that the membership of the WTO is far from a consensus on the specific items of the agenda for the Doha Ministerial.

It is also clear that India may already be shaping the agenda for future deliberations at the WTO with or without a new Round, and despite its negligible trade weight.

Veena Jha, Consultant, UNDP

D–217, Bhaskar Marg, Bani Park,
Jaipur 302 016, India,
Ph: +91(0)141-228 2821
Fax: 91.141.2282485

Related Images: