The road after Nairobi ministerial

The Hindu BusinessLine, January 07, 2016

By Pradeep S Mehta

Much has been written and said about the Nairobi meeting of the WTO criticising India’s trade and industry minister, Nirmala Sitharaman. She could not have done better than what she did for our poor farmers.

We all knew very well that the rich had already expressed their desire to shut down the excruciating and inconclusive 14-year long Doha Round much before landing in Nairobi, and they succeeded despite objections by many poor countries.

That said, let us focus on what we should do now both at the domestic level and in the international arena so that we can take stock and strategise for the future.

Bilaterals and regional trade agreements are replacing the multilateral space, which is why the US and the EU could not be bothered with the Doha Round. And if the poor persisted, then the Nairobi ministerial would have collapsed, as at Cancun in 2003.

Times have changed
The Cancun ministerial collapsed when the Africa group walked out of the green room on Singapore issues: investment, competition, transparency in government procurement and trade facilitation.

Farm subsidies still remain on the WTO’s agenda but the Nairobi ministerial is ambiguous on this, and one wonders whether they will be addressed at all.

Of the four Singapore issues, trade facilitation was retained and wrapped up at the Bali ministerial in 2013. The other three issues, along with a few others, will now be resurrected in Geneva.

This is a fallout of the Nairobi ministerial with the caveat that all members have to agree. My guess is that the rich will push it through a plurilateral approach — seeking a negotiating agenda with willing members.

By the way, these issues are already covered in the mega regionals, such as the Trans-Pacific Partnership (TPP), which were orchestrated by the US and cover a majority of global trade. We are also engaged in these issues in the RTAs that we are negotiating.

Since 2001, things have changed hugely. We are successfully wooing foreign investment and also investing abroad, so why fear an investment treaty? In fact, it may help us, and is better than negotiating several bilateral treaties.

We also have a good competition law regime in our country. We have joined the WTO’s plurilateral Government Procurement Agreement (GPA) as an observer, with the intent to join it. This will enable our firms to bid in public procurement contracts abroad; they cannot do so because we are not party to the GPA.

Foreign suppliers are already bidding and securing contracts in India. We are strongly promoting procurement from abroad coupled with or without investment in the sensitive defence sector, so where’s the fear? GPA members maintain negotiated carve outs, which we will also be able to do. Our own public procurement law is on the anvil.

Negotiating the right way

Therefore, at the international level, India should engage in such deals when they are foisted on the agenda. Crucially, joining them at the inception will allow us to influence the negotiations.

It will also send a signal that India, in spite of the Nairobi outcomes, is a serious international economic player with ambitions to become one of the largest economies in the world sooner than later. In the words of Arun Jaitley, in a signed article: “Achieving inclusive growth will provide the basis for India to engage internationally. The year 2015 ended with two major efforts at international/multilateral cooperation: the COP (Conference of Parties) 21 climate change conference in Paris and the World Trade Organisation (WTO) negotiations to conclude the Doha Development Agenda in Nairobi. India was a constructive player in both efforts, not least because we had so much at stake.”

At the domestic level, we need to do a stocktaking of our strengths and weaknesses sector by sector and arrive at a sound strategy. Simultaneously, we need to study the TPP chapter by chapter to see how they sit with the proposed Regional Comprehensive Economic Partnership (RCEP) agreement of which India and China are members. A news report says that India and China will do the study together. Seven countries are common to RCEP and TPP, so willy-nilly, the standards of TPP will creep into the RCEP, gradually.

Many angles

India’s future agenda on trade and competitiveness should be guided by a multipronged strategy. First, we should raise our level of ambitions while negotiating trade and investment deals.

Various studies have shown that trade liberalisation helps the economy to grow. Other than swiftly concluding the negotiations with the EU, the European Free Trade Association (EFTA) and Australia, and at a level of comfort to both parties, we should emphasise swift conclusion of RCEP.

Unless, we close this deal quickly, some critical members of RCEP will get attracted to TPP and the geo-economic importance of RCEP will diminish. Given its rising clout, China may too join TPP. If that happens, then US will find it easy to attract other Eastern and South East Asian countries to join up, thus leaving India out in the wilderness.

We need to speed up our efforts in reducing the costs of doing business through a carrot and stick approach. Our subsidy system in industry and agriculture which can be impugned at the WTO needs to be reformed.

We have launched direct benefit transfers in many of our welfare schemes and should do the same in our production systems.

Then we need to send signals across all branches of the government at Centre and States so that we can harness ourselves to deal with the international agenda in a ‘whole of government’ approach, and in all trade deals.

In conclusion, our international trade policy cannot be defensive, but needs to be proactive.

The writer is the secretary general of CUTS International.

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