A meeting of 35 trade ministers from important trading countries is scheduled for September 3 and 4, 2009, in New Delhi. The meeting has been called at the initiative of Government of India. This meeting is a prelude to the seventh Ministerial Conference in Geneva from November 30 to December 2, 2009, four years after its last conference in Hong Kong, China, in 2005. The focus of the forthcoming conference is “The WTO, the Multilateral Trading System and the Current Global Economic Environment”.
WTO: Promise v. Performance
World Trade Organisation (WTO) was formed with the promise that rule-based and transparent trade regime would enhance world trade, which would act as engine of growth on the one hand and alleviate poverty and generate employment on the other by rectifying the historic trade imbalances hitherto acting to the prejudice of the developing nations. Pseudo-estimates were given regarding the gains developing countries were to derive from the successful completion of the Uruguay Round leading to the formation of the WTO. It was assured that the developing countries would be the major gainer and would get major share in the pie of the addition of
$ 700 billion in the global GDP and their trade deficits too would diminish. Contrary to this, the trade deficits of developing countries have widened manifold. The trade deficit of India alone has widened from less than $ 5 billion to more than
$ 100 billion. Other developing countries have become even more vulnerable on this count. The sugar-coated assurances that freer trade would facilitate transfer of technology to the developing countries have proved to be misnomer and rather the developing countries are being denied access to technologies being developed by themselves, in the name of new patents regime.
Indeed, the implementation of the Uruguay Round had proved so catastrophic that no headway could be made thereafter in the subsequent six ministerial conferences from Singapore (1996) to Hong Kong (2005) and to this date. Poverty has worsened, farmers’ suicides are growing unabated, employment is on decline-quantitatively as well as qualitatively, with an uninterrupted wave of industrial closures and foreign takeovers.
The ‘lead’ being taken by India to resolve the present impasse for the conclusion of the Doha Round on the basis of July text would compel to further open up trade, which would lead to import surge of agricultural as well as non-agricultural products, eventually, destabilising both agriculture and industry.
Threat to Agriculture and Food Security
Agriculture being the means of subsistence for more than 60 crores of people in India, any further liberalisation of agri-imports would render vast majority of population vulnerable. A study of 102 countries conducted by the Food and Agriculture Organisation (FAO) has found that even with limited opening up import surges for many agriculture commodities have threatened the farm sector. Because the US and EU have been raising farm subsidies in the name of non-trade distorting green box subsidies which overweigh four times the trade distorting subsidies.
The removal of quantitative restrictions, limits on the types of domestic subsidies developing countries can provide to agriculture, restrictions on managing the food stocks, procurement and distribution and prohibition of export subsidies by WTO or Bretton Woods institutions have already deprived the developing countries of their legitimate sovereign rights to strengthen their agriculture sector, protect the farmers and safeguard the food security. So, further lowering of duties with ultimate zero tariffs on certain products would lead agriculture to complete disarray.
Special Products (SPs) and special safeguard mechanism being proposed, as protective tools for the developing countries, would hardly be able to safeguard our interests. SPs are agriculture products on which developing countries would be required to make lesser or no reductions on their maximum allowed customs (bound tariffs). As per December text, only 12 per cent products can be designated as SPs. But of this only 5 per cent of the SPs can be exempted from any tariff reductions, which translates into 35 tariff lines and thus, India can protect only about eight or nine crops as four tariff lines usually cover one crop. To the contrary, India has 15 agro-climatic zones with a diverse number of crops being grown in each region so we have to safeguard the interests of farmers in all regions who are involved in cultivating a wide number of crops and preserve their livelihood and national food security.
Special Safeguard Mechanism
Special Safeguard Mechanism (SSM) means extra duty, which could be imposed in the situation of surge in imports of any particular commodity. This should ideally be a tool for a member country to safeguard the local producers from unfair dumping which is indicated either by sudden surge in import volume or decline in prices. July text is the basis of talks in the forthcoming mini ministerial meeting diluting this right to impose SSM as surge in import is decided on the basis of average of the last three years’ imports of a particular commodity. Instead of focussing the discussion on genuinely safeguarding the interest of vulnerable farming sector, the discussion has now shifted to technicalities like whether there should be 10 per cent or 40 per cent increase in volume to trigger an SSM and how much a member country should be allowed to raise tariffs.
Non-Agricultural Market Access
Non-Agricultural Market Access (NAMA) deals with the industrial products, electronics, hand tools, toys, chemicals, fish and fish products and forest products. Proposals included in the text are extremely imbalanced and do not fulfil the “less than full reciprocity for developing countries” and special and differential treatment (SDT) principles.
If these proposals are accepted, the challenges for our micro, small and medium industries, which employ large number of people, would be very serious and uphill. Presently, the India’s average custom duties are around 11.5 per cent. If this text is accepted, India would have to keep the tariffs for many industrial products at around its current applied levels. In fact, India’s average tariff ceiling for its highest tariffs will have to come down to 18.8 per cent from 130 per cent. Tariff ceilings largely would move between 11 per cent and 16 per cent, thus leaving no space in the future to increase, even if need arises. The so-called flexibilities for developing countries are also linked to the amount of cuts they will make in NAMA overall.
The text also retains the “anti-concentration clause”, despite the protest of developing countries, which is designed to prevent developing countries from excluding an entire sector, from full formula tariff cuts. Even the controversial “sectoral approach”-wherein the participating member is expected to lower the tariffs in selected sectors to zero or very low levels-was supposed to be voluntary. However, US and other developed countries are insisting on making it mandatory for countries like China, India and Brazil, at least in few sectors.
In contrast, rich countries will commit to much lower reductions in their duties and do nothing to their non-tariff barriers.
India’s Gains in Doha at Stake
The unilateral play of fork and brute strength in the multilateral trade talks ever since the creation of WTO in 1995 was reversed by Murasoli Maran, the then Commerce Minister, in Doha ministerial conference held in 2001. At Doha, India had singularly resisted the pressure of the Euro-US combine and successfully obstructed the Singapore issues and also brought to focus the issue of unfair agri-subsidies by developed countries and issues related to public health. This ultimately led to the third world solidarity where almost 110 developing countries have now come together to resist the Euro-US pressure. Arun Jaitley, Minister of Commerce in NDA government, who led the Indian delegation at Cancun in 2003, had further strengthened the cause of the third world by effectively putting in place the groups like G20, G16, etc. But the gains made at Doha and Cancun are being reversed now by the recent undue haste being shown by the present UPA regime represented by Commerce Minister Anand Sharma. The strategy, which was evolved on the basis of national interest and also a progressive approach to work for a genuinely equitable multilateral trade regime, is now at stake. It seems, the present UPA government, instead of further consolidating on the gains made in Doha by the previous NDA regime, has actually started toeing the line scripted by US and EU again.