A strategy for Cancun

As we go into the ministerial meeting in Montreal and the Cancun negotiations, the strategy India must follow becomes an urgent concern. Eve...

As we go into the ministerial meeting in Montreal and the Cancun negotiations, the strategy India must follow becomes an urgent concern. Every major actor at the WTO has well-defined strategies based on work and discussion. If there is one in India, it is a closely guarded secret. In this column, many moons ago we discussed a report Ambassador Charlene Barshevsky of America had given to the US Senate and I had argued that India deserved a similarly detailed plan. At Doha, instead of a strategy we won ground by the sheer persistence and doggedness of the team and its minister.

We must have a stated broadbased position with detailed analysis of the national interest. Let us begin with what the others are saying. There are fairly contentious issues in the negotiation for India as the comments on the mandated India’s Trade Policy Review bring out. Thus on the 2002 Trade Policy Review, Canada “noted that many tariffs remained high, and hoped that high tariff and non-tariff barriers would not impede access to high quality and competitively priced imported goods for Indian consumers.” (WTO, Trade Policy review: India 2002, Geneva, WTO, 2002). Switzerland argued that “the rather large proportion of unbound tariff lines as well as the gap between bound and applied rates provided scope for uncertainty, and diminished the predictability needed by economic operators.” Even protectionist Japan “thought that India’s tariff was a bit too high.” The EU stated that “there was still a need to cut down the high number of rates and to simplify the complex tariff structure.” New Zealand ‘‘was concerned about the increase in the average MFN tariff from 35 per cent in 1997/98 to 41 per cent in 2001/02. New Zealand also had reservations about the extent of tariff escalation on agricultural forestry imports.” And again, “New Zealand looked forward to working with India in the relevant negotiations to address some of these issues.” The US “asked about India’s plan to simplify its tariff and excise structure, and to reduce rates, which were prohibitively high.” Even Norway wanted tariff simplification to “cover fish and fish products, and hoped it would do so at the lower levels.’’

That larger issues will not be allowed to rest emerges from the official WTO Discussant on India’s Trade Policy Review. Mary Whelan stated that “The Secretariat Report referred to a build up of grain stocks: she asked how India intended to address this issue.” Further, “New Zealand agreed with India that the need to eradicate hunger, and to ensure food security had created distortions in the economy, through higher support prices and financially and environmentally unsustainable input subsidies.”

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Meanwhile, the tradition in India is for the country to give unilateral trade concessions. The argument is that India can impose high tariffs and her trading partners would not stand in the way. India taxes agriculture anyway so why worry, since subsidies can be traded against the tax. These “experts” wish away the kind of terrain we face. The negative AMS (Aggregate Measurement of Support) argument is based on earlier World Bank studies and the numbers posted by India using 1988 as a base. No one worries about this anymore apart from the Delhi think tanks. The World Bank, to be fair, said eight years ago: “The estimated mild protection of agricultural price policies contrasts with earlier studies which indicated much higher levels of relative price discrimination and deserves an explanation. The present estimates take into account the fact that India, because of its large size cannot export infinite quantities of rice on the thin rice world market without affecting the world price. Ignoring this price-depressing (or large country) effect of Indian rice exports would significantly over-estimate the extent of price discrimination imposed on rice by Indian food policies. The present estimates also treat wheat as non-traded, recognising that under free trade its equilibrium domestic price would have remained within the import-export parity band for most years. Correcting for the large-country situation in rice, and the non-traded status of wheat, significantly lowers the price discrimination of Indian agriculture since rice and wheat alone account for about 30 per cent of the India agricultural production basket.”

The 1988 base AMS calculations are also up for change and the “Scheduled Total AMS commitments may be expressed in national currency, a foreign currency or a basket of currencies. In case a foreign currency or a basket of currencies is used and the final bound Total AMS in a Member’s Schedule is expressed in national currency (or another foreign currency) and a participant wants to avail itself of this option, the final bound Total AMS shall be converted using the average exchange rate(s) as reported by the IMF for the year at issue.” Therefore, both the unit of calculation and the reference year are up for grabs. Posturing and sloganeering will not be a substitute for hard work.