WTO: Which way will scales tilt?

A good deal of truth may not get revealed till the end of 2005, when the numbers get firm and the outcome more transparent. First a couple of general observations:

• The publicity overdrive by the Commerce Ministry declaring outright victory adds to confusion. Indians are simple but not gullible. If our victory is so overwhelming, it is slightly puzzling that Zoellick, the US negotiator, and Pascal Lamy, the EU negotiator, have also simultaneously declared victory in Washington and Brussels. We all know that benefits of trade have a multiplier effect, but the outcome of any negotiations cannot bring equal benefit to all. One is reminded of what Kissinger once said: ‘‘A good definition of an equitable settlement is one that will make all sides equally unhappy.’’ It would have helped if the Ministry would have shared with the country the positives with the negatives and our achievements within the given constraints. This Government can greatly profit from the Prime Minister’s own style, in which he takes the nation into confidence, moderates expectations and leaves one with the feeling that complex issues hardly lend themselves to glib answers.

• The engine of trade liberalisation was stalled for some time. We are still way behind the schedule accepted in Doha in 2001. The Geneva outcome restarted this engine. While this may not be a historical achievement, it is a significant small step in the global trade liberalisation efforts.

• India played an important role in the formation of a group of developing countries, known as G-20, which stalled the streamrolling of the basic interests of developed countries. The interests of developing countries vary significantly. India could not afford to get isolated and there were limits beyond which the mechanism of G-20 could not stall further progress.

• The recent Geneva talk was about a ‘Framework Agreement’. This means delineation of the basic principles of negotiation. Beyond this stage would be a Modalities Agreement, which would deal with micro details (the devil is always in the details) covering specific formulae, determination of tariff numbers, the sequencing of tariff cuts, options and choices. In this context, the most worrisome feature of the Geneva agreement is asymmetery in outcomes. The developed countries have even at the Framework stage itself locked in their key concerns like the expansion of the Blue Box, capping support at 5 per cent of the average total value of agricultural production during a historical period. This is huge. However, the many key concerns of developing countries have still been left in vague formulations. We have been left with platitudes while they have secured key quantitative numbers. From this perspective, the developed countries have jumped the ladder—secured at the Framework stage what should have been the outcome at the Modalities stage.

The Geneva outcome has three core components. Agricultural products, access for non-agricultural products and the so-called Singapore issues:

• In the agricultural sector, the basic problem of developing countries is that the huge subsidies given by the developed countries to their farmers make access for their farm products uncompetitive. So the basic issue is to improve access to their markets while retaining our domestic farm policies, given its implications for food security, poor farmers and consumer stability.

On these, the positive achievements include: The continuation of special and differential treatment for developing countries, access for Special and Sensitive products, continuation of state trading enterprises to preserve domestic consumer interest as well as ability to resort to a safeguard mechanism (modalities and details to be negotiated later) for sudden import surges. Equally positive is the acceptance to eliminate all forms of export subsidies, even though no final date, sequencing or modalities for determining its consistency to internal reform have been spelt out.

As against this, the negatives are quite sweeping: For the first time, there is acceptance to reduce ‘de minimus’ and making its present level of continuation only for ‘subsistence’ and ‘resource-poor farmers’. So it is still left into the future as to how effectively we would succeed in pleading our case to fall in the category of ‘subsistence’, and that our farmers are resource-poor’.

Then again, the ‘Blue Box’ has been accepted already, limiting it to 5 per cent of the ‘‘average total value of agricultural production through a historical period’’. That period would be established in negotiations. This is a major concession which can be debilitating for developing countries. Box shifting has been an old game played by developed countries. They will use it once again. Box fungibility has dangerous implications.

Non-trade concerns have for the first time entered the Green Box, giving flexibility to developed countries to expand on this concession even while they have not undertaken any commitment on reduction of their product specific support or accepted any time frame or path for elimination of export subsidies.

On market access, parameters have been left open on tariff bands and tariff caps—we did not succeed in securing acceptance of linear formulae with average and minimum cuts.

• On non-agriculture market access, it is non-linear tariff reduction formula on a line-by-line basis and a lot would depend on the dynamics of future negotiations. India has undertaken substantial unilateral reduction and should try to secure credit for its action and also ensure that the future trajectory is in consonance with our proposed domestic action.

• On Singapore issues, only trade facilitation has been included. We all know the advantages of customs modernisation and Electronic Data Processing for export promotion. The issue is not whether trade facilitation is good for us but whether we have secured or are likely to secure any benefit in return.

On the whole, the Geneva negotiations understandably represent a mixed outcome. Our compromises are significant while our gains remain somewhat intangible. On agriculture, there are many subsisting and serious concerns. Who can assert with confidence that the scales are tipped in our favours and much less the direction in which it would move over the coming 18 months? Basically, developed countries need attitudinal changes in accepting what Disraeli had asserted—that ‘‘protectionism is not a principle but an expedient’’.

We have a long and arduous task ahead. Our small negotiating team in Delhi and Geneva needs to be significantly strengthened based on what other countries have done in terms of numbers, expertise, diversity of skills and continuity of engagement. The US model of a USTR or an institutional mechanism elsewhere deserves consideration. Subsuming the entire gamut of functions from policy making to actual negotiations in a single entity of a ministry may be inadequate to meet contemporary challenges. John F Kennedy had advised that ‘‘Let us never negotiate out of fear but let us never fear to negotiate’’. Our negotiating expertise, capability and institutional support mechanism needs to be substantially restructured to meet the daunting challenges ahead.

Write to nksingh@expressindia.com