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Why
India should support a new trade-negotiating round
Published
on: Financial Express,
September 06, 2001,
By
Pradeep S Mehta & Pranav Kumar
CUTS
Centre for International Trade, Economics and Environment
The
reverse countdown to the fourth World Trade Organisation (WTO) Ministerial
Conference has begun without any agreement on the agenda. Even the European
Union and the United States, the world trading giants, have not been able to
overcome their major differences over the Agreement on Agriculture. Already a
sense of panic seems to be taking grip on the international trading community.
Before the summer break, Mike Moore, director-general of WTO, urged members
“to get real” on agreeing the agenda. A second failure to launch a global
trade round, he said, following the failure in Seattle in 1999, “would
certainly condemn us to a long period of irrelevance”.
Though India’s share in global trade is slightly over half-a-per cent, it has
emerged as an influential voice in the international trading community. What is
India’s latest stand vis-a-vis the agenda? “No” to a new round unless
implementation issues are resolved satisfactorily, and “No” to negotiations
on the so-called ‘new’ issues, i.e., competition, investment, trade
facilitation and government procurement. However, different shades of opinion
are becoming apparent among Cabinet members. The entire world is looking to
India as a leader of the developing world and a major potential force in future
global trade. India must realise that it is now time to take concrete steps
rather than engaging in set-piece rhetorical exchanges.
The WTO is a forum to bargain and negotiate. In this environment, principles
take a back seat to a realistic assessment of what is best for the country. Yet
India’s steadfast resistance over the two years since the Seattle Ministerial
has hardly softened, leaving no room for the give and take that trade talks
necessarily involve. This is hardly the realistic approach that a successful
trade negotiator requires. Indian policy-makers need to weigh up carefully the
potential gains and losses of this approach to key groups— consumers, farmers,
manufacturers etc. The opposition may sound better than it actually is, given
the alternative.
Some of the influential developing countries like South Africa and Egypt have
shifted camps from the no-round camp to yes-round camp. Some are crediting the
shift to arm-twisting by the US or EU, but it may also be the result of a
reassessment of their national interests.
One of the main reasons for opposing the new round is non-implementation of
Uruguay Round Agreements. The logic sounds fine: you should not give away more
until you get what you were promised. But what is our end objective? The
successful resolution of implementation issues. Progress outside the context of
a round of trade talks has been limited. Recently, the least developing
countries (LDCs) have won duty and quota-free access for an extended range of
products to the EU under the Everything But Arms (EBA) proposal, but three of
the most important items (rice, sugar and bananas) have been excluded.
The strategy of resisting a new trade round has yielded some results, too, at
least in terms of attracting attention. Robert Zoellick, the US Trade
Representative, probably would not have visited India had she been supporting
the new round. He has offered some concessions to India within the unilateral
Generalised System of Preferences (GSP) programme. Duty-free access to the US
market under GSP is to be restored on 42 products including carpets, jewellery
and leather. This decision by the US government is almost certainly intended to
convert India into a supporter of the new round. However, there are no
guarantees under this system—the privileges can be withdrawn as quickly as
they were granted.
Another reason behind the resistance to the new round was to stop the US and
others pushing labour standards onto the agenda.
However,
it looks increasingly likely that this highly contentious issue will not be
included in the talks. Developing countries have made a strong case against the
linkage at the WTO and dug their heels in.
India
needs to assess what there is to gain from holding its ground at this stage. Can
any more concessions be wrung from the developed countries? What kind of
pressure will India be able to exert if other influential countries are all in
support? In theory, the agreement of all the members of the WTO is needed to
start a new round and, even alone, India would be able to put on the brakes. In
practice, countries which see gains from trade liberalisation will find ways to
move forward, inside or outside the WTO. Isolation is not the issue; results
are. China, for example, was able to develop very successfully outside the WTO.
China stood apart when it served the national interest, now, it is willing to
accept the conditions for joining.
India needs to conduct the same clear-headed analysis with regard to the new
round. Indian policy-makers should also develop maximalist and minimalist
positions on all of the issues that might arise. Even if a new round is not
launched, mandated reviews of agriculture, Trade Related Intellectual Property
Rights, services etc. will have to go ahead. A more flexible approach would
allow negotiators to respond better to the situation as country coalitions shape
up at WTO. India should approach the Doha meeting as an opportunity. It has a
renewed strength in the international community. Perhaps it is for the first
time India’s voice is being given a significant weight in international
trading community. This will allow Indian negotiators to bring home real
benefits for the country if they are given the flexibility to engage in agenda
formulation and to engage actively in any subsequent negotiations, right from
the beginning.
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Winning
the battle, losing the war in the global trading arena
Published on: The Financial Express, 25
August, 2001
By
Pradeep S Mehta, Pranav Kumar
CUTS
Centre for International Trade, Economics and Environment
After 50 years of
patient progress and some hard negotiations, the international community has
achieved its objective of a rules-based multilateral trading system. The World
Trade Organisation (WTO) was established in the year 1995. But the question
remains, is it enough to ensure a free and fair trade regime? The answer is ‘No’.
To establish a
fairer and freer trade regime, countries need to adhere to certain basic
principles. Evidence shows that things are not moving as per the fundamental
requirements of the multilateral trading system. Even two of the biggest
champions of free trade: the United States and Japan are often unable to rise
above their narrow parochial interests. For example, Japanese restrictions on
Chinese farm products and US threats to protect the domestic steel industry are
a flagrant violation of the spirit of multilateralism.
These are only few
of the increasing number of trade battles in the recent past, which have both a
positive and negative impact on the trading system. Positive to show that there
is a rules-based system, but negative to indicate that there are problems
between the trading countries. Some of these are extraneous.
Growing trade disputes
Domestic political compulsions rather than the requirements of the multilateral
trading system are guiding the international trade policy of many member
nations. An ever-increasing number of trade disputes and frequent unilateral
trade sanctions are testimony to this fact. Apart from a few, like the
US-European Union banana dispute and the Chile-EU swordfish dispute, hardly any
dispute has been settled amicably. Though the latest news in the banana case is
that there are problems in that settlement also.
Moreover, in some
of the adjudicated cases, the country concerned has not implemented the WTO
rulings. This is what happened in the case of the shrimp-turtle dispute. The
panel report on the US’s implementation of WTO rulings in this case has been
delayed, reportedly due to serious disagreement between the three panelists. In
June, Japan slapped emergency curbs on Chinese exports in a bid to shore up
support from the farm lobby ahead of the national elections.
The demand for
import curbs in Japan is spreading fast to other domestic sectors as well. Japan’s
largest bicycle industry group, the Japan Bicycle Association, was seen lobbying
the Ministry of International Trade and Industry to impose emergency curbs on
bicycles imported from China. China retaliated by issuing new restrictions on
imports of Japanese automobiles.
US President George
W Bush, on the US steel industry’s plea for government relief, ordered the US
International Trade Commission (ITC) to conduct a thorough investigation into
the steel business under Section 201 of the 1974 trade law. The probe will
determine whether the problems faced by troubled American steelmakers are caused
by “unfair trade practices”. Those targeted include the steel industry of
India and the EU. The witch-hunt could lead to unilateral trade sanctions
against any steel exporter to the US. All this, in spite of the fact that the US
is one of the most vocal protagonists of trade liberalisation.
The US system of
sharing the spoils of anti-dumping and safeguard actions with the complaining
companies takes the cake. It is currently at the top of the agenda of the WTO’s
dispute settlement system. The EU and eight other countries: Australia, Brazil,
Chile, Indonesia, Japan, South Korea, Thailand and India have asked for a panel
to be set up.
Developing
countries’ role
Many developing countries have also started using several trade-distorting
measures of a different nature. For example, during the 1990s there was a
significant rise in anti-dumping cases initiated by developing countries like
India. In 1992-93, India initiated only two anti-dumping cases, but this number
went up to 26 in 2000-01. Between 1992 and 2000, India initiated 89 anti-dumping
cases, the highest by any country. Following India’s liberalisation of
consumer goods imports, many affected firms in the consumer goods sector are
howling for anti-dumping action. Their chorus has been strengthened by tall
promises made by politicians that they will be protected from cheaper imports.
Clearly, the loss will be the consumer’s and the economy’s.
These trade
measures are not only against the poor, but one poor country is doing it against
another. For example, Bangladesh imposed an import ban on Indian rice as it had
a bumper harvest. Even in the case of disputes for which compromise solutions
have been negotiated, the true beneficiaries are not producers but big
multinational marketing companies who are acting as intermediaries between
producers and consumers.
In the EU-US banana
dispute, which was settled recently, big marketing companies like Chiquita of
the US and Noboa of Ecuador were the major beneficiaries. Poor farmers of Latin
America and Africa were left out.
This trend is
portentuous and against the basic spirit of WTO. Its importance is increasingly
being undermined by the narrow intentions of many countries whose sectoral
lobbies are successful. If a country like Japan, which has a substantial trade
surplus, cannot adhere to the basics of the multilateral trading system, how can
poor countries be expected to resist the cries for protection at home?
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A
message on labour linkage for Mr Zoellick and Mr Maran
Published
on: The Financial Express, 9 August, 2001
Secretary
General
CUTS Centre for International Trade, Economics and Environment
It might surprise him to know this, but commerce minister
Murasoli Maran could be doing US Trade Representative Robert Zoellick a big
favour if he says a resounding “No Way” to the very mention of labour
standards in connection with the World Trade Organisation (WTO).
In doing so, Mr Maran would also be defending the fundamental national interest
of India as the country awaits the promised gains from integration into the
world trading system. India’s abundant skilled labour is the source of its
riches, a thought which India’s representatives should vigorously reiterate at
the upcoming negotiations.
Introducing a social clause in the WTO would open the floodgates for trade
measures against developing countries. One only needs to look at the strident
demands for the social clause by the US’s textile unions to understand that
the real motivations are not humanitarian. They are narrow and selfish.
But the members of the Bush Administration are free traders at heart who find
themselves up against these parochial demands of regions and sectors for
protectionism. Many Democrats in Congress and a handful of Republicans have
taken up the agenda of certain constituencies and have set the labour linkage as
the price for trade negotiating authority. But why should broad national
interest be held to ransom by lobbies?
Mr Zoellick and his colleagues have some powerful arguments for resisting the
labour linkage. One is the prevailing view among the world’s most prominent
international trade economists that the linkage is harmful. Well known
economists Jagdish Bhagwati and Jeffrey Sachs, among many others, see the
linkage as an impediment to the gains that free trade can bring.
Two, developing country academics and civil society are overwhelmingly against
it. Evidence of this can be found in the TWIN-SAL statement of 1999. In the run
up to the Seattle meeting, 103 people from all over the world signed on to the
Third World Intellectuals and NGOs Statement Against Linkage. Two years on,
experience has only fortified their arguments. How convincing are the ‘humanitarian’
arguments put forward by northern NGOs for the social clause in the light of
this?
Three, is that developing country governments will not accept the linkage at any
price. In the tug-of-war of WTO negotiations, there are some issues where
developing countries are willing to give ground. Labour linkage is not one of
them. If the US wants to restore the confidence of developing countries in the
multilateral trading system, it will have to be the one to show flexibility on
this issue.
It is in relation to this last point that Mr Maran can help. If he comes out
with a clear message that developing countries will not let a WTO Round go ahead
if linkage is on the agenda, then Mr Zoellick can take this message home with
him to Congress to buttress his case.
This outward opposition should not, at the same time, cloud over many other WTO
issues where the US and India have much scope to co-operate. Both have a clear
interest in getting the European Union (EU) to open up agricultural and reduce
their enormous farming subsidies. Both have an interest in blocking the
introduction of the unnecessary and unscientific environmental standards that
the EU is pushing for. On reducing industrial tariffs, the core business of the
WTO, both countries have much to give and much to gain.
India, then, should focus its resistance. Rather than saying ‘No’ to almost
everything, including the new Round itself, it should say ‘No’, pointedly
and selectively to linkages. Elsewhere, it can say a judicious ‘Maybe’.
After all, at this stage India is only committing to start talking about the
issues, certainly not to agreeing to whatever treaty may finally emerge, a
process which could take years, even decades. A country with 4,000 years of
history can certainly hold its own in drawn-out negotiations.
India could even try saying ‘Yes’ and laying its own proposals on the table.
One of these items on India’s proactive agenda could be freeing up workers’
ability to provide services in foreign countries. Movement of “natural persons”,
as this is known in the WTO jargon, was one of the methods of trading in
services identified in the General Agreement on Trade in Services (GATS), since
downplayed and forgotten. India has brought it back into the limelight with a
concrete proposal for liberalisation of the temporary movement of labour.
It is not clear at the moment which issues will be on the table for the Doha
Ministerial. The last meeting of the General Council before the WTO’s August
holiday forced a reality check revealed how wide the gaps between members’
positions still are on agriculture and environment? Where the EU stands exposed?
And on implementation and anti-dumping. India’s energies are much better spent
shaping this agenda and forging issue-based alliances with its trading partners.
If Mr Maran can strengthen Mr Zoellick for his return to the Capitol, then Mr
Zoellick can fortify Mr Maran to be active rather than reactive.
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Why
India should support a new round of negotiations
Published
on: The Economic Times, 6 August, 2001
Secretary
General
CUTS Centre for International Trade, Economics and Environment
WHEN Thiru Murasoli
Maran talks to Robert Zoellick this week, the best thing he can do is be
positive. He should say `Yes’ to a new round of trade talks at the WTO, not
because of hard sell by the US and EU in their door-to-door sales push for the
round in the world’s capitals, not because other key developing countries such
as Brazil, Mexico and South Africa, and even China, favour a new round, but
because it is the best thing for India to move forward the implementation
concerns in the current context.
No one is under any illusion that the bargaining by national delegations at the
WTO is as tough as any in Chandni Chowk and India needs to be ready to give as
well as to take. But this is not something it can do standing at the Red Fort.
It's not clear at the moment, what issues will be on the table for the November
Ministerial. Some of the most contentious issues are already there in the
'built-in' agenda, notably agriculture and implementation.
But without an agreement on a broader overall package, the arduous but
ultimately beneficial process of hammering out trade-offs cannot even begin.
Negotiators should never compromise key national interests.
As far as the US is concerned, not all issue areas are up for barter. On
anti-dumping and TRIPs, the US position might as well be set in stone. The
domestic corporate lobbies are too strong for the US administration to engage in
negotiations.
The US is also very unlikely to reduce its high tariffs on clothing and textiles
on which so many jobs depend. In the area of TRIPs due to all the noise on
public health, the US will not go hammer and tongs after countries, which are
failing in implementation.
In its turn, India should dig in its heels on linkages between trade and labour
standards. Such a linkage would undermine India's key advantage in international
trade, its plentiful labour force.
The protectionist motivations for the linkage are barely disguised by US unions
who are happy to flex their political muscle through Democrats in a finely
balanced Congress.
If India and other developing countries give in on this issue, they will be
abandoning millions of their own people for the sake of a few thousand jobs in
the southern United States.
In this resistance movement, governments have the support of some of the world's
most respected US-based trade economists: Jagdish Bhagwati, Jeffrey Sachs, T N
Srinivasan, Arvind Panagariya, and many others.
If any more proof of the legitimacy of that position is needed, it can be found
in the TWIN-SAL statement of 1999.
In the run up to Seattle, 103 people from all over the world signed on to the
Third World Intellectuals and NGOs Statement Against Linkage (TWIN-SAL). The
statement called for the Linkage between trade and labour standards to be
buried. Two years on, experience has only fortified their arguments.
Of course, Zoellick faces a precarious position at home on introducing labour
standards into the WTO framework. Most Democrats, and a number of Republicans,
have stated this as the price of their support for the President's fast track
(trade promotion) authority.
But a handful of Democrats do understand developing countries' objections. A
clear and reasoned rejection of the linkage by India will help strengthen
Zoellick's bargaining position when he returns home to face Congress.
The US and India share common ground in several areas. On agriculture, both
countries would like to see the EU reduce its enormous subsidies to farmers.
On tariffs, too, they both have an interest in seeing their trading partners
reduce their dirty tariffs. On environment too, both India and US share the same
concerns.
Many in the US are becoming as suspicious as India that rules would be another
form of protectionism.
Resistance may be called for on labour standards, but in other areas India
should be taking a positive approach. EU leaders have been liberal with their
rhetoric on making the new round of trade talks a 'Development Round'.
If that's the case, then let India turn its list of action areas into a
Development Agenda. It should, after all, be the developing countries that
define this 'development', that others are so happy to talk about.
A real Development Agenda would prioritise implementation, reform TRIPs and make
Special and Differential treatment and technical assistance operative realities.
It would also include a genuine approach to the movement of labour. If developed
countries are really committed to the multilateral trading system and getting
the developing countries on board, then accepting a Development Agenda is their
only option.
If this commitment is hollow, then let India's positive engagement reveal it for
what it is.
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