India’s
gains, losses at Hong Kong Ministerial
Looking at India’s interests, our negotiating team did
fairly well in the trade negotiations
Published:The Financial Express, January 16, 2006
By Pradeep S. Mehta
While doing a post-mortem of the WTO Hong Kong Ministerial,
what must be kept in mind is that the expectations were low and so the
outcomes are really modest. Countries like India, Brazil, South Africa,
etc., besides protecting their own interests, are also expected to speak
for a larger group of Southern countries. And it is often difficult to
harmonise the two interests, for the South is not as homogeneous a group
as the EU or the OECD.
India and Brazil had to deal with three major issues.
First, protect their own interests. Second, protect the interests of LDCs
and other developing countries and mediate between North and South. If
the roles are so diversified and negotiations so complex, it would be
a little unfair to expect our commerce minister, Kamal Nath, and Brazilian
chief negotiator, Celso Amorim, to score an ‘A’ in all three. While Nath
is being criticised for siding with developed countries on Annex C (Services),
Brazi-lians can question Amorim for failing to get EU to agree to 2010
as the end date for eliminating export subsidies.
Annex C of the Hong Kong declaration sets out new approaches
and timelines for negotiating services trade liberalisation. The main
fear of developing countries is that the new ‘plurilateral’ approach of
making requests and offers will ultimately replace the bilateral approach.
It also threatens to erode the existing flexibilities of the GATS.
What were India’s demands in Hong Kong? In the run-up
to the Ministerial, the government had a series of national consultations
on each of the core issues viz., agriculture, non-agricultural market
access and services. In agriculture, there was near-unanimity that India
should make every effort to protect its farmers, while in services, opinion
was in favour of being offensive in negotiations.
On industrial goods, though, there was no clear position
in terms of defensive or offensive interests. India had a very clearly
defined stand on the key elements of Nama negotiations. In agriculture,
India’s main demands were to get ‘special products’ and a ‘special safeguard
mechanism’ and also not to undertake any reduction commitments under market
access and domestic support.
As per the Declaration, developing countries have the
flexibility to self-designate an appropriate number of tariff lines as
special products on the grounds of food security, livelihood security
and rural development. Besides, they would be allowed to use the special
safeguard mechanism to stop imports if found to be harming farmers. As
for commitments, India would not be required to make any cuts in de minimis
support, as well as any overall cut in trade-distorting domestic support.
• Developing countries can use a special safeguard mechanism to help farmers
• The outcome on cotton, as demanded by LDCs, is quite disappointing
• And the LDCs’ package doesn’t give quota-free market access to all products
Looking at India’s interests, our negotiating team performed fairly well.
However, critics are right in saying that the outcome on cotton, a demand
of LDCs, is really disappointing. The LDCs’ package is also not very healthy.
Their main demand—of duty and quota-free market access for all products—
was not conceded to by the developed nations. On product coverage, the
accord speaks about market access for at least 97% products. This is an
escape clause, which will allow developed countries to continue to protect
‘sensitive products’ that are of export interest to LDCs, such as textiles
and clothing, rice, sugar and leather products.
As for Nama, WTO members found it difficult to build
consensus either on the ‘linear formula’ or the ‘Swiss formula.’ A consensus
has almost emerged that it will be a non-linear Swiss-type formula. The
ABI formula, sponsored by Argentina, Brazil and India also proposed a
Swiss-type, non-linear formula, with dual coefficients. This is what was
agreed in the Hong Kong Declaration. The value of coefficients has been
left for future negotiations. We will need to be careful while negotiating
coefficients to make sure that we do not have to make tariff cuts larger
than the rich. The real gain, particularly for India, came in the sectoral
initiative. Second, as demanded by India, the participation would be on
a non-mandatory basis.
Given the Ministerial’s modest outcome, our negotiators
should not be condemned. On the issue of cotton, duty and quota-free market
access for LDCs and other developmental package, the results are not upto
the desired level. In these, it is the rich who have to deliver. India
and Brazil did try to clinch a favourable deal for LDCs but could succeed
only partially.
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Pradeep
S Mehta: Competition Bill: still too many flaws
Published:The Business Standard, January 07, 2006
By Pradeep S. Mehta
From giving the proposed commission some adjudicatory
powers which are those of the Tribunal, to staffing it with ex-MRTPC
personnel, the list goes on.
On my request, Company Affairs Minister Prem Chand
Gupta asked his private secretary to show me the proposal for draft
amendments for the Competition Act, 2002. Rather than a “yes, minister”
response, the private secretary murmured that it is a secret document,
and hence “sorry, minister”. I could never see it then, but have been
able to obtain a copy now, when the same has been submitted to the Cabinet
for onward submission to Parliament in the Budget session. In this age
of “right to information”, the prime minister’s explicit directions
to expand transparency in all public dealings, and wider public consultation
to get the best policies in place, it is quite amusing that some in
the government wish to continue to do things in such a sinister fashion,
and for such an important law.
The new competition law, as a replacement of the archaic and inadequate
Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, was drafted
quite some time ago with wide public consultations. The concept Bill
that came out was good, but the two drafts that were presented in Parliament
were quite different due to some vested interests. Ultimately, it was
passed in Parliament in 2003. However, the same was challenged in the
Supreme Court because babus wanted to sit as judges, and the apex court
was terribly pissed off.
The proposal now is to split the competition authority into two; one
the Competition Commission as the regulator to be headed by an expert,
and the Competition Appellate Tribunal headed by a judge.
Alas, once again, the debate will swing on selecting retired bureaucrats
(read experts) and retired judges for the two bodies, because in both
cases the age limits are beyond 60 years. This is despite the government’s
assurance in Parliament that the body will not be a parking lot for
retirees. It won’t look at competencies, and to ensure that bureaucrats
find a place in both bodies, the proposed amendments have added “administration”
in the qualifying criterion.
The only little hope of getting some better people is that the amendments
propose a selection committee to be headed by a retired judge, when
earlier the committee was headed by a minister. One wonders why the
government did not take into account the proposal of the Raghavan Committee’s
concept Bill to have a collegium (comprising of Chief Justice of India
or nominee, finance minister, minister for company affairs, governor
of the Reserve Bank of India and the Cabinet secretary) as the selection
committee. The collegium was a high level selection committee, which
could not have been influenced as easily as the newly proposed committee.
Second, no procedure has been outlined on how candidates will be identified.
Other than the institution, the framework of the law has to be sound
for it to be effective. Unfortunately, there are many major flaws in
the Bill. The first one is that the Competition Commission of India
(CCI) will have regulatory powers, which include cease and desist, directions,
injunctions and minor monetary penalties. These are adjudicatory functions.
The Bill goes on to say that the appellate tribunal will be the adjudicatory
authority, and will have the right to award compensation, and hear appeals
against the CCI. Thus, the confusion which can emanate may lead to challenges,
and make the Commission a toothless tiger.
Second, it is proposed that the MRTP Commission gets a two-year life
after the new law comes into force, so as to deal with pending cases.
This was considered by the Raghavan Committee, which had stated that
all cases relating to unfair trade practices be transferred to the consumer
disputes redressal machinery, while cases relating to restrictive trade
practices and monopolistic practices be transferred to the new CCI.
This was also incorporated in the law. Apparently, this change appears
to have been made to suit the existing members at MRTPC, who were appointed
quite recently. Concomitantly, the Cabinet note proposes that all staff
of the MRTPC will be transferred to the CCI, which can add to further
confusion. Besides that, importing deadwood into the CCI will turn it
into MRTPC, mark-II, rather than a lean and mean body to work as a body
which will need to be totally distinctive of the old MRTPC.
The third major flaw is that the new Bill adds another definition for
preventing market access through unfair practices. There is no need
for the same, which can lead to further confusion on the overlap of
jurisdiction between the competition authority and consumer disputes
redressal agencies. The existing definition of unfair practices under
the clause on “abuse of dominance” is quite inclusive.
The fourth major flaw is the leniency provision, which had earlier read
as a special relief to the first party who spills the beans in a case
of collusion (for instance, cartels), and before the enquiry begins.
It is now proposed that all parties who wish to cooperate with an enquiry
can do so right until the time that the director general submits his
report to the CCI. This would open the doors for rampant corruption,
and defeat the very purpose of the leniency provision.
One of the most important drawbacks is not empowering the CCI to deal
with competition issues in the regulated sectors, such as telecom, electricity
and so on. In the best traditions of other countries, the competition
authority, having an economy-wide remit, has the powers to deal with
all behavioural issues, while the sectoral regulator deals with structural
issues in the regulated sector. An effort was made by the department
to do so, but that met with stiff resistance from regulated sector line
ministries, which is but natural. A compromise provision has now been
put in, which speaks about references to be made by the sectoral regulator
to the CCI, but that its opinion will not be binding. This creates a
disincentive to regulators to refer matters to the CCI. Another important
suggestion being made in policy circles is that the Competition Appellate
Tribunal become the common appellate authority for all regulators. That
can promote convergence of thought and action. This is a model followed
by some countries and merits serious consideration. It requires some
wisdom to deal with the issue of overlap, which can only be dealt with
by the prime minister.
Another crucial overlap issue is the absence of covering abuses due
to intellectual property rights, which have been left rather weak. The
TRIPs agreement in fact calls on countries to tighten this coverage.
Many competition laws of the world have such a provision, and we too
need to do so.
The seventh crucial drawback is that the proposal for regional benches
of the CCI will be dropped on the grounds that the CCI will not be an
adjudicatory body. For a huge country like India, the CCI can have regional
offices, rather than benches, such as the registrar of companies. Many
countries — both big and small — in the world have regional offices
of the competition authority. You can’t sit in Delhi and police the
markets of the country.
One only hopes that when the bill is placed in the parliament, lawmakers
will look into it carefully. We have waited for the new competition
law for long, and there is no harm in getting something, which is modern
and effective, and doesn’t go back to the apex court to decide.
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