Right to Protest: At What Cost?

Published:  The Hindu Business Line, December 29, 2003

 By Pradeep S Mehta &
Nitya Nanda

TWO recent court judgments that relate to the right to protest have resulted in a raging public debate in the country. On September 29, the Calcutta High Court banned rallies and processions in the city during weekdays between 8 a.m. and 8 p.m.

In another judgment in August, the Supreme Court ruled that government employees had no fundamental, legal, moral or equitable rights to go on strikes. Both judgments are under review. On an appeal filed by the West Bengal Government, the Calcutta High Court stayed its earlier order on ban on rallies and processions until further direction, while the Supreme Court decided to reconsider its judgment of banning strikes by government employees.

Predictably, while the average citizen has welcomed the judgments, politicians and political parties, by and large, are not comfortable with them. On the issue of banning strikes by government employees, the Bharatiya Janata Party (BJP), which leads the ruling NDA at the Centre, has supported the apex court verdict.

Admittedly, in a democracy, a total ban on rallies and processions may not be a solution. After all, it is a form of protest that is practised even in many developed countries such as the US and the UK. Moreover, it is not only the political outfits that organise rallies and processions, but non-political groups as well. Indeed, many religious as well as marriage processions, and such other events organised by private individuals also cause inconvenience to the public. Many such rallies and processions are part of India's cultural traditions. But in cities they cause much disturbance. Indians must change their attitude towards such processions, as they may not be in consonance with the standards of city living.

Kolkata has received the dubious distinction of being termed "city of processions." The Right to Protest or the Right to Freedom of Expression has become a public interest issue. There are instances when victims of violence could not reach the hospital in time. Undoubtedly, we have gone too far with our sense of rights but ignored responsibilities, thus forcing the High Court to be so restrictive.

The question is should such processions be banned? The people of Kolkata are fed up with rallies and processions and, hence, may be happy with the court order. However, they may also not want it. After all, rallies, processions and road-blockades are sometimes organised spontaneously in response to some outrageous event.

Thus, an outright ban may not be the best solution. People may even ignore such bans. One may recall that such rallies were banned in China and the enforcement of the ban led to the infamous Tiananmen Square massacre in 1989. Ironically, some of the political groups that oppose the Calcutta High Court order failed to condemn the Tiananmen Square incident. Instead of imposing a total ban, a proper regulatory mechanism should be evolved so that such rallies and processions do not disrupt public life.

The ban on strike by government employees is another complex issue. Nevertheless, the issue has not been understood many in its proper perspective. Many trade union leaders, unsurprisingly, observed that this would lead to a totalitarian regime. However, it must be noted that the Supreme Court judgment pertains to government employees only. It does not relate to workers in general who are covered by the Industrial Disputes Act and have a right to strike.

Government employees, compared to the average working standards in the country, are actually a pampered lot. Their record of accountability and responsibility, in people's perception, are also not very high. One does not hear of action against government employees on the ground of non-performance. Moreover, they are employed not by profit-seeking and exploitative businessmen but by democratically elected governments. If governments are not able to do justice to their own employees, then one may very well argue that they cannot do justice to the people. Moreover, they have a number of channels for redressing their grievances.

However, sometimes they go on a strike even for petty reasons, putting public interest at stake. They forget that a strike should be resorted to only as the last option when all other available channels are exhausted.

The Supreme Court observation is, however, not tantamount to imposing a total ban on strike. It has just interpreted the existing legal provisions. Denial of the right to strike as a fundamental right does not necessarily mean that they cannot go on strike. However, it allows the governments to take penal action against the striking employees. One may, of course, argue that the government should not take harsh actions, such as dismissal, for going on strike. The government decision will, however, be challenged in a court.

Both the issues need to be debated widely before coming to any conclusion, as they are not simply legal or judicial issues. It is also important to raise awareness among all the stakeholders on these issues. Government employees must recognise that their job is to serve the people who pay for their salaries. People at large also must keep in mind that their right to protest or celebrate through rallies and processions should not disrupt public life.

---

We Owe It To Maran For Success At Cancun

Published:  The Financial Express, November 25, 2003
By Pradeep S Mehta 

“WTO is a necessary evil,” said Murasoli Maran as the commerce minister, who had acquired considerable skills on the complexity of the World Trade Organisation (WTO). Certainly, he was one politician, who had begun to understand the ins and outs of the WTO system, though not all would agree with his approach to this ‘evil’ body. “It is ironic that Maran, among the most well-read, competent and reforms-friendly of politicians should be talking like this,” said Jairam Ramesh, economic commentator, “If the WTO is an evil, how has India managed to win some trade disputes against the US and Europe even as it has lost some others?”.  

Maran certainly held strong opinions. The attitude was displayed best in the run-up to and at the Doha ministerial meeting of the WTO. He did not surprise any of us by playing in the typical Indian style of opposing everything, and when the going got tough, surrender to the larger body of world opinion. Apparently, he was guided by what he had to play before a home audience. Besides, according to him, he bought time on the controversial Singapore issues. Indeed that turned out to be true if one looks at what happened at Cancun, earning encomiums from our current commerce minister Arun Jaitley.

Maran wetted his beak when attending the third ill-fated meeting of the WTO at Seattle in November/December, 2000. Initially, he was being treated by the bureaucrats as a green minister, for he had taken over as commerce minister just a few weeks before the meet, in October. At the stormy Seattle meet, after the first two days, he seized charge of the process by putting the de facto head of the Indian delegation to his station. From that day, as the commerce minister, he has been in charge of whatever positions that we have developed at the WTO. He was one minister, who had his own mind and unless convinced, did not get swayed by advice.

He was well informed as our commerce minister, and would have taken on an increasingly one-sided agenda being pushed by some rich countries. He was surely missed at the ill-fated 5th ministerial conference held at Cancun in September, 2003. The whole multilateral trading system is so complex that it takes some time to study and develop skills to be able to comprehend even the ABC. But Maran was deft, because he worked hard and studied thoroughly. He often sought our reports and papers regularly, and even debated some of their contents. After the Doha ministerial meeting, when the US went tangent on a protectionist agenda: steel tariffs and increasing farm subsidies, he asked me to write about it.

The Doha meeting saw him in full bloom. He single handedly blocked the adoption of the agenda, and forced the meeting to extend by one day. US trade negotiator Robert Zoellick was hoping to tire the sick minister, but Maran disappointed him by staying awake the whole night of the penultimate day. In hindsight, his action was right, though many, including the Financial Times criticised him.

Before the Doha meeting, what surprised many of his detractors was his single minded pursuit of opposing the launch of a new round. And linking it to resolution of the existing implementation problems. He did not succeed in stopping the launch, but returned as a hero. Because, there was a text on resolving the implementation issues, diluting the TRIPs etc.

In fact, even during the meetings of the advisory committee, of which I am a member, he heard varying views on the issue of the new round. But stood his ground.

So much about trade. If one looks at his performance as the industries minister, it is quite different. He has been gung-ho on foreign direct investment in spite of the Swadeshi lobby. He has done extremely well, in spite of all odds. Though there has been a downturn in the world economy and FDI flows plunging even in the USA, flows into India went up a whopping 68 per cent in 2001-02. “On the ratio of FDI to GDP, we have come quite close to China,” said a beaming Maran to me when I queried him about the improving situation. “This is without considering the round tripping which inflates the Chinese inflows.” Alas, that smiling face is no more.

---

Doha Round: Moving A Mountain  

Published:  The Financial Express, November 24, 2003
By Pradeep S Mehta

We will miss your delicious lunches”, said K M Chandrasekhar, the Indian ambassador to the World Trade Organisation, to the Japanese trade ministry’s director general, Nobuo Tanaka. He was not referring to a ‘free lunch’ but to the fact that Tanaka had threatened that Japan would resign from the WTO and leave Geneva. The reason: Japan’s insistence on negotiations on investment policy at the WTO under the impasse-ridden Doha Round. 

This conversation took place on the sidelines of a high-level seminar organised at Geneva in the first week of November on how to move the Doha agenda. The sentiment reflected the net outcome of the seminar — and the bleak scenario at Geneva — that countries are not very serious about moving the Doha Round forward.

Chandrasekhar was being humorous, but Tanaka sounded serious. His colleagues and the Korean ambassador to the WTO, Eui-yong Chung, were also equally determined. One can understand Japan’s demand — they want a handle on China where a large amount of Japanese foreign direct investment is flowing. They also do not have any bilateral treaty to govern investments.

Investment was one of the causes of the failure of the September Cancun ministerial. It was one of the four Singapore issues, along with competition policy, trade facilitation and transparency in government procurement. Many countries were opposed to investment, in particular, and all Singapore issues, in general. The Africans walked out of the green room in opposition to all Singapore issues. On the other hand, the European Union was ready to withdraw investment and competition, but wanted negotiations on transparency and trade facilitation. It was, however, not clear whether both or just one issue could have been agreed to by all parties. It is another story that the meeting actually collapsed due to agriculture, as neither the United States nor the European Union were prepared to do more than what they offered on agriculture just before the Cancun meet.

That was not enough, which led to the creation of a formidable developing country alliance with Brazil, China, India and South Africa in the lead. However, the Mexican chair, Derbez, called off the meeting after the failure of the green room on Singapore issues. He did not go that extra mile in calling for the green room on agriculture. That’s an issue which will continue to haunt historians.

Be that as it may, it is surprising that European business has not been a demandeur for all Singapore issues. Even at the Geneva seminar, European business representatives said that they would be happy if negotiations were launched only on trade facilitation. That can certainly help move the agenda forward if, simultaneously, some steam can be obtained on agriculture. However, EU officials at the seminar did not wish to reveal their cards as clearly as their business did. They stated that they would be flexible only if other countries showed greater flexibility. In India’s context, this means that she has to reduce her agriculture tariffs more than what she would care to.

On the whole, the EU does not show any hurry to move the Doha agenda, as its trade supremo, Pascal Lamy, is very upset at the collapse of the Cancun meeting. The November 7 meeting of member states’ trade officials within the EU also could not arrive at any conclusions. On the other hand, the US has shown some willingness to move on the Doha agenda after such a call was made at a recent APEC summit. The problem with that is that the summit has called for ‘building’ upon the Derbez text of September 13. That draft was not acceptable to many, and thus they feel that it cannot be a ‘starting’ point.

Clearly, the situation is in a flux. The European Union continues to be quiet. One hopes that they will give some indication after an informal meeting of their trade ministers on December 2. As it stands today, they are testing the waters to see whether plurilateral approaches to competition and investment could fly, or whether negotiations can be launched on trade facilitation and perhaps transparency in procurement. Many are opposed to either the plurilateral approach or even the two less onerous Singapore issues. Renato Ruggiero, the former WTO director general, in fact, made a few good suggestions at the meeting to get out of the logjam on a long-term basis: First, that the ministerial process should be de-dramatised, ie, a ministerial should be held every six months with a narrow agenda, without engaging in any major institutional changes. Second, to expand the role of the director general, with powers to move on the agenda rather than leave everything to members, especially when there is an impasse. Third, to establish a group of eminent persons who can meet outside the rigid boundaries of the WTO system and build consensus on contentious issues.

Criticising the approach of the US and EU in pursuing regionals, Ruggiero made a smart suggestion that there should be a standstill on new bilateral and regional trade treaties till the Doha Round is over. And that the Committee on regional trade agreements should be given a strong mandate to examine the existing treaties and how compatible they are with the WTO’s fundamental principles. Many pundits have already criticised RTAs as stumbling blocks rather than building blocks.

Among other eminent persons speaking at the seminar, former Mexican president Ernesto Zedillo, who now heads the centre on globalisation and development at Yale University, stood out with some of his wise remarks. Responding to a participant’s suggestion he felt that the agenda can move forward only if heads of governments recognise that it is an issue which requires attention. He felt that neither senior officials nor trade ministers can move the Doha round forward, as much has to be done and they will not be in a position to make the desirable commitments. For example, agriculture subsidies in the rich countries can only be addressed if George Bush and Jacques Chirac are ready to talk about it.

Zedillo suggested that developing countries should file complaints on the agriculture subsidies at the WTO once the peace clause is over at the end of the year. That could be a sureshot way to move the two trading giants to first, start lowering their farm subsidies, and second, to move the Doha agenda forward.

---

A head for Competition Commission

Published:  The Hindu Business Line, November 20, 2003

 By Pradeep S Mehta 
Nitya Nanda

As the Competition Commission's chief task is to decide whether a particular trade practice is harmful for the market, the economy or consumers, the top slot would require the expertise of an economist. If the right persons are not appointed at its formative stage, a useful opportunity will be lost.

THE recent observation by the Supreme Court on the issue of the appointment of the chairman for the soon-to-be-established Competition Commission of India has triggered a debate of a strange, and probably unique, kind. On the face of it, it appears to be a turf war between the Judiciary and the Executive rather than what the qualifications for the head should be.

What is clear is that in India, where market distortions are galore, the Competition Commission's head will need to be a professional who can meet the challenges of helping the economy grow by following a rigorous and vigorous agenda.

Competition policy is a regulatory function and not a judicial one. If one looks at competition panels worldwide, most are headed by people with either legal or economic/academic background. Putting a retired bureaucrat or a judge in charge may be the norm. One, of course, would find exception in countries such as Italy, where the competition authority has been headed by a former Prime Minister, thus raising the profile of the agency.

If one looks at the most successful and highly-rated competition regulators around the globe, they are, and have been, led by young and dynamic persons.

For example, Mr Allan Fels, who just retired as chairman of the Australian Competition and Consumer Commission, is an economist who blazed a trail of market reforms for the last decade or so. His former colleague and vice-chairman, Prof Allan Asher, was a lawyer with 10 years as a consumer activist. Prof Asher's successor, Prof Louise Sylvan, again an economist, has headed the Australian Consumers Association.

In Brazil, the competition authority — CADE — was headed by an economist in his mid-forties — Prof Gesner Oliviera who reverted to academia, after completing two terms as the CADE Chairman. Prof Olivierahas been succeeded by another mid-career economist.

In South Africa, the Competition Commissioner, Mr Menzi Similane, is a lawyer in his early forties. The Competition Tribunal chief, Mr David Lewis, is, however, a mid-career economist. It is interesting to note that in South Africa, the Competition Commission, which investigates cases and does not have adjudicative power, is headed by a lawyer, while the Competition Tribunal that actually adjudicates the cases is headed by an economist.

The South African law is, perhaps, the best model that India could have followed. As in India, the final arbiter is the South African apex court though it has a specialised Bench.

In Peru, the INDECOPI, that regulates intellectual property, competition policy, consumer protection, market access, anti-dumping, bankruptcy and technical standards and is a model of a integrated regulatory body in a developing country context, has been headed by a dynamic and young Ms Beatriz Boza, an accomplished economist.

Prof Mario Monti, the powerful Competition Commissioner of the European Union, is also an economist. One can find several such examples elsewhere too, including Canada and the US which have the longest experience in competition law and policy.

Not only going by the experience worldwide, even common sense suggests that to be successful, such authorities need to be dynamic and proactive and free from government interference. If one goes by the experience of Monopolies and Restrictive Trade Practices Commission (MRTPC), the present avatar of the proposed Competition Commission, it has always been headed by a retired judge.

The MRTPC became another court. dogged by procedural delays where a case could take several years to be decided. Just as an example, if one looks at the annual report of the MRTP Commission, one can see the real position.

Rarely can one find that a retired person has been able to provide leadership to such an organisation. If at all such a person has been proactive, more often he has become super-zealous rather than providing balanced leadership. Naturally, many consumer groups are worried that even the new avatar of the MRTPC will also be ineffective if manned by retired bureaucrats/judges.

Similarly, the fear has also been expressed by the corporate world that retired bureaucrats and judges might bring with them the hangover of a command-and-control regime.

An inefficient Competition Commission will cost consumers, as it will not be able to check anti-competitive practices. Delayed decisions of the Commission will also cost business dearly as it will bring uncertainty and firms will not be able to take important strategic decisions.

Despite its legal status as a quasi-judicial body, the Commission is not going to be another court but an important institution for economic governance. Thus, like a retired bureaucrat, putting a retired judge at the head of the Commission can send wrong signals. It might also bring in the so-called court culture to the Commission.

The real issue, however, is not whether we need a bureaucrat or a judge but the kind of persons to man the 10-member Commission who understand the issues and can deliver.

Imagine a situation where it has to be decided whether some food or drinks manufactured by a company is safe enough and whether it should be allowed to be sold in the market. It involves a judicial function which means a decision has to be made whether something should be allowed or not.

Obviously, only a food scientist can take the right decision. Similarly, the job of the Competition Commission would be to decide whether a particular trade practice adopted by a company or a group is harmful for the market/economy or consumers. Admittedly, one would require the expertise of an economist.

In developed countries, as mentioned before, such bodies are headed either by an economist or a lawyer. But these countries have a long tradition of competition law enforcement and, hence, many lawyers have adequate expertise in economic issues as well. In developing countries, however, such inter-disciplinary training is not yet available. Hence, it would be better to have an economist head such bodies.

A selection procedure for the head of the Competition Commission that is not transparent would undermine the credibility of the new organisation which will be difficult to regain.

On the other hand, if the right kind of persons are not appointed at its formative stage, a useful opportunity will be lost.

After all, forming and running an efficient organisation is much easier, but turning around an inefficient organisation is very difficult, if not impossible!

That was precisely why a new law was adopted, rather than tinkering with the old MRTP Act. But a new law will need a new approach.

---

WTO Negotiations — Time to Give and Take 

Published:  The Hindu Business Line, November 18, 2003
 By Pradeep S Mehta

International negotiations are a matter of give and take. If one has to become advantageous in six things, one will need to give in on at least two things.

THE Commerce Minister, Mr Arun Jaitley, has arrived as a skilled and thoughtful communicator. Late October at a seminar that featured a post-Cancun analysis speech by him, Mr Jaitley exhorted the country that future trade negotiations are going to be tough and one will have to be ready to make some concessions. Breaking all traditions, some weeks ago, he also wrote a long article in the press on what happened at Cancun and what lies ahead.

It is rarely that a Minister dealing with international trade is so clear and open. Overall, the public discourse will help create a better understanding in India and elsewhere. Also, the controversy surrounding international trade and globalisation will benefit from more transparency.

It is not only the WTO but also the recent offensive by India to enter into bilaterals and regional free trade agreements that came in for debate at the seminar.

This is where the media have to be better informed rather than highlight some stray protest, cautioned Mr Jaitley. This then becomes a sort of mantra of a particular trade deal as being bad. The much older Indo-Sri Lanka FTA had come under attack by the tea, spices and garments lobbies, but it has not affected India's industry.

What is worth noting is that except a few newspapers, none reported this crucial aspect of Mr Jaitley's speech. What most newspapers carried was India's rejection of the September 13 Draft Ministerial Declaration as a basis of taking forward the negotiations at Geneva. In fact, it was this draft which had caused the most heartburn and, thus, turned away countries from reaching any deal. The draft did not capture the feelings of members on both agriculture and Singapore issues, while belittling the issue of cotton subsidies ("eat cakes, if they cannot get bread!"). The last clearly hurt not only the small West African countries, but also the whole continent.

The South African Trade Minister, Mr Alec Erwin, writing in the Financial Times (September 29) criticised the process adopted by the Mexican chair saying that, "On the afternoon of day four (September 13) of the five-day ministerial meeting, the Chairman released the second draft agreement. Developing countries criticised it, sometimes passionately, as an unacceptable basis for negotiations. This was not a political or polemical stance; the balance of the draft was wrong... On cotton, the draft called on West African farmers — whose livelihoods are being destroyed by the effect of the US and the EU subsidies — to consider other economic options, but did not commit the US or the EU to remove subsidies themselves. African countries were appalled".

Mr Jaitley, writing in the Financial Express (October 9) buttressed the issue: "A high degree of distortion prevails in the agricultural sector, with heavy subsidies being given in certain developed countries to their farmers. This not only limits access into markets in these countries, but also prevents fair competition in third country markets. In countries like India, with a huge rural population, entirely dependent on agriculture and a large proportion of them below or close to the poverty line, a small disruption in the market could bring down prices sharply, leading to fall in incomes and to actual starvation and widespread misery."

Development was the buzzword at Doha, and that seems to have been lost somewhere. Cancun reminded us of this, as noted by many ministers and observers. "With a political substance without precedent, a group of countries with a remarkable negotiating capacity and a solid technical preparation has arrived and shown the need to focus on "development" of the great majority of the WTO members. This event is systemic and from now on will have an impact on the negotiating dynamics of the organisation," wrote the Argentinean Foreign Affairs Minister, Mr Rafael Biesla, in El Paes (October 14), one of Spain's leading newspapers. "Cancun has made a change in the balance of the powers within the multilateral system evident".

Another crucial point was made by Mr Jaitley, which did not was reported by the press. He warned that whatever is written needs to be done carefully, because that puts our negotiators under great pressure.

In international negotiations, one really does not know which way the road will turn. Therefore, opinions are often based on experience and perceptions, on which even experts differ.

The most important point made by Mr Jaitley is that international negotiations are a matter of give and take. If one has to become advantageous in six things, one will need to give in at least two things.

That message seems to have got around pretty well, and will, thus, make the lives of Indian negotiators easier — as and when negotiations are re-launched at Geneva. And that is what we want.

---

Don't Take It Out On The Roads 

Published:  The Hindu Business Line, November 07, 2003

 By Pradeep S Mehta 

JAIPUR'S image of a city of non-belligerent road-users was dented recently. A minor mishap involving the cars of a bureaucrat and an MLA ended up in a major brawl.

This shows that road rage can grip anyone, even the educated and elite, that is, when road rage takes over, people tend to forget their dignity and status and stoop down to appalling levels.

According to the Institute of Road Traffic Education (IRTE), Indian roads are witness to over 230 deaths and around 3,500 serious injuries every day, implying an estimated annual social loss of Rs 55,000 crore. More appalling is the fact that a major case for this is neither bad roads nor negligent drivers, but the recently recognised phenomenon of road rage.

The uppermost question, therefore, is: Is it enough to observe traffic rules and be a careful driver, or must one yield to aggressive road-users?

Generally, aggression on the road overcomes a driver without warning and tends to destabilise so completely that it makes him/her irrational and impulsive. Drivers might end up doing things they normally would not — such as chasing, abusing, hurting and, at times, even killing. Not surprising, then, that it is referred to as the `mad driver' disease, which is spreading fast on Indian roads.

It has been rightly pointed out that when people lack the cardinal three Cs — care, courtesy and consideration — while on road, they become potential aggressors as well as possible victims of road rage.

What is the cause of this terrible over-powering feeling of anger while driving? There are a number triggers, but the most obvious ones are high stress levels and suppressed anger.

Stress causes tempers to fly at the slightest provocation and, consequently, normal people behave abnormally. Dr Pradeep Aggarwal, a practising psychiatrist in New Delhi, sees road rage as an extension of urban lifestyle.

When people are unable to cope with the pressures of day-to-day life, they end up expending their frustrations while driving without realising how dangerous this can be.

These high stress levels and anger may lead to petty issues being blown out of proportion.

For instance, in Delhi, a policeman was beaten up by a cyclist for restraining him from crossing the path of a VIP motorcade, and, in another incident, two men were beaten up and shot at by a driver who was chastised by them.

Road-users, in general, lack traffic sense and courtesy. Wanton disregard of traffic rules — jumping signals, taking wrong turns, and so on — has become the norm rather than the exception. Also, as people find themselves in a hurry to reach their destinations, they indulge in mindless driving.

But the conditions — bad roads, pollution and the increasing number of vehicles, including two-wheelers and cyclists — are also to blame for the growing intolerance and impatience. In this context, the following excerpt from a UK newspaper brings out the scene on Indian roads rather well: "Travelling in India is an almost hallucinatory potion of sound, spectacle and experience. It is frequently heart-rending, sometimes hilarious, mostly exhilarating, always unforgettable, and when you're on the roads, extremely dangerous."

Apart from the need to reach the destination on time, it is competition between drivers that results in speeding.

Drivers, especially of autos and private buses, overtake recklessly just for the kick of it. Nearly everyday one hears of road-users being injured or even killed by reckless driving.

Drunken driving is another manifestation of road rage. Alcohol impairs a driver's sense of judgment and also causes him/her them to behave rashly, thus endangering traffic safety. Recently, Delhi saw drunken occupants of a car beat up two cops who were trying to mediate between them and a Blue Line bus driver. Drunken driving is responsible for 60-65 per cent of the accidents.

Using mobile phones is a potential cause for road rage. If the conversation over the cell turns out to be unfavourable for the driver, it could affect the equanimity of the driver.

Curbing road rage is an inherent aspect of road safety. Apart from the financial and social losses, it is the harbinger of misery, suffering and grief, which cannot be compensated with money. Though the monster of road rage has reared its ugly head only recently in India, we must accept it and work towards harnessing it fast to ensure the safety of our road-users.

---

Cancun Collapse: Opportunities And Threats

Published:  The Hindu Business Line, October 01, 2003

 By Pradeep S Mehta 

Can the developing countries sustain the solidarity they forged at Cancun? In that lies the answer to the future of the WTO and what it stands for — equitable trade. The developing countries can do it if they first start trading among themselves more, says Pradeep S. Mehta.

IT IS a hat-trick for agriculture. First, it caused a serious crisis during the Uruguay Round, delaying its conclusion. As per the original schedule, the Uruguay Round was to be completed by 1990 but it got extended by three years and concluded in 1993.

The second time at Seattle, talks failed mainly because there were serious differences over liberalisation in agriculture. Labour standards, however, were made the scapegoat. And, finally, at Cancun, it was agriculture once again. However, this time the blame was passed on to the Singapore issues, especially investment.

In the run up to the Cancun Ministerial, many predicted yet another Seattle. But no one expected such a well-planned `Seattle'. The entire show was very skilfully masterminded by the US. Immediately after the formal announcement of the collapse of trade talks by the chairman, many NGO activists from developing countries were chanting slogans, "We Won, We Won".

But in the true sense it is the developed countries that were the ultimate winners. Their main intention was not to agree on any concession on agriculture and somehow maintain the status quo.

This is also evident from the EU Agriculture Commissioner, Mr Franz Fischler's reaction to the G-21 proposal. According to him, developing countries were asking for the moon. Now Mr Fischler joins the chorus that the World trade Organisation's system for negotiations needs reforms, as it will be difficult for it to reach consensus with 148 countries in the room.

Agriculture dominated the first three days of the Cancun ministerial. The tug of war between the G-21 group and the EU over farm subsidies overshadowed all other issues including the Singapore issues. Both the EU and the US tried their best to break this alliance.

When they could not, they brought in, as it were, "Plan B": Antagonise the developing countries so much as to lead to the ministerial's collapses. The inclusion of Singapore issues in the second revised draft ministerial text (the first during the ministerial), particularly investment, was a part of this strategy. The developing countries fell into the trap.

Following the failure of the EU and the US in breaking the G-21 ranks, the way the negotiations were conducted gave enough indication that the result was fixed by developed countries, especially the US. The delay in bringing in the second revised draft ministerial declaration, the tying up of investment with agriculture, and the final hasty wrap up of talks by the chairman, all raise questions in people's minds, puzzle trade analysts and deserve clarification.

Last time at Doha, when the developed countries were determined to launch a new round of trade negotiations, the ministerial was extended by a day to arrive at a consensus. But at Cancun, when developing countries managed to putting the developed countries in the dock on agriculture subsidies, the latter bulldozed the entire ministerial.

Why the delay in bringing out the revised draft ministerial declaration? The text was released at noon on September 13, and the next afternoon the chairman announced the failure of the ministerial. Less than 24 hours were given to reach a consensus on such contentious issues as investment, competition, trade facilitation and transparency in government procurement.

Was the chairman not aware that in seven years (since the Singapore Ministerial of 1996) neither the protagonists nor the antagonists would budge from their positions? How, then, did he expect a consensus in less than 24 hours?

At Doha, the ministerial revised draft was put out on November 13 and the Ministerial concluded on the 15th. So three full days were devoted for negotiations before the final consensus. At that time, the developed countries were clearly interested in making a success of the ministerial because they were interested in launching a new round of trade negotiations, environment was part of the agenda and, more important, new issues were included in the Doha Work Programme. So, they did everything — from arm-twisting to giving sops to developing countries.

The inclusion of investment in the revised text at Cancun puts a big question mark on the role of the facilitator. Of the 146 WTO members, more than 70 have on record said no to launching negotiations on Singapore issues. Sixteen said no in writing to to negotiations on Singapore issues. If, yet, the draft declaration proposed negotiations on Singapore issues, clearly his mind was set. Moreover, the language on investment, the most contentious issue, was strongest. There was no talk of linking investment with agriculture. If there was any talk of quid pro quo, it was between investment and mobility of labour. Among the new issues, some trade analysts were hoping to strike a compromise on competition rather than on investment. A consensus on investment was beyond anybody's imagination. Furthermore, on investment there is no unanimity even among EU members or their businesses.

Why investment was included in the revised draft declaration? One answer could be that as the G-21 was acting tough on agriculture, the EU wanted to counter it by pushing investment onto the agenda. The second possibility is that as investment was the most contentious Singapore issue, the developed nations zeroed-in on it only to antagonise developing countries and lead to the failure of the talks. And this is what happened.

Fingers are also being pointed at the chairman, who abruptly announced the collapse of ministerial, when the situation was definitely not like Seattle. There was not a slight, but in fact a fairly good, chance of reaching a consensus, had the chairman extended the time for negotiations. Be that as it may, the timely release of the World Bank's Global Economic Prospects 2004 has come as a shot-in-the-arm of developing countries to expose their extremely high domestic farm support given by the rich countries.

According to the report, on cotton the US provides the greatest support to its producers: $3billion annually. The EU provides about $0.6 billion each year to its producers. While the US and the EU were maintaining high support, several cotton-producing developing countries (especially those in Africa) undertook substantial policy reform to raise the efficiency of their cotton sector.

Price and export prospects of developing country exporters — especially in Africa — would greatly improve if support in developed countries were reduced or eliminated.

Incidentally, cotton subsidies were high on the agenda at Cancun. The WTO Director-General, Dr Supachai Panitchpakdi, was himself facilitating the talks on cotton. The economies of four African countries (Chad, Burkina Faso, Mali and Benin), which brought this issue to the negotiating table at Cancun, are heavily dependent on cotton.

Although this issue was raised separately, it was in tandem with the G-21 demand for the complete phasing out of farm subsidies. The four African countries demanded a separate commitment from the US on cotton, while the latter insisted on discussing it only under the Agreement on Agriculture. In view of the uncertainty over agriculture, the four African countries were quite justified in raising this issue separately.

In the aftermath of Cancun, uncertainties arise on two fronts — first on the ongoing Doha Round and, second, on the future of the WTO. As for the first, there are no two opinions that it is now impossible to conclude it on time.

On the future of the multilateral trading system, it all depends on how developed countries take the challenge of the new-found solidarity of developing countries.

For long the Bretton Woods institutions have been virtually the hand-maidens of developed countries, which dictated the policies of these two organisations. If the WTO is not allowed to remain a similar tool in their hands what will be its future?

Many people are speculating a fresh spurt in bilateralism and regionalism. They are already proliferating. The 1990s saw the signing of the maximum number of RTAs. The setting up of the WTO hardly had a negative impact on it. In fact, the newfound solidarity among developing countries may have some impact on bilateral and regional trade negotiations too.

Developing countries have realised their new strength to negotiate on more equal terms. Till now developed countries have had the upper hand in such trade treaties.

For example, the US has its own template of bilateral trade agreements in which it tries to include labour and environment, two highly contentious issues in the multilateral trade negotiations.

The collapse of the Cancun ministerial provides both opportunities and threats to developing countries and the overall world trading system. For the first time developing countries have not succumbed to developed countries' pressures. If the former take this forward, there is a real good chance of reforming the WTO to make it more transparent, democratic and equitable — everything the world body's preamble promises. Second, in the world trading system a country draws its strength from its share of the world trade.

Two-thirds of the world trade takes place among developed countries. For the developing countries to translate their new solidarity into real power they will have to enhance South-South trade. Only then can they sustain before the combined might of the US and the EU. Ultimately, it is economic power that counts.

---

The After Effects Of Cancun

Published:  The Economic Times, September 20, 2003

 By Pradeep S Mehta 

The solidarity shown by the poor countries at the Cancun trade meet, which came as a surprise to many, is a genuine reason for pride in the developing world. It showed what can be achieved in a democratic institution. If only trade negotiations were truly a democratic business!

No sooner was the meeting over, both the United States and the European Union expressed their intention to find other ways to achieve their aims of opening markets for their goods and services. This would mean that countries like India which are without any regional or bilateral arrangements would suffer more than they would have under a multilateral regime.

How did this situation come about? The Cancun WTO ministerial was trapped in some contentious North-South issues and even before the meeting began many had wondered whether common ground could be found. Two of these issues revolved around the age-old subject of agriculture and the Singapore Issues: investment, competition, trade facilitation and transparency in government procurement. Apparently, the resolution of one was tied with the other as the draft declaration had specified a common target date for concluding the negotiations. For a long time the EU, the main demandeur for the Singapore Issues, has been insisting on such a trade off.

When the negotiations on a draft declaration could not succeed, the Green Room process (where few influential countries meet to sort out the differences) was launched. To begin with, the Mexican host started discussions on Singapore Issues rather than the more important subject of agriculture — perhaps at the insistence of few interested countries.

On Singapore Issues, EU eventually agreed to unbundle and drop investment and competition from the WTO agenda entirely. The US was also ready to go along with the EU. Some of the developing countries such as India and Malaysia could live with this. However, the African group did not want any, while the other two EU supporters: Japan and Korea insisted on all four. It is interesting to note that while EU was ready to move on agriculture, both these East Asian countries were immovable. When the discussions appeared to be blocked, the leader of the African group, Kenya, walked out of the Green Room.

In the face of this breakdown, the Mexican chair decided to call the meeting to a close, declaring that the whole ministerial negotiations were impossible. This was immediately rebutted by India and some EU member states, when leaving the meeting, who said that if only the chair had extended the discussions a deal could have been struck. Alas!

This leaves us to wonder what was behind the chair’s seemingly hasty decision; perhaps it’s strong northern neighbour!

Looking at the statements made by the US officials before and since the meeting, it appears as if they were only waiting for an opportunity to move away from the multilateral to the regional and bilateral track. Washington has promised to pursue these negotiations with renewed vigour in the FTAA and elsewhere. Having suspended such a strategy since 1999, the EU has also now announced that it will pick up deals on a bilateral basis from 2005.

What is bad about bilateralism as against a multilateral forum? In bilateral deals, it is the strong which dictate both the policies as well as how they will be interpreted. It is less likely that a poor country is able to make the same show of strength in a one-to-one negotiation with a rich country. The situation is perhaps worse for the countries that will be ignored in the surge of bilateral deals as their markets are too small to interest the big players. Secondly, under a bilateral deal the victimised country cannot even approach the WTO dispute settlement forum, which has earned a good reputation for fairness.

On the other hand, there are small African countries who are quite happy with the failure of the Cancun meeting, because they feel that they would not have gotten anything from it. Their gloom is worsened by the US response to their demand on ending cotton subsidies. Cotton is one area of agriculture on which many of the smaller African countries are highly dependent.

Some commentators have also linked the failure of the Cancun meeting to cotton. Just as the issue of TRIPs and access to medicines had become a symbol of the success of the Doha meeting — held two years ago from which the Doha Round draws its name — the plight of cotton farmers in West Africa became the acid test of the rich countries resolve to support development as an agenda of the WTO. All hopes were dashed when the US backed off on offering anything to the African demands, saying that the cotton issue can only be discussed under agriculture talks. This was perhaps a reason for the Africans to walk out when Singapore Issues were being discussed.

It may never again be possible for the South to achieve the same co-ordination at the WTO because international economic relations are so dynamic and often situations change with so many variables which influence their management. The institution of WTO is itself set to change, as both the two trading powers want sweeping changes in the way it operates. Consensus visibly doesn’t work according to the EU, that promises to come up with a proposal for dramatic reforms. Without the principle of consensus, democracy will make way for the rule of jungle, where might is right.

Back in 1971, at Cancun, North-South economic relations were discussed by heads of government such as Ronald Reagan and Indira Gandhi in the hope that a clash between north and south could be avoided. In 2003 it seems as if polarisation between the rich and the poor may still be deeply entrenched. We cannot forecast the impact of this in future in either of the areas of economic and political relations, but if this new-found developing country solidarity can be sustained, it could bring in a new power equation among the rich and the poor countries of the world.

---

Support For G-21 Swelling, But European Union Still Remains Clueless

Published:  The Financial Express, September 13, 2003

 By Pradeep S Mehta 

Cancun Sept 12:  Agriculture continues to hog the headlines here and any agreement appears as elusive as it was when the ministerial began. The matter continues to agitate those outside the hallowed portals of the convention centre. Farmers groups continued their agitation few miles away charged by the sad incident of a Korean farm leader committing hara-kiri. The farmer: Lee Kyung-hae climbed the high security fence waving “WTO kills Farmers”, took out a knife and stabbed himself in the chest. Incidentally, he was the same farmer who had camped outside the WTO building in Geneva a few months ago asking for exclusion of agriculture from the WTO.

Mr Lee’s death must be in vain. The two groups—with a large silent majority continue to hold hardline positions. The G-21 alliance (comprising of countries like Brazil, India and China) is holding on, with the other party: the EU trying hard to break this alliance. That is the crux of the proceedings that dominated discussions at the WTO ministerial conference in Cancun on September 11. There is a feeling among the EU officials that India is a difficult nut to crack. A strategy to separate Brazil from India may be well on their cards. That is why they have primarily identified Brazil as the leader of G-21 rather than India.

Further, developed countries have spotted some clear differences between the two big developing countries - Brazil and India - on contentious agriculture issues. Brazil, a leading farm exporter and member of the Cairns group of countries is strongly advocating for total liberalisation of agriculture that includes tariff reductions and complete phasing out of subsidies by rich countries.

On the other hand, India is mainly interested in the elimination of subsidies and not the reduction of tariffs, as it itself maintains relatively high tariffs rates to shield her farmers. Another soft target is Argentina, which owes billions of dollars to the International Monetary Fund.

Delivering an update on the day’s happenings at the Ministerial, Franz Fischler, the EU Agriculture Comm-issioner, in a briefing with NGO representatives, said that the meeting this afternoon with the facilitator of the agriculture group was the starting point of the real negotiations in agriculture. The discussions lasted over two hours where the G-21 and the EU presented their respective positions. Mr Fischler commented that the G-21 countries in their proposal were demanding reforms in the Blue Box (elimination of blue box subsidies), Green Box measures (capping and strict criterion) and Amber Box (setting of higher targets and ambitious timeliness for trade distorting subsidies.

According to him, the fact that they were discussing Green box measures, besides Blue box and Amber box makes their proposal flawed. The EU’s position, he said is that “the Green box indicates non-trade distorting subsidies and the WTO is only concerned with trade distorting subsidies, so why should we discuss Green box measures at all”. The risk he said was that discussing this will block discussions on other sectors that need reform.

---

CAS: Bouquet Of Problems 

Published:  The Hindu Business Line, September 11, 2003

 By Pradeep S Mehta, Rajan R. Gandhi 

SINCE June, consumer groups have been cautioning against the implementation of Conditional Access System without adequate safeguards. A Cuts (Consumer Unity and Trust Society) survey of six Indian cities revealed the existence of monopolies and cartels among service providers and a serious level of dis-satisfaction with the last-mile cable TV operator. At a CUTS-sponsored National Seminar in New Delhi on July 1, speakers cautioned against the hasty imposition of Conditional Access System without putting in place a regulatory mechanism.

For reasons not very clear, the Ministry of Information and Broadcasting stuck to its implementation plan and sections of the service providing industry were chortling at the thought of getting their hands on a slice of the Rs 10,000-crore pie. The arithmetic behind this.

There are about 80 million TV sets in the country. Considering that some households do not have access to cable TV or that there could be more than one TV set but only one cable subscription there would still be 48 million cable TV connections, and with each subscriber paying Rs 175 a month it is easy to see why the industry is drooling — at stake is Rs 10,000 crore.

This, of course, is not incremental value. Rs 10,000 crore is the existing value of cable TV subscriptions. The bulk of this — say, 70 per cent — is simply not accounted for by cable TV operators. As there are some 40,000 of them, the revenue is not that difficult to conceal.

One of the declared aims of the CAS is to do away with this under-declaration. To what extent this objective will be achieved remains to be seen. In New Delhi, the existing rates of tax are 8 per cent service tax and Rs 20 per subscriber per month as entertainment tax. Applying these rates to the estimated 48 million cable TV subscribers throughout India, the Central and State governments between them stand to earn close to Rs 2,000 crore. Since this is not a specific cess and the Government is not obliged to do anything at all in return, this is a highly productive method of raising revenue.

Thus far, the arithmetic yields Rs 2,000 crore for the Government and Rs 10,000 crore for the service-providers, at existing rates. Nothing except market forces can prevent broadcasters from raising prices. While there may be a limit to the price, events such as the cricket World Cup could lead to opportunistic pricing. The consumer has been protected from this so far by the much-reviled cable TV operator who will have neither the motive nor the means to do so after CAS takes effect.

The CAS was supposed to be "consumer-friendly" and even the Prime Minister has gone on record affirming this. What is emerging presents a terrifying picture of what can happen when the Government uses its muscles with the favour dispensers.

The Government has all along been saying that no broadcaster would be allowed pricing that permits more than 10 per cent difference between the prices of a `bouquet' of channels (a bundled price) and the aggregate of all the channels priced individually. Thus, if a broadcaster offered five channels at a bundled price of, say, Rs 100, the total outlay of each channel when purchased individually should not exceed Rs 110.

But consider this: Star TV has priced its `bouquet' of nine channels at Rs 50, while the a la carte rates for its nine channels totals Rs 110; not a 10 per cent but a 120 per cent price differential.

And, now, consider this: Cable TV operators have agreed, with great reluctance, to relay 30 FTA channels at the base price of Rs 72 per month plus taxes. There are, however, some 60 FTA channels. The law is silent on whether or not the cable TV operator can levy a charge for the FTA channels in excess of the bare minimum 30 channels.

Yet, the worst transgression of consumer rights possibly lies in the stipulation that consumers must compulsorily purchase a Set Top Box (STB) if they wish to watch pay channels. It cannot be forgotten that CAS originates from disputes about the actual revenue and the sharing of the spoils between the service-providers — the broadcasters, the multiple system operators and the cable TV operators. The viewer is being asked to pay for resolving this dispute, which was not his own making! The position should be the exact opposite: The service providers should actually pay the viewer for keeping track of his or her viewing habits.

Local vendors of STBs have tried some not-too-subtle-moves to create a demand for their products and obfuscating the issue. The truth is that the STB has no built-in circuitry to enhance picture and sound quality. No service provider has announced the provision of value-added services such as video games for which customers will have to pay separately anyway. The customer will also have to invest further in an input device such as a joystick or keyboard to play video games. Picture and sound quality depend on the broadcast and the transmission cable, not on whether an STB is digital or analogue. For political reasons, the implementation of the CAS has been put off in Delhi at least till end-December. Service-providers and the I&B Ministry are too scared of the Shiv Sena to push CAS through in Mumbai, and a sort of uneasy calm prevails. The West Bengal Government has stalled CAS saying that it had not been adequately consulted or briefed. So Chennai becomes the "guinea pig".

At first, multi-system operators (MSOs) in Chennai spoke of the "outstanding success" of the scheme, attributed to the fact that there were only two MSOs and most of the regional language channels were in any case FTA. However, even two MSOs could not form a viable cartel. One of them — SCV — is part of the Sun group and offers Sun's pay channels free. The other MSO, Hathaway, has countered by offering Star TV channels at a highly discounted rate. Thus, on the day that CAS was implemented in Chennai, only 2,000 STBs were sold.

Will the service-providers ever be able to sort out the mess? Most unlikely. Broadcasters blame the MSOs for not settling their overdues or paying on time, and the MSOs the broadcasters for making repeated verbal agreements, but putting nothing in writing, and backing out of commitments. The MSOs also accuse cable TV operators of under-declaring their subscriber base. Consumer groups have repeatedly approached the I&B Ministry and even the PMO. Their reservations are not against CAS per se, but in the way it is being introduced. They see the STB as an unfair financial imposition and have urged the Government to put in place a regulatory mechanism whereby they can be assured of four basics.

First, that the service-providers must pay for the cost of installation and maintenance of the STBs. Second, that the total financial outlay on cable TV subscriptions should not exceed their existing expenditure, even if it means that they will have access to fewer channels than before. Third, that quality of reception must at least be maintained.

And, fourth, that their complaints are promptly and efficiently attended to. Had the Convergence Bill been finalised, it would have been possible to address these concerns along with a host of technical and non-technical issues simultaneously. In its absence, and considering the monopolistic nature of the cable TV industry, an independent regulatory authority seems essential if there is to be no further strife. Simply passing the buck to State governments, as is being contemplated, will just not. Kaun Banega Crorepati? As it stands, no-one.

---

Limited Negotiating Capital Must Be Used Judiciously

Published:  The Financial Express, September 08, 2003

 By Pradeep S Mehta

The WTO secretariat has circulated a revised draft declaration for the Cancun ministerial. However, entrenched positions among countries as well as a flurry of proposals in the interlude held up the release of the draft declaration, originally planned to be released on August 22. The 21-page text covers key areas of the Doha Agenda, and unlike the July 18 Draft, has more flesh on its bones. However, several developing countries have criticised the revised draft as being imbalanced and not taking into account development needs and their proposals in many areas. Nevertheless, the revised draft has tried to adopt a hybrid approach in some crucial issues like agriculture and

non-agricultural market access. Agriculture, along with TRIPs, public health and the four Singapore issues, has been the major contentious issues in the current Doha round of trade negotiations; non-agricultural market access could also claim a place on this list.

On TRIPs and public health, a deal has been struck. But its complexity will certainly add to the list of ‘implementation problematique’. The deal on TRIPs, however, has partially restored developing countries’ confidence that the Doha round has some links to a development agenda.

When the Doha Development Agenda was launched, many had questioned as to how it would enhance development. Proponents had claimed that not just TRIPs, but agriculture liberalisation and technical assistance on various issues too which would constitute a development agenda. Agriculture remains a hot potato, despite some movement. First, the EU’s compromise on Common Agricultural Policy, followed by the US-EU joint proposal, have paved the way for a deal on agriculture at Cancun. As already mentioned, the revised text proposes a hybrid formula for tariff reduction, i.e., between the “Swiss” and “Uruguay Round” formulae, though many developing countries are not happy with it. India, along with China and Brazil, has joined the grand alliance against the US-EC joint proposal. But I am not sure how far India is going to benefit out of it. Clearly, at present India is not a major farm exporter. Perhaps India is howling only because agriculture is a politically sensitive subject at home.

Next, the most contentious issues: the four Singapore issues, especially competition and investment. The revised draft carries the language of both protagonists and antagonists. But, I don’t see how either of the two sets of proposals will be acceptable to all Members. In all probability, some deal will be struck and a middle path adopted. The US has just launched a new proposal on Singapore issues, which has perhaps surprised the EU. The US is ready for negotiations on trade facilitation and transparency in government procurement, and also amenable to a peer review system on competition. It is willing to drop investment knowing fully well that countries are opposed to it. At Doha, the former commerce minister, Murasoli Maran, had succeeded in delaying the launch of negotiations. But, this time it is unlikely that after the US move, the EU will settle for anything less than the launching of negotiations, even with soft law options. The EU has been asking for simultaneous progress on the four Singaporeans as a sort of quid pro quo against what it will be giving up in agriculture. As part of a wider deal, the EU is likely to push US to give more on competition. It already has the support of Japan and Canada for all the four issues. Thus, the EU will push hard for the Singapore issues at Cancun.

What should we do then? We should see the writing on the wall. We have a deal on TRIPs and public health, which will benefit the poor, and the domestic pharmaceutical industry in India, Brazil and South Africa immensely. Secondly, it will also prove that the iron-clad TRIPs agreement can be assailed. This will come in handy when other more critical issues, such as seeds will come up in future. Another, crucial area of developing countries’ interest is Temporary Movement of Natural Persons (Mode 4 of GATS).

Therefore, ideally, India should bargain for better market access for professionals in developed countries. In this area, we can also have an alliance of more than 50 developing countries, including Pakistan, Bangladesh, Sri Lanka and Nepal. This could become a quid pro quo with some Singapore issues.

Quite clearly, the rich countries would not like to see a failure at Cancun and will do everything possible to ensure that it succeeds. However, in pushing their own interests forward they would not give much in substance. Thus, the poor countries, including India, will need to see how they can capitalise on a situation in which the dice is clearly loaded against them. We have limited negotiating capital. Therefore, it is necessary we should use it judiciously. Diplomacy requires that we define our negotiating positions positively, rather than negatively. Further, and most importantly, prior to defining our negotiating position, we must think hard about the end-game. For example, on agriculture, joining hands with China and Brazil will not bear much fruit, as unlike them, India is not a major farm exporter.

Secondly, we need to do a huge amount on our domestic front before we can become a net agriculture exporter. Thus even on the limited deal on agriculture, which will most likely be hammered out at Cancun, the rich will have garnered enough support from their allies in both the poor and rich countries. In such a situation, we will probably be isolated once again.

Whether, it was the URA or the Singapore or the Doha ministerials, we have repeatedly staked very hardline positions and retreated, thereby losing credibility and have been isolated repeatedly. This risk has increased manifold after the entry of China into the WTO.

---

Bumps On The Road To Cancun

Published:  The Economic Times, September 06, 2003

 By Pradeep S Mehta

AT Cancun, all eyes will be on Arun Jaitley. Not because he is handsome, but because the powers will push him hard for not doing a Maran. The Doha meeting was held to ransom by Maran, and Cancun may witness an encore. Once again, we will need to choose between the Red Fort and the Chandni Chowk, i.e., whether we stand firm on our principles, which may not translate into commercial gains, or enter into some tough bargaining to consolidate and expand our gains.

The Cancun WTO ministerial agenda is again locked in controversies. Our own Doha agenda to get implementation issues resolved has been relegated in a sense. Luckily, the access to medicines debate has been resolved. However, this complex resolution will also become a part of the ‘implementation problematique’. On other issues, some type of movement is taking place, but clearly the battle is going to be tough and hard.

To a large extent, the international political and economic agenda, including the WTO, is driven by the two powerful members: the United States and the European Union. There are bumps on the road, which these two have to clear lest the talks end up in a stalemate. That’s a fact of life, whether we or the swadeshiwallahs like it or not.

Agriculture has always been one of the most contentious issues, which was one of the principal reasons for the delay in the Uruguay Round and for the failure of the Seattle meeting. In spite of much haggling, in the run up to Cancun, the two have arrived at some sort of a deal addressing subsidies, which many including India have criticised strongly.  The rather diluted farm deal does not say much on tariffs. The Cairns Group, farm exporting countries, will push hard on tariffs seeking greater market access in both the rich and the poor world. What will happen at Cancun is anybody’s guess but a deal on this will certainly be very crucial for its success.

Another deal, which has been struck between the two giants, and Canada, is on non-agricultural market access, i.e., tariffs on industrial goods such as automobile parts, fishery products, garments, etc. We do not have any problems with this deal and can live with it. We also do not have any problems in maintaining an increasingly liberalising policy to attract foreign investment in the manufacturing sector. However, we do have serious problems with the proposal to multilateralise investment policy. An investment policy is too intrusive and any international agreement can lock in our policy options, which we can ill afford. That is the other strong pillar of our national consensus, our Red Fort thinking of clear opposition.

At Doha, it was agreed that negotiations on investment policy and competition policy can be launched at Cancun if there is an explicit consensus on the modalities of negotiations. Thus investment policy, competition policy and its two stablemates, transparency in government procurement and trade facilitation, are up for grabs at Cancun. We are not opposed only to investment, but to all four of them.

To carry forward our agenda, we are constantly reminded about building up coalitions and alliances with like minded countries. History and realpolitik shows that each country will follow its own self-interests and leave India alone at the end of the day.

EU has been asking for a deal on the four Singapore issues, altogether, as a sort of quid pro quo against its ‘sacrifices’ in agriculture. As part of a wider deal, the US may go along with EU, being supported by Japan and Canada. Thus EU will push hard for its adoption at Cancun, and then what will we do? What we can do is to put on our Chandni Chowk thinking topi and firstly ask for unbundling of the Singapore issues.

Just a few days ago, the US has agreed to unbundle and move on trade facilitation and transparency in government procurement dropping investment, but proposing a peer review process for competition. One is not too sure if the EU will go along with the US on both, but would have to agree to drop investment. If that happens, then it will be wise on our part to agree to the launch of negotiations on competition, trade facilitation and government procurement with a very limited agenda, as has been agreed at Doha. Each of these pacts can enhance welfare without creating problems for our own policy space.

Further, as each of these three pacts will also include special and differential treatment provisions, we will need to get an article of good faith expressed by the rich to agree to strike deals on the pending agenda of implementation issues and SDTs, before we agree to negotiate.

---

Approach Cancun With ’20 In Mind

Published:  The Financial Express, August 18, 2003

 By Pradeep S Mehta

The President and the Prime Minister want India to be a developed country by the year 2020. How we approach the World Trade Organisation (WTO) will be of crucial significance in this journey.

As Cancun approaches, our commerce ministry is engaged in a last minute fire-fighting exercise. Commerce minister Arun Jaitley believes that there is a national consensus: that we should continue to harp on agriculture and we should oppose an investment agreement. Let’s examine the content and the process with which Jaitley has approached these issues.

The ministry got a grant from UK’s DFID to do coalition building with countries over contentious issues that we feel are necessary to either push the WTO members or to stop them from bringing on board. Several meetings have been organised in association with UNCTAD, for example to: a) push for inclusion of our geographical indications and traditional knowledge in the TRIPs pact; b) stop an investment pact from being taken up.

One can’t forecast any results from such ventures, but our national position have been re-stated quite well. As for success, countries are self-centred and when push comes to shove, they could easily change their stance. Whether it was the Singapore Ministerial (1996) or Doha Ministerial (2000), in the last lap India has been isolated. Our allies have crumbled under pressure or allurements.

What hasn’t been done is to build a coalition nationally. The ministry is engaged in last minute consultations without finding the time for a two-way learning and exchange process. In Jaitley’s recent meeting with trade union leaders, even INTUC suggested that India should walk out of the WTO. This portentuous advice has been often stated by the Swadeshi elements including the BMS. The problem runs across the board and is often reflected in our language press, which few policy makers ever read. The world’s trade ministers agreed at Doha thus: “We shall therefore at the national and multilateral levels continue to promote a better understanding of the WTO and to communicate the benefits of a liberal, rules-based multilateral trading system.” Despite the clear intent, we have done very little to educate our people.

Our inherent weakness is that trade policy is run by generalist civil servants from various services: administrative, foreign, revenue, and economic. None has sound experience of the dynamics of trade policy or the science of economics and law on negotiations. A cadre-based trade service exists, but its involvement is at a considerably lower level. The shots are called by the Brahmins. Some of them are arrogant, one can’t even ’educate’ them. There is little institutional memory. Understanding of nuances is at a premium, but there is not a single officer in the ministry who was at Seattle. Fortuitously, some of them are at our mission in Geneva, but then Delhi’s bureaucrats call the shots.

The advisory committee on international trade, of which I am a member, was summoned after after 19 months on 8 August, 2003 just one month before the D-day. The last one had taken stock of what had happened at Doha. In the interlude the ministry set up consultative groups, but their reports have never been discussed publicly.

The notes put up by the ministry at these meetings are also exclusively on what they think and not what the rest of the WTO members think. There is little fresh air and/or challenge thus depriving the ministry of good advice. The world recognises the role of NGOs. But our government behaves like an ostrich. Despite repeated demands and assurances, the ministry refuses to enlist NGOs on the official delegation. Business interests continue to find a place. All developed country governments have various non-official interest groups nominated in their official delegation. Many developing country governments too have started doing this. This helps to convey these government’s sincerity and builds up national and international coalitions. One can’t forecast anything in the WTO until it happens. Things will move fast as we come closer to the D-Day. A crucial issue is the agreement on agriculture and how the grass gets trampled when the US and the EU fight.

After three weeks of talks, both have put forward a joint paper at Geneva. The paper hasn’t met with the world’s expectations. India has — rightly — criticised it. The Cairns Group (an alliance of developed and developing country agriculture exporters led by Australia) has also howled. Some haggling will now ensue, but a deal will be struck.

The US, EU and Canada have also struck a deal on non-agricultural market access. These were two of the contentious issues in the Doha to Cancun trail. (Issues of our interest such as implementation, TRIPs etc have not got the same steam). Look at the political impact of these on Cancun and what India should do. Firstly, the EU has been wanting negotiations launched on the four Singapore issues: investment, competition, trade facilitation and transparency in government procurement. That might be agreeable to the US as part of the agricultural deal, though there would be nuanced differences on how to approach each of these issues. But that is no big deal as the contours of the possible agreement will be shaped over the next few years. Secondly, the EU is not in favour of unbundling the package of the four Singapore issues, which is perhaps a tactical rather than strategic move.

India has been a vocal opponent to the four Singaporeans, most vehemently the investment accord. That is also reflected in the national consensus. Thus we need to see what we could gain or lose if we strategically signal our acceptance to move on the rest of the three issues. Perhaps the EU may relent, and feel happy that they could get something rather than nothing. However, as the US is also a demandeur for a high standard investment agreement, we may need to put that on a slower track than the others. That can be done only, if we can put forward an alternate proposal on the table rather than opposing by arguing on principles and rhetoric.

When Jaitley had visited China in June, there was understanding that Beijing will be our ally in this effort. But subsequently this changed to a Kamraj type of attitude: parkalaam (let’s see). For China, WTO commitments will help them to reform their domestic agenda. This might even apply to us.

I am not suggesting that we should also proceed in the same manner, but we can’t ignore this altogether. Someone will need to do some quick thinking about how we would like to see these issues in 2020, when we join the rich man’s club. Imagine, if we become a net capital exporter, will we need the protection of a multilateral framework on investment. Or if we see that our economic development will be hampered by increasing cross-border anti-competitive practices, a suitably-drafted multilateral competition policy can actually help us. On trade facilitation there is a consensus that it will only help our traders by reducing delays, while on transparency in government procurement it can only increase welfare.

Once again, by saying “no! no!!” and then getting dragged in kicking and screaming will not show us well. What we do at Cancun should be pragmatic and in line with the vision for India in 2020.

---

Election reforms and `Shekhawat formula' 

Published:  The Hindu Business Line, August 13, 2003

 By Pradeep S Mehta

To have 107 elections in a litlle over a decade-and-a-half is something developing countries, such as India, can ill afford.

TALKS of electoral reforms in India are, perhaps, as old as the history of elections. And as for the changes suggested to the poll process, the term "innumerable" explains the phenomenon best.

Though some of them were meant to be more than mere political rhetoric, they either got lost in the melee of suggestions or failed to see light of day.

For a form of government, which is essentially "of the people, for the people and by the people", it goes without saying that elections are a prerequisite, especially so if it is to be preserved not just as a democracy but a "vibrant democracy".

But to one's dismay, going by the available figures, to have as many as 107 elections in little over a decade-and-a-half is something developing countries, such as India, can ill afford.

Talking about the monetary part, the official statistics go on to narrate the taxing tale: The exchequer has been spending no less than a mind-boggling Rs 900 crore for conducting just one general election. And, with the ever-growing trend of coalition politics — both at the Centre and in the States — catching up fast, the number of elections, including those to the State Assemblies, is set to shoot up further. Recurring elections also drive the government's attention away from core issues. The price of democracy is proving a bit too costly for the Indian nation to bear!

The alarming situation has left the intelligentsia, political pundits and the government perturbed. But the irony of the situation remains that despite the concern for both frequency of polls and the escalating cost thereof, due to lack of political will, literally every move of the Election Commission (EC) to put things on the track is derailed by the politicians themselves, whether in or out of power.

Only recently, the Chief Election Commissioner, Mr J. M. Lyngdoh, at a seminar in Jaipur suggested such measures as rectification of the voters' list, prevention of use of muscle- and money-power as also bogus voting. He cited the example of Madhya Pradesh where strict action was taken against some District Magistrates following confirmation of charges of serious discrepancies in the voters' lists in their jurisdictions.

A former judge, Mr Vinod Shankar Dave, surprised the audience with his revelation that he found discrepancy in his own name, while Ms Aruna Rai said that she had been described as a "male" in the voters' list. There was unanimity among those present that the trend of seeking votes in the name of caste and religion was spreading like an epidemic all over the country.

"But all is yet to be lost" seems the message of the Vice-President, Mr Bhairon Singh Shekhawat, who recently offered some suggestions to save the crumbling house. Instead of going Utopian, Mr Shekhawat mooted some concrete, workable measures.

The first move, as suggested by him, in this direction should be to ensure commencement of elections to both the Lok Sabha and the State Assemblies simultaneously — every five years and in a fixed month. Amendments to the Representation of the Peoples Act to this effect will ensure a fixed tenure of the Houses concerned, where the members will also, naturally, have a fixed term of as many years.

But, then, what about the governments shown the door by "no-confidence motion"? To check this malady, Mr Shekhawat wants a subsequent but immediate confidence motion to follow.

A similar provision exists in Germany and some other European countries. This would guarantee a without-delay alternative to replace the first one, and thereby, negating the very possibility of going through the chagrin of holding an election prematurely — before the five-year term of the House concerned.

If in the worse case scenario, no Opposition party gets the requisite numerical support, it would be mandatory for the members of the House to elect one out of them as the Prime Minister or Chief Minister, as be the case, then and there directly. But no elections at all!

Once there is a stable government, the rest will follow as naturally and smoothly as a calm and quiet Ganga flowing down its course. Assured of a fixed five-year term, the politicians will naturally have more time on hand to think about and focus on other growth- and public welfare-related issues, calling for their urgent attention. Also, the government would then be better placed to divert the hard-earned money of the taxpayers to constructive areas instead of allowing it to go down the poll drain.

The viability and the practicability of the suggestions of Mr Shekhawat can be gauged from the fact that it was endorsed by leaders of almost all political parties, except a few who feign ignorance about the "Shekhawat formula", since they know that they do not have anything better to offer.

A person like the Rashtriya Janata Dal supremo, Mr Laloo Prasad Yadav, who is often described as a conservative man and averse to the ideas of change and development, hailed the proposals of Mr Shekhawat in these words: "It is good thinking. All parties should ponder over it."

In fact, Mr Shekhawat's views are more than merely keeping the frequenting polls away — they are about reforming the very political system of India to call it a vibrant democracy in the true sense.

Though the critics may point out that the "Shekhawat formula" calls for too many amendments to both the Constitution of India and the Representation of Peoples Act, it is high time we went for them. For, if that is the way to save India's democracy one should not find much wrong about the technique evolved by the VP.

Even otherwise, how urgently the Constitution needs some remedial changes to keep it in tune with the times is obvious from the fact that within 53 years it had to be amended close to 90 times! If there are some lacunae in the draft, why shy away from admitting the fact? Should one allow the Constitution to become outdated and stale? No! An exercise to keep it up-to-date is the need of the hour.

Experience certainly has an advantage over sheer bookish knowledge. And, it is at this juncture that we need to look up to the elder generation, which has been a witness to the ups and downs of the course of history, for their precious advice.

Also, more and more people like Mr Shekhawat should come forward with constructive ideas to strengthen the nation in every possible way, and more important, prevent it from withering away as the "largest working democracy" from the world map.

---

Examining The Political Case For An Investment Agreement At The WTO

Published:  The Financial Express, August 12, 2003

 By Pradeep S Mehta

As the D-Day for the Cancun Ministerial approaches, trade policy bureaucrats are very busy in formulating their respective negotiating positions. Even the traditional one month’s summer holidays in Geneva have been cut down to a fortnight, as the time is very short.

But, the honchos are busy in their home capitals working out possible trade-offs, so that even if Cancun is not successful, it does not become another Seattle.

As I have written earlier, in the current Doha Round of trade negotiations, so far, agriculture, Trade Related Intellectual Property Rights (TRIPs) and Singapore issues have remained the most contentious subjects of negotiations. Some efforts have been made to bring convergence on views over agriculture and TRIPs, but the jury is still out. Of the two contentious Singapore issues, in my last column (In Search Of A Dealmaker at Cancun, August 4) I dealt with competition. In this column I deal with the more difficult nut: investment.

On this either the demanding or the opposing World Trade Organisation (WTO) members are not willing to budge an inch from their respective positions.

The European Union (EU) is consistent in its demand, while India, in association with China, leads the like minded group (LMG) of vocal opponents of an investment agreement at the WTO.

All the Singapore working groups, including the one on investment, have finished their pre-Cancun meetings and submitted their reports to the WTO’s General Council last month. This means that any further formal talks/progress on this issue will take place only at Cancun. What will happen on investment at Cancun? It is very difficult to predict the same now. However, seeing the hardline stance of protagonists and antagonists, this issue has the potential of playing the role of a spoilsport.

In the WTO, including any issue for negotiation depends either on its economic merit or political support. And it is the business lobbies of each country which drive the agenda. As regards an investment pact, the economic argument may be very weak but there could be a political support behind it. After all, the main demandeurs (EU, Japan, Korea) of an investment agreement in the WTO are big economic powers. A recent interesting debate on this in the Financial Times throws light. While Kavaljit Singh from India has been able to get a piece published in the pro-establishment the Financial Times opposing the possible investment pact, others have argued for it. In a letter to the editor, US International Business Council’s President Thomas M.T. Niles writes, “What business need in order to promote foreign investment are market access and high standards of investor protection.” It is these very two demands, which are strongly opposed by India, China et al.

If we look at the numbers game in the WTO, there is a 15-member EU, supported by Japan and Korea, and some non-EU members such as Norway and Switzerland, who are the main demandeurs of an investment agreement. In all probability they will get support from the USA, Canada and Latin America.

Most of the Latin American countries feel that as investment (and competition) provisions will be inserted in the proposed Free Trade Areas of America Agreement (FTAA), there maybe no harm in a multilateral agreement on investment in the WTO. As it is, a multilateral setting may be better than regional and bilateral agreements. The number of supporters crosses 50 and if the EU manages to rope in all the least developed countries (LDCs) by giving some concessions to them —as it often happens— then they will sail through in the game of numbers.

In the past also, the TRIPs agreement was signed without having any strong economic arguments in favour.

On the contrary, even free trade economists have criticised it most stridently. However, the pact got into the WTO mainly under pressure from big US and European pharmaceutical companies.

Had economic arguments prevailed, the TRIPs pact would not have been there at all. It perpetuates monopoly and rent-seeking behaviour, which are against the principles of free trade.

Similarly, a debate is sill going on, whether WTO is the right forum for handling investment. The trade-investment link, other than what is covered under Trade Related Investment Measures (TRIMs) agreement or the General Agreement on Trade and Services (GATS), is by no means straightforward.

The bulk of foreign direct investment (FDI) flows continue to be market-seeking and actually substitute trade. Therefore, possible trade distorting investment policies have been taken care of under the TRIMs agreement, while service-related investment will be taken care of under the GATS pact.

Hence, there is very little justification of including a full-fledged investment agreement under WTO. The other arguments, often cited against an investment agreement are: lack of empirical evidence supporting increased flow of FDI to developing countries. Secondly, a multilateral investment pact’s one-size-fits-all approach may be good for capital-exporting Japan but may not be beneficial for capital-importing poor countries.

Further, the WTO’s coverage of balance of payment issues is at present confined to current account transactions but an investment pact would necessitate capital account liberalisation etc. Like in any civilised debate, protagonists of investment agreement may have counterarguments for all the above facts but they do not have any compelling arguments in favour of the investment deal in the WTO.

Therefore, if at all negotiations on investment are launched at Cancun, it would be mainly due to the strong political clout of demandeurs. This won’t be surprising because at Doha, the EU managed to get mainstream environment into the work programme of the current trade round in spite of the fact that majority of the members, in principle, were against linking trade with environment.

If such a situation emerges and EU manages to get negotiation on investment launched at Cancun, what should be the negotiating strategy of developing countries?

The first obvious demand is to seek a balance between mobility of capital and mobility of labour. Both are mobile factors of production and in my view the economic arguments for free movement of labour are stronger than those for free movement of capital. This is already mandated in a sense under mode 4 of GATS, which seeks to ease the restrictions on movement of natural persons.

Secondly, the developing countries will need to ask for much more enforceable policy flexibility than what is being proposed. Their experience with the existing special and differential treatment provisions in the WTO have been rather dismal, to say the least.

---

In Search Of A Deal Maker At Cancun Round 

Published:  The Financial Express, August 04, 2003

 By Pradeep S Mehta

Yet another mini-ministerial meeting at Montreal end-July to resolve the Doha Round conundrum was perhaps just another jet-setting opportunity for countries to restate their positions ad nauseum. The motion, if any, was there in Australia’s threat to walk away from world trade negotiations if global farm trade couldn’t be reformed during the current round of talks.

The EU’s continued persistence with launching negotiations on Singapore issues and objections by the US to a draft WTO agreement on access to essential medicines are giving many sleepless nights. In such a scenario, it is very difficult to predict what could be the possible dealmaker(s) at Cancun a few weeks away. One way or the other, countries are quite keen that the Cancun meeting doesn’t become another Seattle.

On agriculture, over the last one month there has been some progress. First, the agreement among EU members to reform their Common Agricultural Policy (CAP), though only a part of the problem has been addressed. This was followed by a decision by the EU and US to draft a joint WTO proposal on farm trade, which has released some tension. In such a complex situation, it is well known that agriculture is the one issue that can either make or break future trade talks. While the EU has shown willingness to give some concessions on agriculture, it is adamant on launching negotiations on Singapore issues. With equal determination, some developing countries are blocking negotiations on them. At the same time, developing countries want the EU to push the US for an agreement on TRIPs and Public Health and to liberalise the movement of professionals under Mode 4.

What does the EU have to gain in lieu of all this, so that they can satisfy their own domestic constituencies? The answer lies in some progress on Singapore issues. The EU i