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WTO talks highlight emerging nations’ power
Financial Express, August 27, 2008

When ministers from over 30 countries gathered at the World Trade Organisation (WTO) headquarters in Geneva last month and failed to arrive at a consensus on market-opening commitments in agriculture and industrial goods in the first few days, WTO director general Pascal Lamy resorted to a short cut to achieve a breakthrough quickly.

He formed a core group of seven countries that included representatives of both developing and developed countries. This select group included India, Brazil, China, the European Union, the US, Japan and Australia. Significantly, Lamy said later that a similar core group around 15 years ago would have included the US, the EU, Canada and Japan as they were the important players then, but now it had to be a group of seven including “big brothers” like India, Brazil and China. “This is because the world has changed,” he admitted.

The growing clout of the BRIC (Brazil, Russia, India and China) countries was evident even more in the WTO talks as India and China stood up to enormous pressure from the US to weaken the Special Safeguard Mechanism (SSM). The SSM enables developing countries to impose additional duties to protect the livelihood of poor farmers from import surges of farm products and their fall in prices. The issue eventually led to the failure of the marathon negotiations on the ninth day.

Of course, it is another story that Brazil broke ranks with other developing country allies in this aspect due to their aggressive interests in the farm export business. Significantly, Brazil’s agri-exports were worth over $58 billion last year.

But the leadership of developing countries taken up by both India and China to protect hundreds of millions of poor farmers had the backing of around 100 countries including the G-33 (the group of countries including India, Indonesia, Cuba, Philippines and Venezuela, all with defensive interests in agriculture), African Group comprising all African WTO members, the ACP group including African, Carribean and Pacific nations, and the small and vulnerable economies (SVEs).

Goldman Sachs, that coined the acronym BRIC in 2001, had predicted last year that that India’s GDP per capita in US dollar terms will quadruple by 2020 from the 2007-level, and also the country’s economy will overtake the US in dollar terms by 2043. Besides, the economic output of the BRIC countries will be more than the powerful G-7 in 2032. It is worth noting that despite having a GDP of.

When ministers from over 30 countries gathered at the World Trade Organisation (WTO) headquarters in Geneva last month and failed to arrive at a consensus on market-opening commitments in agriculture and industrial goods in the first few days, WTO director general Pascal Lamy resorted to a short cut to achieve a breakthrough quickly.

He formed a core group of seven countries that included representatives of both developing and developed countries. This select group included India, Brazil, China, the European Union, the US, Japan and Australia. Significantly, Lamy said later that a similar core group around 15 years ago would have included the US, the EU, Canada and Japan as they were the important players then, but now it had to be a group of seven including “big brothers” like India, Brazil and China. “This is because the world has changed,” he admitted.

The growing clout of the BRIC (Brazil, Russia, India and China) countries was evident even more in the WTO talks as India and China stood up to enormous pressure from the US to weaken the Special Safeguard Mechanism (SSM). The SSM enables developing countries to impose additional duties to protect the livelihood of poor farmers from import surges of farm products and their fall in prices. The issue eventually led to the failure of the marathon negotiations on the ninth day.

Of course, it is another story that Brazil broke ranks with other developing country allies in this aspect due to their aggressive interests in the farm export business. Significantly, Brazil’s agri-exports were worth over $58 billion last year.

But the leadership of developing countries taken up by both India and China to protect hundreds of millions of poor farmers had the backing of around 100 countries including the G-33 (the group of countries including India, Indonesia, Cuba, Philippines and Venezuela, all with defensive interests in agriculture), African Group comprising all African WTO members, the ACP group including African, Carribean and Pacific nations, and the small and vulnerable economies (SVEs).

Goldman Sachs, that coined the acronym BRIC in 2001, had predicted last year that that India’s GDP per capita in US dollar terms will quadruple by 2020 from the 2007-level, and also the country’s economy will overtake the US in dollar terms by 2043. Besides, the economic output of the BRIC countries will be more than the powerful G-7 in 2032. It is worth noting that despite having a GDP of Inspite of BRIC’s increasing influence in WTO talks, many experts are doubtful whether it would translate into any immediate gains for these countries.

Says Pradeep S Mehta, secretary general of CUTS International, an NGO tracking WTO talks: “Brazil, India and China would lose only very marginally even if the Doha Round talks were to fail ultimately. Besides, the South-South trade (or the trade between the developing countries) is growing as against traditional rich OECD (Organisation for Economic Co-operation and Development) markets.”Noting the growing South-South trade, the United Nations Conference on Trade and Development (UNCTAD) took the initiative to hold negotiations of the Global System of Trade Preferences (GSTP) among developing countries. Currently, there are 43 developing country members of GSTP, but it does not include China and South Africa.

“Already the third round of GSTP talks is getting closer to completion. When it is completed, the developing country-to-developing country market access issues will be taken care of,” says Nagesh Kumar, director general of the New Delhi-based think-tank Research and Information System for Developing countries (RIS).

Lakshmi Puri, acting deputy secretary general, UNCTAD, says the GSTP countries account for $1.8 trillion in exports and $1.6 trillion in imports. “They account for 50% of South-South trade. Total intra-GSTP exports is $813 billion and in Asia 25% is intra-GSTP trade,” she adds. The GSTP can facilitate South-South trade liberalisation and also help countries like India gain market access in other important developing country markets in Latin America, Asia, Africa and the Caribbean without having to enter into bilateral trade agreements with each of them, experts say. This way, GSTP can also save countries like India from making major concessions to developed countries at WTO.
 

According to UNCTAD, the share of developing countries in world trade tripled from 1995 to $3.7 trillion, or around 36% now. Also, South-South merchandise exports, as a share of total world merchandise exports, stood at 17% in 2006, from 10% around 10 years ago. Interestingly, in 2006, more than 46% of developing country merchandise exports were bound for other developing countries, UNCTAD says. The share of inter-regional trade in total South-South trade also showed an increasing trend and has reached 18% in 2005.

Puri says that from just 38% in 1995, presently around 53% of India’s merchandise exports are currently bound to other developing countries. “While India’s total merchandise trade with developed countries of the world has grown at an annually averaged rate of 12% between 1995 and 2005, its South-South trade has grown faster, at 17%,” she points out. Although India’s foreign trade has increased by over 270% from 1995 to 2005, its trade with developed countries has grown by only 176% over this period as against the 323% rise in trade with the South, she adds.

On the other hand, RIS in a recent policy brief had quoted a World Bank study saying out of the projected the gains of a successful Doha Round global trade deal of $96 billion, developing countries can garner a share of only $16 billion. “The developing country benefits are just 0.16% of the GDP. In per capita terms, that amounts to $3.13, or less than a penny per day per capita for those in developing countries,” the RIS says.

This mean a poor worker or farmer earning $100 a month would see an increase of just 16 cents in 2015, it says, adding that projected per capita income gains of rich countries were 25 times of that made by developing nations. At the recent talks in Geneva, the US has agreed to commit at the WTO level to bring down their overall trade distorting subsidies to $14.4 billion. But this is more than twice the amount of subsidies they are currently giving to their farmers, which is $7 billion, Kumar points out.RIS also says the total tariff losses in industrial goods for developing countries would amount to $63.4 billion, which is around four times of the projected gains.

But according to Lamy, said a global trade deal would result in reduction of import tariffs across the world by half the amount of what is today. “There would be savings in the order to $150 billion in tariffs,” he had said, highlighting that developing countries would be the beneficiaries of two-third of this amount.

Mehta says that, however, despite insignificant gains, India, Brazil and China would continue to support WTO due to its rules-based system that will help solve international trade disputes.

Even Russia, which is not yet a WTO member and therefore, has no vote to support or veto issues, has a big delegation in WTO and participates as an observer, he says. WTO’s dispute settlement system seems to be saving its grace as of now.

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