Let nations trade
Financial Express, August 31, 2008

By Siddhartha Mitra

Globalisation is a much punched bag; the xenophobic traits that all humans possess in some measure actually encourage such punching. Yet most people and the many anti-globalisation bodies they form do not realise that the world and they themselves would be much better off if their punches had been directed elsewhere.

A wonderful actor might be involved in a flop; the problem in most cases is with the plot and sometimes the insipid co-star. Sensible producers still continue to line up outside his door armed with better plots and promises to hire more competent actresses.

Such sensible producers offer a contrast to anti-globalisers who despite the association of trade with rising affluence in many parts of the world focus only on cases where it has been associated with deepening deprivation and indebtedness. They also forget to examine the often naughty and defaulting hand maidens of liberalisation — infrastructure, governance and human capital formation — but take the easy way out to blame liberalisation itself.

All of us trade without realising it. People like me sell our human capital services or skilled labour for a monthly salary. With our salaries we satisfy our varied need for services (that of a cook, a chauffeur, a barber etc) and commodities (food items, durables etc). This in effect is trade in the same sense as that which occurs between nations: we trade our skilled labour for all the items we need. Nobody deters individuals from trading. In fact their very survival depends upon the ability to trade. None of us living in this modern age can even think of producing the hundreds of commodities that we use every month, from staid trash bags to fragrant shaving cream, on our own.

Moreover, despite trade among individuals, there are poor people just as we have poor nations in an interlocked trading world. Most people are poor because they cannot offer anything that is valued by others. The illiterate villager, crowded out of his land by the multiplication of his kith and kin, might have nothing to offer to other rural or urban dwellers and finds himself condemned to poverty.

In certain cases, there are too many people offering services of the same kind (such as cleaning, washing, sweeping, even digging ditches) — life is thus reduced to a cruel lottery with a fraction of those offering a service actually managing to eke out an income through its provision, leaving others unemployed and impoverished.

The argument being made is as follows: just as the essentiality of trade among individuals for their survival is not in doubt, similarly the potential and wide ranging therapeutic effect of international trade on nations should not invite scepticism.

Just as trade among individuals cannot lift everybody of poverty — otherwise India would never have seen 50% of her population living below the poverty line in 1972, trade among countries might not make all countries rich and with good reason. Such inability does not imply that we point our guns at ‘globalisation’ per se; instead it is essential to ensure that the mentioned hand maidens do their job. Trade is a harbinger of development but only when the hand maidens stop sulking and start delivering.

The following example, in the form of a fable, might cure doubting Thomases of some of their scepticism about the benefits of trade among communities/nations:

In the valley of flowers everything else has stopped growing. The human inhabitants, on the verge of starvation, have given up all hope when in walk a bunch of explorers from a neighbouring land laden with food, drink and other provisions. They are quite taken by the wild flowers of different hues and are ready to pay for these in terms of food and drink, which in any case they have in surplus. The flowers they buy enrich their lives; at the same time, inter-community trade saves the inhabitants of the flowering valley from starvation.

This fable, with a Bollywood type saccharine ring to it, nevertheless is both illustrative and representative of the huge potential benefits that might flow from trade — gains that have been exploited by South Korea, then China and finally India and Vietnam to grow and escape from the poverty trap. This is not to say that international trade will be the saviour under all circumstances. As pointed out earlier, the presence of opportunities for trade among individuals, though essential for their survival, is often not sufficient; it is then foolish to expect international trade to have all the answers. Just like poor individuals, poor countries may remain so because they have nothing to offer the rest of the world.

Trade in this case might just become a distraction; it results in no additional income but introduces countries to the attractions of the global market place. Some borrow, spend on these attractions and get mired knee deep in debt. Is this any different from a man borrowing a huge amount from the local money lender and going on a spending spree? Moreover, is this a good reason for every country to close its trading doors to the rest of the world? Of course not; the potential benefits dwarf the losses that might result from misuse of the trading instrument. All of man’s modern inventions—the telephone, television, internet, credit cards to name just a few— can and have been misused. But given the huge benefits that they confer on society and humanity, nobody calls for a ban on these; their use and popularity increase by the month. Why should ‘international trade’ be the odd one out?

The author is Director (Research), CUTS International, a leading research, advocacy and networking group and can be reached at sm2@cuts.org

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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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Workshop on South Asia
Newindpress,August 20, 2008

KOCHI: The International Centre for Economic Policy and Analysis (ICEPA), Cusat, and CUTS International, Jaipur, and Friedrich Ebert Stiftung (FES-India) are jointly organising a national workshop on `Regional economic cooperation in South Asia' with focus on `Indo-Sri Lanka trade' at the School of Management Studies on August 21.

The workshop is part of a series of national consultation aimed at assessing the prospects of India's approach towards regional economic cooperation in South and South-East Asia in bilateral and regional settings. The recommendation will be taken forward to various levels, including the Centre and inter-governmental bodies.

India and Sri Lanka are negotiating a Comprehensive Economic Partnership Agreement (CEPA) to build upon the India- Sri Lanka Free Trade Agreement by widening the coverage through inclusion of trade in services, investment and economic cooperation. The discussions are being held in three regional centres in the country.

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Govt officials to undergo training by Raj-based NGO
Business Standard, August 17, 2008

Non-governmental think-tank on trade and regulatory issues CUTS will organise a training programme in Jaipur from August 18-21 for middle-level Indian government officials and business executives.

The training programme 'Strengthening Skills on Commercial and Economic Diplomacy' is supported by the Department of Commerce, Government of India and seeks to fill the vacuum that exists in terms of an absence of institutional base on commercial and economic diplomacy, CUTS said in a statement here today.

Governor of Rajasthan S K Singh would inaugurate the event which would seek to imbibe in the participants skills on commercial and economic diplomacy through lectures, simulation exercises, group discussions, among other things.

The programme would cover various aspects of commercial and economic diplomacy such as opportunities and challenges of India in the global economy in 2020, trade promotion activities from Uruguay Round to Doha Round and simulation exercises on trade and investment negotiations.

"It was felt that developing country representatives often do not perform at the same level of efficiency and effectiveness as their counterparts from developed countries in the application of various tools of commercial and economic diplomacy," the statement said, adding such programmes are important in imparting government officials with the requisite knowledge and skills.

Former Indian Ambassador to the GATT (General Agreement on Tariffs and Trade) B K Zutshi, Former Commerce Secretary of India S N Menon, Senior Fellow, DiploFoundation and a former Indian Ambassador to Germany Kishan S Rana would be among few experts at the training programme.

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`I can't set the timeline for conclusion of the Doha Round'
Business Line, August 15, 2008

At a time when the global economy is set for a slowdown, particularly in the developed countries such as the US and the European Union (EU), the call for opening up trade is not heeded and the tendency is to erect barriers, both tariff and non-tariff, to protect one another from the blast of competition.

But it is precisely in these troubled times that the world needs a rule-based multilateral trading system where the gains of liberalisation and economies of scale would help many a nation in weathering their domestic troubles - this is applicable to both developed and developing countries.

Yet, in an irony of sorts, the members of the World Trade Organisation (WTO), a group of 153 countries, failed to evolve the modalities or parameters for such liberalisation in agriculture and non-agricultural market access (NAMA) at a crucial mini-ministerial meeting in Geneva during end-July.

It is not for the first time that the talks among trade negotiators under the Doha Round of the WTO have failed; the deadlines have been repeatedly missed - Cancun (Mexico) in September 2003, Hong Kong in 2005, and subsequently in Geneva (2006) and Potsdam (Germany) in 2007.

However, the WTO Director- General, Mr Pascal Lamy, who was in the Capital recently to attend the silver jubilee function of CUTS (a civil society organisation) and also to try and pick up the thread of broken talks with the Indian authorities and to gauge their moods, seemed unfazed by the string of failures to arrive at a consensus on contentious issues.

Being an avid jogger and indefatigable interlocutor in the adroit art of bringing warring members to the negotiating table to try and succeed in the trade opening exercise, Mr Lamy concedes that though the opening up of markets spawns benefits to many, it also exacts adjustment costs which cannot be ignored.

He avers that opening up of trade works for development and removal of poverty but only "if we address the imbalances it creates between winners and losers, imbalances that are all the more dangerous the more fragile the economies, societies or countries."

Not the one to ignore detractors who upbraid the WTO as an octopus organisation, Mr Lamy contends that WTO is "a consensus-based member-driven body, providing the basis of a system in which each country - even the smallest - counts. This is where its legitimacy lies. No Security Council in the WTO and no board of directors".

In his sojourn interspersed with a spate of meetings and interviews, Mr Lamy spared half-an-hour to talk to Business Line.

What follows is Mr Lamy's take on what happened in Geneva and what he is doing to make members meet so that they all can deliver results to bolster the multilateral trading system:

"After the talks broke down in with the membership and they all said that what was there on the table remains on the table, so conclusion of the Round is still in people's minds.

"The negotiations stumbled on the issue of the special safeguard measure (SSM) but designing a special safeguard measure to protect developing countries against import surges in food remains part of the "to do" list. Given the differences in positions between India and the US over the volume of imports which would be the trigger for the safeguard measures and on the size of the remedy, I decided to visit India and the United States to see how the differences could be bridged.

"My objective of the visit to Washington is the same as my mission here. Look back at what happened on the SSM - is it a technical problem or political problem? Has India well understood what the US concerns were? Has the US well understood what India's concerns were?

"We have a long history of safeguard spanning 60 years in the GATT-WTO (GATT is a predecessor to the WTO). The discussion has been on not whether there should be safeguards or not but what should be the parameters so that they are used in exceptional circumstances without disturbing normal trade. This time, what is normal and what is exceptional is where the differences could not be bridged.

"We have a single undertaking and the rule is that nothing is agreed until everything is agreed. Within this single undertaking, it happened that agriculture and industrial tariffs (NAMA) should go together as set out in the famous Hong Kong Declaration in Para 24. Once modalities in these two are framed, other issues like rules, services and anti-dumping would automatically get moving.

"At the July meeting, 17 out of 20 items in the list on the agenda were agreed. Later, the reports of the Chairs of Agriculture and NAMA, released in August 11 and 12 in Geneva, faithfully reflected the state of negotiations. The ministers did not do item number 18 - whether this is a sort of insurmountable hurdle or whether this hurdle can, with a little bit of time, understanding, talking, research and negotiations, be overcome remains to be seen. Now we still have issues such as cotton subsidy in the US, and intellectual property rights.

"No doubt, there has to be an agreement on slashing down subsidies on cotton by the US as they are more than corn or peanuts. We did not get there because of the linkage between productspecific caps in the amber and blue box (permissible subsidies).

"G-7 process composing Australia, Brazil, China, the European Communities, India, Japan and the United States works in concentric circles within which possible compromises are presented and these float in the G-7 and go to G-30 or G-35 (five times bigger) and if the talks float there too, they go to the whole WTO membership numbering 153 (five times bigger).

"I am not in the betting business. Negotiators are in the business. I am in the business trying to make things happen from the moment members want me to help them trying to get there. I can't set the timeline for conclusion of the Round.

"Contrary to what western and sometime Indian media write, China is a very active participant in the WTO negotiations. "Any WTO agreement will have to be ratified by the US Congress like it has to be ratified by constitutional process in India or Israel. If you look at the history of trade negotiations, no trade treaty has been agreed by the US Congress on a partisan basis. It has always been part-Democrats and part-Republicans."

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India ready for talks if Lamy gets positive U.S. response
Business Line, August 14, 2008

NEW DELHI: India on Wednesday reiterated its willingness to join the global trade talks if World Trade Organisation Director-General Pascal Lamy gets a positive response from the U.S. next week for resolving the Doha deadlock on safeguards for farmers in developing countries.

“We have always said if the WTO Director-General feels there is a chance for [another] opening, then we will be prepared to come again to Geneva,” Commerce Secretary G.K. Pillai told journalists on the sidelines of a FICCI-CUTS conference here.

He said Mr. Lamy “would get back to us” after his visit to the U.S. and consultations with others.

Participating in a panel discussion, Mr. Lamy said there was a critical need for building consensus “as there is no other option available at this time.”

He said