Does failure of WTO
talks matter?
The Economic Times, July 05, 2007
By Pradeep S Mehta
Since developing
countries like India, China and Brazil do not
stand to gain anything significant from the
Doha Development round, it doesn't matter
whether the WTO talks are concluded now or
later, says Pradeep S Mehta.
The failure of talks on
the WIO Doha Round at Potsdam in the third
week of June made front page news in many
newspapers. But it did not send the markets
spinning, and thus was not an earth-shaking
event.
A friend, in the
engineering business asked me as to what it
means for India and how will it affect him.
His business has been doing well in a buoyant
Indian economy, which includes exports to
other developing countries. Being a complex
situation, one could only tell him that if the
talks do not succeed, then it would hurt the
global economy, and may affect his business to
some extent. The impasse can create some bumps
on the road. It would certainly affect many of
our exports to the rich world, where newer
barriers will be erected to hinder them.
Coming down to some
expert speak, the talks among the four members
of the new quad: the US, Europe, Brazil and
India broke down mainly over farm subsidies.
Alas, the blame is being attributed to India
to a large extent in this geopolitical circus.
Is it right? The simple answer is No. The
demand on reducing farm tariffs in our own
tariff regime was not amenable to our
political managers. They have to get elected
again.
The western media have
parroted the views of the US that their offer
on farm subsidies was linked to our reduction
in industrial tariffs. For us to reduce our
tariffs on manufactured goods is not as much a
problem as is being made out in this mud
slinging game. The issue of greater concern
for us was about reducing our protection to
farm goods imports. "We cannot bargain the
livelihoods of 650 million farmers in India",
said Kamal Nath, the commerce and industry
minister, when he walked out of the Potsdam
meeting.
Of course, every trade
deal comprises a quid pro quo, i.e., we have
to give something to get something. However,
one has to travel in history to understand how
trade-offs have been an intrinsic aspect of
negotiations. One vital example is our
acceptance of the agreement on trade-related
intellectual property rights (TRIPs) as a
bargain to get textiles
and clothing on board in
the Uruguay Round. Even in that we were
cheated, as most textile quotas expired at,
the end of the 10 year period in 2005.
The Uruguay Round itself
was a Herculean task which took over seven
grueling years. The demands of rich countries
have always been pretty one-sided, seeking
greater market access for their goods and
services. Thus whatever could not be sorted
out then was added as an in-built agenda for
future resolution. Agriculture was pushed as a
negotiating agenda in the Uruguay Round by the
net agricultural exporting countries,
comprising a heterogeneous group of developed
and developing countries, where farming is
efficient without depending upon artificial
support.
Agriculture continued to
remain on the front burner, and was included
in the Doha Round, which was launched in 2001.
One great impetus for this was to send a
signal to the world that the 9/11 disaster in
New York has not pushed the world into some
kind of depression. The intent was right, but
how to get developing countries on board,
which had till now not been able to digest the
complex and unfair deal derived from the
Uruguay Round. This round had launched the WIO
in 1995.
Thus the Doha Round was
christened as the Doha Development Agenda,
while many are still puzzled about the
outcomes for development in the framework
deal. One major issue to achieve development
in poor countries is to cut down protection to
farm goods in the west. In fact, agriculture
has always been the deal breaker in trade
talks, and it was a sense of deja vu when the
Potsdam talks failed.
Frankly, it was
difficult for the US to move forward because
firstly, the fast track authority to the
President to negotiate trade deals was
expiring end-June. Besides that, the
Republican government led by George Bush now
has a Democrat dominated Congress, and the
United Progressive Alliance (UPA) government
led by Manmohan Singh in India, has faced a
series of debacles in state elections. In the
given situation; it is unlikely to expect any
creative thinking from the two nations which
may have greater economic logic but
politically unviable. There will be a new
President in the US by November, 2008 and a
new government in India by 2009.
The government, which
comes to power in India in 2009, will have a
similar approach to the Doha round. We would
want the rich to put money where their mouth
is, i.e., deliver on development promises.
This is our commitment to the developing
world, to whom we have a responsibility. As
ever, agriculture will be a key issue.
As far as domestic
agriculture is concerned, we have offensive
interest in third country markets, and there
is a great potential. As it is, we are today a
net agriculture exporting country. But our
exports to third countries are not competitive
due to subsidies in the west. Among the
potential high growth areas, rice (not basmati
alone), dairy products, fruits and vegetables
are some of them. However, we need to address
some domestic issues to realise the full
potential.
Other than expanding
agriculture investment, we need to improve
infrastructure and establish a good supply
chain management system. Here, opening up our
retailing sector to large companies will be of
great help, as they can create the enabling
environment, which will
capture economies of scale to improve the
whole supply chain system. Consequently,
farmers would also benefit by getting higher
farm gate prices and consumers would benefit
by getting quality products at lower prices.
Our manufacturing sector
is progressing pretty fast, and to support
that we have been unilaterally liberalising
our tariff regime and promoting special
economic zones. On industrial products, the
tariff is on an average 11.2%. This helps both
our small-scale and large-scale sectors by
enabling them to get intermediates and inputs
from the best source and at the lowest cost.
In services too, we have been liberalizing
unilaterally, which is helping us to improve
our competitiveness. Pundits have analysed our
gains of a completed Doha Round to be in the
range of $3.5 billion; for China, $1.3 billion
and for Brazil, $3.9 billion. Given these
small gains, it will hardly matter much
whether the Doha Round is completed now or
later.
The author is Secretary General, CUTS
International, a leading research, advocacy
and networking group and can be reached at
psm@cuts.org
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