Challenges for INDIA at World Trade Organization

Challenges for INDIA at World Trade Organization ::

Very few among the ardent observers of the World Trade Organization (WTO) had held any hope that the 10th Ministerial Conference held recently in Nairobi would provide some direction to the seemingly rudderless organization. The run-up to the Nairobi Ministerial was unlike any of the previous ministerial conferences as most of the members did not show much interest in drawing up an agenda to discuss and take decisions.

It was not difficult to surmise why developed countries wanted to walk away from the multilateral trading system that the WTO represents, for there were at least two related reasons. The first was that developments in the WTO, especially in the Doha Round negotiations, were forcing the big powers to share the economic pie with not just the emerging economies, but had also raised the spectre of bringing the new aspirants, the so-called Next Eleven and others.

The second, a reaction to the first, is the series of initiatives taken by the US and the European Union (EU) to forge mega-regional trade deals. The first of these deals, the Trans-Pacific Partnership (TPP), a 12-member arrangement initiated by the US, was agreed to two months before the convening of the Nairobi ministerial, while the US and the EU are working to forge the Transatlantic Trade and Investment Partnership (TTIP).

Negotiations in the Doha Round that were conducted under the rubric of the Doha Development Agenda (DDA) challenged the carefully crafted framework of rules that the major economic powers had put together in the covered agreements under the WTO. The DDA, which was launched after the Doha Ministerial Conference in 2001, was put forward as an agenda to rework several of the key agreements, keeping in view the development concerns of the developing countries.

Thus, the agriculture negotiations were mandated to include in the WTO’s Agreement on Agriculture (AoA) instruments that would take cognizance of the food security and rural livelihood interests of developing countries, while at the same time curb the use of trade-distorting subsidies. The latter mandate was focused on a politically inconvenient issue for developed countries, especially the US and to a lesser extent, EU members.

The Doha Ministerial Conference also saw WTO members introduce measures to blunt the market power of large firms in the pharmaceutical industry that they exercised using their patent monopolies. And, finally, India and other developing countries argued for freer mobility of labour in global services trade and to therefore provide an opportunity to their workforce to benefit from trade.

In sharp contrast, the TPP, along with TTIP, has set the stage for the developed countries to do all the talking about trade rules. The emphasis in these agreements is on opening markets without paying any attention to removing the distortions in the markets caused by subsidies and other export incentives. This implies, for instance, that the bane of agricultural subsidies, granted by the US and the EU, that have distorted global commodity markets and hurt small farmers in developing countries can continue unchecked.

The DDA was given the mandate to critically look at farm subsidies given by the US, which had increased from $61 billion in 1995 to $140 billion in 2012 and are threatening to increase further after the 2014 Farm Bill, but with the coming of the new trade arrangements such as the TPP, the US’ subsidy regime would remain unchallenged, paving the way for consolidation of the large traders in commodity markets worldwide.

At the same time, the TPP has set the clock back on making the patents and other intellectual property laws to strike a better balance between the monopoly rights of the owners of intellectual property and the users of the proprietary products. The TPP has proposed to swing the balance in favour of the former, which raises the spectre of increasing prices of proprietary products, whose immediate impact would be felt in the area of healthcare products.

In the face of such perverse tendencies being promoted by the TPP, the reluctance of the developing countries to counter them remains the biggest unanswered question. Through the deliberations on the DDA, they had given themselves a platform to put in place trade rules that provided opportunities to the lesser players to take advantage of trade liberalization.

It was, of course, expected that the dominant interests would resist such a move, which they did quite successfully by stalling any forward movement on the DDA. Ironically, it is the developed world that is now using this lack of progress in the DDA as the reason for abandoning it altogether.

Since the conclusion of the Nairobi ministerial, there have been assessments aplenty as to what was gained and lost through the agreements that the ministers have inked.

If the collective interest of developing countries was to “continue to work on all pillars [of the DDA], keeping its development dimension intact”, as commerce minister Nirmala Sitharaman put it, they should feel hard done by, as the Ministerial Conference was not unanimous in its backing for the DDA. Since the WTO work programme is decided through consensus, the future of DDA does seem to be in jeopardy.

In this context, the comment of the US Trade Representative Michael Froman that WTO members “have been freed to consider new approaches to pressing unresolved issues”, assumes significance. This statement implies that select groups of countries would work for advancing of the trade liberalization agenda in select areas, without involving the larger membership of the WTO.

This so-called plurilateral approach is currently being followed informally by countries (the second phase of liberalization of trade in information technology products, or ITA-II, is one such example), but Froman’s comments indicate that this approach could be mainstreamed. Such a development would surely deal a terminal blow to multilateralism, which is expected to be the spirit of the WTO. It is a paradigm that has argued that trade rules must meet the larger objective of development, which faces an existential threat.

The big test for India and other developing countries is to face up to this challenge.

Biswajit Dhar is a professor at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University.