:: Paranjoy Guha Thakurta

Recession, protectionism make WTO talks useless

Paranjoy Guha Thakurta

Augest.02 : Commerce and industry minister Anand Sharma has, of late, seemed rather keen on kick-starting the stalled negotiations at the World Trade Organisation (WTO). India will be hosting a "mini-ministerial" meeting of important trade officials in September. But the chances of the WTO’s Doha Round of talks, that started in the capital of Qatar in November 2001, concluding in the near future are rather remote.

All developing countries, including ours, have a huge stake in a fair and equitable, rules-based international trading system with a transparent grievance redressal mechanism. This was promised by the WTO. But promises are, well, promises! The differences between developed and developing countries on key issues appear so irreconciliable at present that the WTO — with 153 countries as its members — is in danger of becoming an organisation that merely hosts talkathons and helplessly watches as intransigent negotiating positions are adopted.

An important reason why trade talks are unlikely to be concluded in a hurry is the ongoing worldwide recession. Despite a lot of rhetoric about the need to shun policies of protectionism, facts speak otherwise. Countries are not exactly bringing down tariff walls. On the contrary, most nation-states — including those in North America, Europe and Japan — are buckling under domestic political pressures to protect jobs at home, even in inefficient industries. As evidence, one only needs to look at the American government’s bail-out package for General Motors.

The stalemate in trade negotiations and the rise in protectionism in the West are hardly surprising. For the first time since statistics relating to world trade began to be compiled some seven decades ago, world trade will be coming down during the current calendar year. In fact, on July 22, the WTO itself upped its estimate of the fall in world trade in 2009 from nine per cent to 10 per cent. Under the circumstances, all contentions about reviving the Doha Round of negotiations would be filled largely with platitudes.

Speaking at a meeting of the Federation of Indian Chambers of Commerce and Industry on July 29, commerce minister Mr Sharma said he was looking forward to hosting the September "mini-ministerial" meeting of the WTO that would include, among others, trade ministers from the US and the European Union, to put the derailed global trade talks back on track. India had proposed to host this meeting at the Group of Twenty (G-20) summit held in April at London.

"Technical discussions at WTO will resume this month. By the end of July we can expect to have the roadmap for the negotiations. Full fledged negotiations will most probably resume in September… But a quick closure is unlikely, given the large number of issues remaining unresolved. A lot of momentum has been generated to re-start the Doha discussions but the road ahead is filled with challenges", Mr Sharma remarked.

He added that there had been demands for a "new approach" to the negotiations, one that would skip the "modalities" stage and move straight to "notifying individual commitments" by specific countries. "These new approaches are all a euphemism for getting members to reveal where their sensitivities lie. This is not acceptable to India and the majority of the WTO members. There must first be agreement on modalities", Mr Sharma bravely declared, pointing out: "It will take time and intensive dialogue to find solutions and to attain on overall balance in the final outcome. The Doha Round has seen eight years of hard negotiating work. Selectively re-opening issues can jeopardise this delicate balance".

What he was implying was that the developed world would perhaps not succumb to the "divide and rule" policies of the rich nations that had earlier been successful. At the same time, what cannot be denied is that the North and South have remained exactly where they have been for more than a decade on the contentious issues of reduction of farm subsidies in rich countries and protecting the interests of farmers from import surges as well as on the question of reduction of duties on selected industrial products.

In July 2008, the WTO talks at Geneva broke down on the issue of a Special Safeguards Mechanism (SSM) in the Agreement on Agriculture that allows a country to temporarily increase customs tariffs in response to a surge in import volumes or a sharp decline in prices. India and China wanted a 10 per cent import surge to be the cut-off point whereas the US wanted the proportion to be 40 per cent.

The other controversial issue relates to cotton subsidies. Four West African nations (Mali, Benin, Burkina Faso and Chad — called the C4) want a sharp cut in US government subsidies to cotton farmers in that country. In October 2007, the WTO had ruled against the American government’s subsidies and export credit guarantees to its cotton farmers and categorically stated that these did not comply with WTO regulations. The C4 countries believe that US subsidies have almost completely destroyed the livelihood of an estimated 20 million cotton farmers in West and Central Africa by pricing them out of the market because their raw cotton is not internationally competitive.

India, and close to a hundred developing countries, have consistently held the view that sovereign nations have the right to protect livelihoods (not trade) by helping subsistence farmers (not giant agri-business corporations). It has been nearly eight years since the Doha Round of talks began. Two earlier rounds of trade negotiations, the Tokyo Round and the Uruguay Round, had lasted six years and more than seven years respectively.

In the Doha Round, the concerns of the poor countries were sought to be addressed through "special and differential treatment" when it came to reduction of import tariffs. It was also stated that there would be "less than full reciprocity" between developed and developing countries when it came to cuts in import tariffs. In other words, rich countries were supposed to reduce duties relatively more than poor nations. None of this has happened and appears unlikely to take place in the near future.

Paranjoy Guha Thakurta is an educator and commentator