Holding the line at WTO

By C. Rammanohar Reddy

The visit last week to India by Mr. Robert Zoellick, the U.S. Trade Representative, has catalysed the domestic debate on India's position on the launch of a new round of trade negotiations at the World Trade Organisation. Unfortunately, the debate has generated more heat than light and, characteristic of most of the discussion on WTO affairs in India, there has been a great deal of misinformation and plain tendentious analysis.

It seems it is not just Mr. Zoellick who is warning India about its position at the WTO. The burden of domestic ``expert'' opinion is that, one, India is in danger of being isolated at the WTO because of its opposition to a new round and, two, we should therefore lose no time in joining others supporting the launch of a round at or before the WTO ministerial meeting in Doha this November. The somewhat unique feature of this advice/opinion is that it is never clearly argued how it suits India's interests to endorse a WTO round and what precisely should the Indian agenda be for such negotiations.

Rarely has a seemingly innocuous term like a round evoked so much tension. There is no definition of a round at the WTO. But what would be special about a round is that there will be a time-table for conclusion, give and take across sectors and in the end a single package has to be agreed to. The memory of the Uruguay Round still runs deep in most developing countries, which is why a ``round'' causes so much discomfort.

Considering the domestic hostility to the WTO, which cuts across all sections of Indian society other than the body of trade experts, it will be political suicide for the Central Government to now agree to a comprehensive negotiating agenda that could imply substantial trade liberalisation. A part but not all of the anxiety about the WTO may be born of much misinformation. For instance, when the Chief Minister of Punjab attributes the problems of agriculture in the State to WTO agreements and compares the WTO to the ``monkey man,'' Mr. Prakash Singh Badal has clearly got it completely wrong. (The only remote connection Punjab's farm problem has with the WTO is the difficulty in exporting cereals.) But until such fears are cleared one has to take as given that no government can willingly sign on to a huge negotiating agenda at the WTO.

This political reality apart, the other question is what would India want from WTO negotiations? Three broad areas can be identified. First, agriculture where in the post-QR area India would like to protect its farmers from import competition. Some would also argue that India needs to find greater market access for its agricultural products in the protected markets of the EU and the U.S. Second, the service sector, where India's foremost interest would be in negotiating for freer movement of its skilled personnel on temporary assignments abroad. The third broad area of interests is in getting imbalances and defects in the existing WTO agreements corrected. That would include obtaining faster removal of U.S and EU quotas on textiles; more transparency in imposition of anti-dumping duties, modifications in the TRIPS agreement to align it closer to the needs of developing countries and other concerns all of which are contained in the rubric of ``implementation issues.''

If this is a list of India's interests what is the Government saying at the WTO about them? It has been saying that it is willing to fully engage in negotiations on agriculture and services. These are two sectors where it was decided as far back as 1994 that new talks would start in 2000. This is the ``built- in'' agenda. By any reasonable standard the built-in agenda of these two issues plus an ongoing review of many other WTO treaties make for a heavy agenda and in normal circumstances would constitute a WTO round in itself.

The Commerce Minister, Mr. Murasoli Maran, is therefore quite correct in refusing to reconsider the Indian position. And it is wrong for critics to say that India is being obstructionist at the WTO or that it does not support future negotiations.

There can be other items on the agenda, where India can both gain and lose. Industrial tariffs is an example. India has an interest in lowering the high customs duties on many products that it exports - leather, textiles and sugar are three examples. But talks on tariffs can also involve concessions on our side since India has among the highest import duties in the world. It may therefore well have to lower these duties considerably. Therefore, in addition to talks on agriculture and services India may have to agree to negotiate in other areas. There is nothing wrong in this approach provided the Government expects that the net result will mean more gains than losses.

But for India to agree to a widening of the negotiating agenda, it must get something in return. The bottomline here is a downpayment on the implementation issues, which was what all WTO members decided on in May 2000. But these promises have not been kept and there is no sign that they will be delivered before Doha. It is therefore wrong to agree, as some have done in India, for implementation to be made part of the next round.

Each country/bloc has its own conception of what the next WTO round should be about. India and many developing countries say agriculture, services with implementation beforehand. But they do not at this point call it a ``round.'' The U.S. says a round should be talks on the ``built-in agenda'' plus government procurement, trade facilitation and in a narrow form foreign investment and competition policies; the Cairns group of agricultural exporters says an ambitious agenda for agriculture plus anything that will make farm talks palatable for other countries; some Latin American countries do not mind a substantive agenda because they see this as a counter-balancing of the U.S. domination of the proposed free trade zone of the Americas.

And finally there is the European Union, which is the prime candidate for being called obstructionist at the WTO, because in order to make agriculture talks acceptable at home it wants a huge agenda covering foreign investment, competition policies and environment - all in addition to the ``built-in'' agenda.

Therefore, when there are clamours for India to join a new round, what kind of round are we talking about? And why is the present Indian position wrong? Neither question is ever answered by the critics, most of whom offer no reason for endorsing a (large) WTO round of talks other than that the U.S., EU and a number of other countries have already done so.

Finally, there is the ``China factor'' that is often mentioned. Even before it has become a member of the WTO, China has endorsed a new round. It is in China's interests to do so because a new round of talks would offer it a chance to re-negotiate the onerous terms of accession to the WTO that it was forced to agree to. Second, the endorsement last June is also widely seen as a small favour for the WTO Secretariat (an ardent supporter of a round) in exchange for helping speed up China's entry. It therefore makes little sense to say that India must support a new round because China has already done so.

Although there is still a great deal of uncertainty about what the final outcome in Doha will be, India may in the end well be compelled to agree to the launch of a new round with an agenda, say, that is closer to the U.S. than to the EU Even so, is it not better to stick to the very end to our position based on our trade interests, rather than throwing in the towel just because the U.S. and the EU want India to do so?

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