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TRADE-INDIA: Mixed Feelings Over WTO Failure in Geneva

Analysis by Paranjoy Guha Thakurta

NEW DELHI, Aug 2 2008 (IPS) - The collapse of the World Trade Organisation (WTO) negotiations at Geneva has left Indian analysts with mixed feelings. One view is that no deal is better than a bad one. The other is that because the alternative for developing countries is far worse, India should have been more flexible.

The United States blamed India and China for being ‘overly protective’ in opening their doors to a wide range of imports – from food products to chemicals and automobiles. Many countries from the developing world, on the other hand, argued that farm subsidies in the U.S. and Europe were squeezing their own farmers out of the market, thereby reducing local food production and leaving their countries vulnerable to sudden spikes in food prices, as happened in recent months.

China’s representative at the WTO said that what the U.S. was demanding from developing countries was ‘a price as high as heaven’. India’s Commerce Minister Kamal Nath stated that the U.S. wanted to enhance the commercial interests of its large agri-business corporations whereas developing countries like India wanted to ensure that the ‘livelihood of its farmers’ are protected.

Nath told journalists in New Delhi on Thursday: "The U.S. created the deadlock on an issue which was not trade but related to livelihood of farmers. I can negotiate commerce but I cannot negotiate livelihood security". India, the minister said ‘’is ready to be at the table without compromising on issues which concern poor farmers not only of India, but 100 other developing countries’’.

The breaking point in the Geneva talks came on the exact modalities of devising the Special Safeguards Mechanism 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 percent surge to be a cut-off point whereas the U.S. wanted the proportion to be 40 per cent.

This position of the Indian government has been supported by business associations. "It is disheartening to know that the talks collapsed over the issue of a reasonable trigger point needed to safeguard the livelihood concerns of millions of subsistence farmers in developing countries…Even the 10 percent import surge proposal from India (and other countries) was very liberal," said R. Gopalakrishnan, executive director, Tata Sons Ltd. (one of India’s big business groups) in a statement issued in his capacity as head of a committee on trade agreements of the Confederation of Indian Industry.

The WTO – with 153 countries as its members – is meant to facilitate rules-based international trade that is fair and with grievance redressal mechanisms. 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 at 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.

That the U.S. ended up blaming India and China for the collapse of the talks – ironically described in official documents as the Doha ‘Development’ Agenda – that had started in Qatar’s capital in November 2001, merely reflected the planet’s changing economic equations.

What was more significant was the fact that affluent nations could not ‘buy up’ a few developing countries with special sops as had been done many times during past rounds of negotiations. It has been nearly seven years since the Doha Round of talks has been going on. Two earlier rounds of trade negotiations, the Tokyo Round and the Uruguay Round, had lasted six years and more than seven years respectively. The difference this time is that the developing world has remained united.

Developing countries – from better-off ‘emerging’ economies like China and India to the ‘small and vulnerable’ nations of sub-Saharan Africa – have stuck together through thick and thin and refused to yield ground to the powerful nations of North America and Europe, and Japan.

Special deals with individual countries were sought to be struck. They did not materialise. Sweeteners were held out. They were refused. The U.S. and Europe offered to consider more temporary work visas for skilled professionals that India has been demanding for a while. Four West African nations (Mali, Benin, Burkina Faso and Chad) had mobilised themselves to press for a cut in American government subsidies to its cotton farmers.

There was a glimmer of hope on Jul. 22 when WTO Director General Pascal Lamy (whose current mandate expires at the end of August 2009) suggested that there was forward movement in the talks among trade ministers of 30 different countries and that the U.S. and Europe would pare farm subsidies while developing countries would reduce import tariffs. By Tuesday evening, after nine days of intense negotiations, it was clear that the talks would fail.

When the U.S. said it would reduce the ceiling of its official annual aid to agriculture to nearly 15 billion dollars, a member of the delegation from Brazil sarcastically remarked ‘nice try’ and added that what the U.S. government would be doling out to its farmers was ‘still too high’.

The U.S. is the only country in the world where a higher proportion of its population is behind bars (three percent) than the percentage of people who farm (two per cent). It cannot be denied that at least half of the population of the world outside theU.S. directly depends on agriculture for their livelihood. Three-fourths of the world’s poor survive on farming and 95 percent of the world’s small and marginal farmers live in developing countries. By seeking to subsidise a small section of less than six million Americans, the U.S. has pitted their interests against those of nearly 90 per cent of world’s population.

"I am happy that developing countries could not be divided or pushed around but I am not that happy that the talks failed," says Biswajit Dhar, head of the Centre for WTO Studies at New Delhi’s prestigious Indian Institute of Foreign Trade.

In an exclusive interview to IPS, he added that the collapse of the Geneva negotiations meant that multilateralism in world trade was under severe attack. "In the WTO, each one of the 153 member countries has a vote that does not depend on the size of the country or the volume of its international trade. This ensures that the writ of the large and the powerful does not prevail and is, hence, good for small, developing countries."

Since the end of the Uruguay Round of talks, at least 80 bilateral free trade agreements have been signed and the WTO estimates that this number could hit 400. At the same time, the expansion of world that had been earlier predicted has not materialized. Between 2001 and 2006, world trade expanded from 7.6 trillion dollars to 13.6 trillion dollars. In 2001, the World Bank had claimed that the successful conclusion of the Doha Round would ensure additional trade of 850 billion dollars per year but it has since slashed this figure to only 50 billion.

Dhar argues that the economically well-off nations do not want a level-playing field nor do they want substantive reform in international trading systems despite public professions to the contrary. However, other analysts argue that the position adopted by ‘strong developing countries’ like China, India and Brazil on reduction of farm subsidies in the West will not benefit food-importing developing countries.

"As food prices go up further in the U.S. and in Europe, many poor countries – including quite a few in Africa – that are dependent on food imports, would get hurt very badly leading to more poverty, social tension and political turmoil," says T.K. Bhaumik, chairman, economic affairs committee of the Associated Chambers of Commerce and Industry of India.

Speaking exclusively to IPS, he asked rhetorically: "Why have representatives of only 30 countries been mainly involved in the Geneva talks? What about the interests of the remaining 123 countries? The WTO negotiations have become a joke."

Bhaumik was of the view that trade negotiations are "like a game among unequal participants". He said: "Whereas the rich act as bullies, the emerging developing countries are not exactly holy cows who are doing a lot to improve livelihood conditions for their subsistence farmers. I believe we should not be shedding crocodile tears and should not have too ambitious a target for reduction of farm subsidies in the West.

India’s ‘Mint’ newspaper editorialised on Friday that the "patchwork nature" of bilateral deals "when coupled with a tide of protectionism" would erode the authority of the WTO and its ability to settle trade disputes. Further, "the ability of trade to dampen country-specific macroeconomic problems, for example, due to high food prices, will be greatly reduced".

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BRAZIL: Doha Failure a 'Triumph of Protectionism', Say Trade Sources (https://www.ipsnews.net/news.asp?idnews=43381)