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The
indefinite suspension, on July 1, of the Doha Round
of world trade negotiations calls for some rethinking
on the expectations India has from a new multilateral
agreement. The suspension proved unavoidable when it
became clear that the US was offering too little by
way of reduced protection for its own agricultural sector,
while demanding large concessions in terms of agricultural
and non-agricultural market access from the rest of
the world.
The US offer on reduction of support and protection
to its own agriculture was absurd. The US and the EU
have increasingly resorted to substituting trade-distorting
support with support measures defined (incorrectly)
by the Uruguay Round as non-trade-distorting. Even while
exploiting this loophole in the WTO clauses, the US
is unwilling to reduce the total support it provides
through trade-distorting measures.
WTO negotiations regarding tariffs, subsidies and support
are normally conducted with respect to the maximum level
to which a country is allowed to take its tariffs or
support. In keeping with that, the US offered to reduce
the ceiling on its permitted level of trade-distorting
support to $23 billion. This, however, meant nothing
for actual trade since, in 2005, the level of total
trade-distorting support to agriculture in the US was
$19.7 billion. Developing countries wanted an offer
that would establish the ceiling below this level, so
that it would make some difference to actual farm support
in the US. But, unwilling to upset its numerically small
but politically strong farm lobby which awaits a new
farm bill in 2007, the US refused to budge. On the other
hand, it demanded huge concessions from the developing
countries in terms of reduced tariffs and enhanced market
access for both agricultural and non-agricultural products
and services.
This turn of events was surprising, since in the past
the US had always portrayed the EU as being the stumbling
block to realizing an agreement on agriculture. Writing
in the Financial Times of October 10, 2005, the then
US Trade Representative Robert Portman declared US intentions
of realizing ''a 60 per cent cut in ‘amber box' support
-- the most distorting type of subsidies -- over the
next five years'', and a 50 per cent reduction in the
cap on the less trade-distorting support under the ''blue
box''. Based on this projection, he argued that the agricultural
market access offer made by the EU at that time (which
envisaged a maximum reduction of 50 per cent for very
high tariffs and a reduction of the percentage of ''sensitive''
products, subject to smaller tariff cuts, from 10 to
8 per cent of tariff lines) was woefully inadequate.
The US wanted a reduction of 90 per cent in maximum
tariffs and a decrease in the number of sensitive products
to 1 per cent of tariff lines. In its view, the EU proposal
did not come ''close to meeting the expectations all
of us have on market access'', since it implied only
an average reduction of 24.5 per cent in EU farm tariffs.
By the time the mini-Ministerial met in Geneva in late
June 2006, the EU had agreed to reduce average farm
tariffs by 51 per cent, as compared with developing
country expectations of 54 per cent and the US demand
of 66 per cent. This was a significant step forward.
It was the US, now represented by Susan Schwab, that
turned reluctant to reduce trade-distorting support
for agriculture.
This swapping of roles between the US and the EU suggests
that the former is not particularly bothered about arriving
at an agreement. It obviously believes it can win significant
gains in trade without making concessions that would
hurt its domestic interests. The reasons are many, but
prime among them is the success the US has registered
in signing bilateral trade agreements with a number
of countries with a host of WTO-plus features. Before
2000, the USA had Free Trade Agreements (FTAs) only
with Canada, Israel and Mexico. Since then it has negotiated
FTAs with Australia, Bahrain, Chile, Jordan, Malaysia,
Morocco, Oman, Peru, Singapore and members of CAFTA.
And negotiations are on with Columbia, Ecuador, Panama,
South Korea, Thailand and the UAE. Fearing loss of access
to what has become the most important market for many
of them and in the hope of receiving special treatment
for their exports in the US, countries have been willing
to offer US producers significantly enhanced access
to their markets (besides a host of other concessions).
In practice, however, these expectations have been belied.
Some of the FTA participants, including traditional
partners like Mexico and Canada, and new partners like
Australia and Singapore, have in fact seen a decline
in their share of the US export market. A few countries
like Peru and Chile have only managed to maintain or
slightly improve their market share. On the other hand,
non-FTA participants like China and India have increased
their share of the US market significantly.
This has an obvious lesson for India. Faced with the
suspension of the Doha negotiations and recognizing
the importance of the US market for the country, especially
for services exports, there is a body of opinion which
holds that India should join the FTA bandwagon. The
experience of other countries which have signed such
agreements indicates that such a conclusion is not warranted.
Nor is the view tenable, that if bilateral or regional
trade agreements involving the US and the EU are of
no great benefit, India should push for the resumption
of the Doha Round at any cost. The suspension of the
Doha Round, in fact, has a larger message for India's
effort to be seen as a promoter of freer trade. Unlike
in earlier trade rounds when the world trade regime
was shaped largely by the US and leading European nations,
India and Brazil were included this time, initially
in the ''group of five interested parties'' or FIPs (along
with the US, EU and Australia) and subsequently in the
informal Group of 6 (with the US, EU, Japan, and Australia),
which were expected to lead the negotiations. Brazil
and India were presented as representatives of the developing
world: a position they, though not all developing countries,
endorsed.
In the event, an element of hierarchy was added to the
already complex and opaque negotiating process, which
left most negotiators inadequately informed of what
was going on. As presumed representatives of the developing
countries in the G-6, Brazil and India were expected
to offer preliminary concessions in return for potential
gains, and then report the possible deal to other developing
country representatives to win their endorsement through
persuasion or manoeuvre. In some cases, the concessions
granted were last-minute surprises, as was the case
with ‘Annex C' on services at the Hong Kong ministerial.
The fact remains that the more than 100 developing countries
who are WTO members differ substantially in terms of
production and trade structures, and therefore trade
concerns. Most of them, however, are characterized by
two features: backwardness, as measured by their development
distance from the US and the EU; and agrarian distress,
given a slowly growing, crisis-ridden agricultural sector.
This warrants a defensive strategy to protect livelihoods
and food security, even when trying to win greater market
access in agriculture and other areas.
Unfortunately, India's growth strategy in the last couple
of decades has meant that growth in output has come
largely from the non-agricultural sector. In fact, India
has developed offensive interests in manufacturing and
services, particularly the latter. As a result, even
though India's interests in agriculture are defensive
and crucial to the majority of the country's population,
the country's trade negotiators seem more willing to
provide greater market access to agricultural exports
from the developed countries than are other developing
countries. Moreover, pushing this agenda would make
it impossible to ensure unity among the developing countries,
many of which are keen on defending livelihoods and
revitalizing agriculture with safeguard mechanisms,
protection for special products, and a reduction of
agricultural subsidies and other forms of support in
the developed countries.
Many developing countries were critical of the process
leading to the controversial July Framework, which provided
the basis for huge concessions on non-agricultural market
access by developing countries without equivalent reductions
in agricultural support and protection in the developed
world. The Framework was drawn up largely through discussions
among the five FIP members. The recent suspension of
talks due to US intransigence only goes to prove that
Brazil and India cannot influence the major powers,
and are merely instruments to win developing country
support for an unequal deal. Allegations of pursuit
of self-interest are bound to proliferate.
India should shift its focus from serving as facilitator
or catalyst for an agreement, to asserting its solidarity
with the developing countries. Solidarity among the
developing countries is the only hope for garnering
a positive outcome from the Doha Round, if and when
it is revived. India must, therefore, withdraw from
a process that is driving a wedge between developing
countries, and providing an opportunity for the US to
push harder to protect its own interests. It is time
to change course.
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