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Business News/ Opinion / Online-views/  Outside in | Whose WTO is it anyway?
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Outside in | Whose WTO is it anyway?

The view in New Delhi is that it is time to put the 'world' back into the World Trade Organization and 'development' into the Doha Development Round

European and American agricultural subsidies were the biggest sticking points at the World Trade Organization in Geneva, with developing countries insisting that the rich had to cut these before the poor started moving on their part of the deal. Photo: AFPPremium
European and American agricultural subsidies were the biggest sticking points at the World Trade Organization in Geneva, with developing countries insisting that the rich had to cut these before the poor started moving on their part of the deal. Photo: AFP

Sometime in the mid-noughties, Kamal Nath, who was then India’s trade minister and a vocal and voluble spokesman for the world’s poorer nations, happened to be on a train journey from Paris to Brussels with his friend, and sometime-sparring partner, Peter Mandelson. The architect of New Labour’s 1996 election victory in Britain was Europe’s trade commissioner at the time and was trying to get the US and India to agree on the rules for world trade—an agreement that was elusive then and, after last week, looks slippery now.

During that train journey, Nath happened to spot some cows—a common sight across Western Europe’s rural landscape, except that the Indian minister found them to be fat, very fat.

“We looked at the fields and the agriculture I saw, Peter knows, were some very fat cows fed on subsidized food," Nath told a reception at the Commonwealth Secretariat in London in 2007. “That’s my argument because these were really fat cows, couldn’t stand on their legs, their legs were giving way; (they were) force-fed. That subdued Peter a bit. He did not know how to defend that."

Mandelson, whom the Indian described as a “friend, co-negotiator and conspirator", would have been subdued for a very good reason. After years of hard negotiations, a set of trade rules seemed tantalisingly within sight. Negotiators had traversed the globe from Punta del Este to Singapore, Doha, Seattle and ended up on the shores of Lake Geneve.

There, but not yet.

European and American agricultural subsidies were the biggest sticking points at the World Trade Organization (WTO) in Geneva, with developing countries insisting that the rich had to cut these before the poor started moving on their part of the deal.

Those talks famously collapsed in July 2008 with the US and India accusing each other of being the deal-breaker.

Last week, the tables were turned, with India having to defend its food stockholdings for the poor. It told WTO it will not sign a Trade Facilitation Agreement (TFA), which has been driven by wealthy nations, because there has been little matching progress on the food security aspect of the agreement on agriculture.

Because WTO works on the principle of “explicit consensus", any member in theory can torpedo a deal. That India has blocked the deal, however, should not have come as a surprise.

The reason for it is a long history of “trust deficit" between US-led economically advanced nations on the one hand and the developing countries on the other, going back to the early days of the Uruguay Round of trade talks in the 1980s that led to the creation of WTO in 1995 and the launch of Doha Development Round in 2001.

This trust deficit was reflected powerfully in India’s statement at WTO: “There is a growing disenchantment, anguish and anger in domestic constituencies and a sense of déjà vu as once again they see the interests of developing countries being subordinated to the might of the developed world."

“In rounds after rounds, developing countries have been called upon to concede more and more, with little being offered in return."

This is strong stuff by diplomatic standards but it is worth remembering the reason why China and India walked away from the negotiating table in 2008: that too was over the issue of protecting the rural poor, through a Special Safeguard Mechanism, a tool that would allow developing countries to raise tariffs temporarily to protect their poor from sudden import surges or price falls. It is not as if India is principally or implacably opposed to trade facilitation, which would simplify customs rules and facilitate the speedy release of goods from ports and airports.

“Indeed, India has already adopted many aspects of trade facilitation already, including at integrated border checkpoints," said an Indian economist who has been part of Indian trade negotiating teams and spoke on condition of anonymity. “This is an instance of politics determining economic considerations."

The issue that now rankles with Europe and the US is a clause in the Agreement on Agriculture that stipulates that subsidized public stockholdings of foodgrain by developing countries must not exceed 10% of the value of their total foodgrain production. Exceeding the cap can prompt countries to lodge a complaint with WTO.

Rich nations want this exception to end in 2017, but India, in common with members of the Group of 33 (G33) nations, does not like the idea of a time limit and wants it to be open-ended. In addition, the fact that the subsidy is counted on the basis of prices set in 1986-88 means developing countries are finding it increasingly hard to stick with the subsidy cap. Interestingly, this proposal was already in the 2008 draft document covering all the issues in the agriculture negotiations.

Economic diplomacy is relatively new to India, but the country has practised it with a great deal of sophistication, nuance as well as grit and aggression, winning the admiration of the developing world. India’s negotiating objective at trade talks has been driven by the need to carve out, in the words of veteran diplomat Mohan Kumar, the “sovereign economic space that is necessary to meet the immense development challenges India faces."

Negotiators will know there is a fundamental commonality among the world’s poorer nations that setting an artificial time-limit on food security cannot possibly serve their sovereign interests.

That is why the view from New Delhi is that it is time to put the “world" back into the World Trade Organization and “development" into the Doha Development Round.

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Published: 31 Jul 2014, 11:44 PM IST
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