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Don’t let fear eclipse trade

Don’t let fear eclipse trade
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First Published: Mon, Jul 28 2008. 11 40 PM IST
Updated: Mon, Jul 28 2008. 11 40 PM IST
The Doha round of trade liberalization has a well-deserved reputation for being a never-ending process. The ongoing meeting of the World Trade Organization’s (WTO) trade negotiation committee (TNC) in Geneva is stuck on two issues: agriculture and non-agricultural market access.
For developed and developing countries, agriculture remains a hard problem. Developing countries fear that subsidized, rich country agricultural products will destroy the livelihood of their farmers. For developed countries, getting around politically well-heeled agricultural lobbies presents an equally strong challenge.
In his statement at the TNC meeting on 23 July at Geneva, commerce minister Kamal Nath said as much. He raised fears of developed country subsidies jeopardizing the livelihood of Indian farmers.
This is, at best, a partial truth. With a worldwide surge in food prices, subsidies from developed countries serve the developing world. Cheap grain and food exports from the US, Canada and the European Union (EU) can hold inflation at bay in the developing world. For a country like India, where inflation can cause political upheavals, such subsidies should be a blessing in disguise. Yet Nath chose to ignore this fact.
Such hard-held positions make it hard to push even mild (by Indian standards) negotiating proposals. For example, the 10 July draft modalities for agriculture proposed significant cuts in trade distorting domestic support on the part of developed countries. The EU was to cut these by 75-85% and the US/Japan by 66-73%. Later, under another proposed settlement by WTO chief Pascal Lamy, this changed to 80% for the EU and 70% by the US. Even this raised “strong concern” from French President Nicolas Sarkozy, Italy’s Prime Minister Silvio Berlusconi and other EU leaders. Nath struck a hard line and in his comments said he hoped the US offer of a $15 billion cut in subsidies was only their opening gambit and not their bottom line.
This will take the talks nowhere. As Pascal Lamy said, surprise negotiation texts cannot emerge from thin air. They require countries to engage in give and take. India, Brazil and other leaders of developing countries should understand this.
Is Indian obduracy derailing trade liberalization? Write to us at views@livemint.com
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First Published: Mon, Jul 28 2008. 11 40 PM IST