Running with hares and hunting with hounds may not be a wise trade policy for pursuing a nation’s priorities. This is more so when the leading trade hounds of the Atlantic West are falling apart. For anybody, who watched the Donald Trump-Angela Merkel press conference on 17 March at the White House, it is as clear as daylight that the global hegemon and the regional hegemon in Europe are not on the same page on global trade. The US, said President Trump, would fight for “fairer” trade deals to “even out the relationship.” “Right now I would say the negotiators for Germany have done a far better job than the negotiators for the US,” complained Trump, suggesting that Washington received a raw deal in its trade agreements over the past several decades. The US lived up to Trump’s pronouncement by ensuring that free trade and protectionism were relegated to the sidelines at the G20 finance ministers meeting in Baden-Baden, Germany, on 19 March. Apparently, new US treasury secretary Steven Mnuchin, a former Goldman Sachs banker, said he has no “mandate” to agree to the G20’s growing concern about protectionism.
Consequently, there is no mention of any language to “resist all forms of protection” in the communiqué issued by G-20 finance ministers. Perhaps, the real drama on how to pursue global trade priorities could unfold at the G-20 leaders’ meeting in Hamburg, in July. Against this backdrop, India has difficult choices to make at the multilateral level. Last week, a team of top commerce ministry officials visited Geneva to campaign for their pending demands in agriculture and services. For a country with over 400 million farmers, who are resource-poor and barely surviving above poverty line, the stakes are pretty high for the government. Surely, it cannot be seen to be oblivious to their worsening plight in the face of ever increasing imports of farm products.
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Unfortunately, multilateral development-friendly trade instruments are few and far between. If anything, attempts to arrive at such instruments have been blocked time and again in the past 15 years. Flexibilities for policy space such as special safeguard mechanism (SSM) that could curb the unforeseen surges in imports of agricultural products in the developing countries, special products that could be subjected to higher tariffs, and now a permanent solution for public stockholding programmes for food security, are all being held hostage at the World Trade Organization (WTO). Reason: the global trade hounds, particularly from the Atlantic West, want a fresh payment for finalizing these issues raised by India along with developing countries of the G-33 coalition under the leadership of Indonesia. The G-33 has submitted credible proposals on both the permanent solution for public stockholding (PSH) programmes for food security and SSM to break the impasse. The coalition’s proposal, for example, involves adding a new sub-paragraph to the WTO Agreement on Agriculture so as to ensure that market price support schemes for implementing public stockholding programs in developing countries are exempted from any subsidy-reduction commitments. Effectively, it implied placing the PSH programmes in green box subsidies that are currently exempted from the reduction commitments.
The coalition offered other alternatives such as modifying the external reference price of 1986-88 to more reasonable levels. The “existing provisions on public stockholding for food security purpose under the current WTO rules will not be able to address the real need of developing members to effectively support their low-income or resource-poor farmers, nor to fight hunger and rural poverty,” Indonesia said during a closed-door meeting on 17 March. The WTO Agreement on Agriculture which is a sweet-heart deal between the US and the European Union during the Uruguay Round was wrapped up at the Blair House in Washington in November 1992. It ensured best possible outcomes for the two hounds of the Atlantic West to continue with their billions of dollars of subsidy programmes.
And over the years, the two shifted tens of billions of dollars of subsidies to the green box. The US, which now provides around $150 billion for its food stamp programme under the green box, or the EU which offers a range of green box programmes that ultimately contribute to more production, have fought tooth and nail to ensure that they are not touched. Little wonder that the agricultural hounds of the Atlantic West adopted aggressive forms of diversionary/stonewalling tactics for denying a permanent solution for PSH programmes over the past three years. Even though the permanent solution is mandated to be concluded by the end of this year, the chances are pretty bleak going by what the hounds said at last week’s meeting.
India has also submitted a draft legal text for facilitating trade in services at a time when the international climate is grossly vitiated by the growing restrictions on short-term movement of services providers imposed by the Trump administration and the Brexit officials. The hounds—who repeatedly claim that they are the champions of liberalization of trade in services—grilled India with a barrage of questions, signalling their scepticism at New Delhi’s proposal. More worryingly, India faced opposition from its traditional allies in developing countries as to how it could ask for negotiations for facilitating trade in services without a mandate. Clearly, hunting with hounds could erode India’s credibility when it wants the support of the hares for realizing its defensive interests in agriculture.