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WTO deal: India stands to gain, but has its own reservations

WTO deal: India stands to gain, but has its own reservations
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First Published: Thu, Jul 17 2008. 11 33 PM IST

Updated: Thu, Jul 17 2008. 11 33 PM IST
Mumbai and New Delhi: India stands to gain from a global trade deal if it helps curb developed countries’ farm subsidies and deepens trade in services but many, including industry, have misgivings over what the real benefits will be.
Union commerce and industry minister Kamal Nath spelled out his demands on Wednesday ahead of a ministerial meeting in Geneva next week that many see it as the last chance to push the Doha Round of talks forward before a change of US administration in 2009.
(KEY POINTS AT WTO MEET) He told reporters he expected developed nations to reduce their farm subsidies substantially, a key sticking point for India with its 600 million farmers, and said he would not be flexible unless he got a good package on trade in services.
“The Prime Minister is of the view we should try and see this closes but unless India’s interests are met in our sensitivities we should not move forward,” Nath said.
To complicate matters, the government faces a confidence vote in Parliament on 22 July after parting ways with its Communist allies over a nuclear energy deal with the US.
The vote means Nath will miss the meeting’s start, but he will spend the weekend in Geneva for informal talks with other ministers.
At the moment the vote is too close to call, but while there might be a hiatus in who to deal with should the government fall, analysts say India’s negotiating position has broad consensus and is unlikely to change no matter who is in power.
“If it doesn’t survive, even then the basic parameters stay very much intact so I don’t think there will be any change in our position because of the changing political scene,” said Nagesh Kumar, director general at think tank Research and Information System for Developing Countries (RIS).
India is a key negotiator for developing nations in the discussions, which have been under way since 2001 to open up world trade and help developing countries export more.
Industry fears current proposals would see India making bigger percentage cuts in tariffs on manufactured goods than developed countries—which it says contradicts the Doha Round’s development goal and will not help labour-intensive exporters of products such as textiles, garments and leather goods.
It fears the ability to protect small-scale industry as India liberalizes its vast but uneven economy would be unfairly eroded, and is concerned a proposal that each sector should have a minimum number of tariff lines subject to full tariff cuts would put sensitive sectors at risk.
Nath sounded defensive on any rapid liberalization of industrial tariffs in key areas.
“There cannot be any agreement on industrial products which compromises or creates any kind of liberalization in our automobiles, components, textiles and chemicals sectors,” he said.
“These are areas which are very sensitive, where industry is very infant and where we are getting investments.”
On farming, poorer nations want rich ones to open their markets to food and to reduce protection for their farmers by cutting tariffs and subsidies.
“If the deal helps in curbing the artificially subsidized farm regime and makes global farm trade less distorted, that is a big step for India and other developing nations,” said Manab Mazumdar, senior director at the Federation of Indian Chambers of Commerce and Industry.
But Kumar at RIS was sceptical. “You don’t see any prospect of domestic support in developed countries going below the actual levels,” he said.
Services, now 55% of gross domestic product and 40% of total exports of goods and services, are the chief area where India is seeking something for itself.
India’s success in service outsourcing is behind its push for an agreement on greater freedom of movement for its professionals.
“Services is a booming business for India and other developing countries. Making global services trade more open, accessible and transparent is a huge gain,” Mazumdar said.
But progress has been limited, with the US wary of increasing the number of temporary migrants because of national security, and Nath made clear India was unlikely to be flexible unless it got a good deal on services.
Industry officials say a multilateral trading scheme is in the interests of Asia’s third-largest economy as business seeks to expand and sell into new markets.
“Overall the big gain for India would be that there would be a rule-based multilateral trading system,” Mazumdar said. “Ensuring a successful completion of the Doha Development Round therefore helps India and other developing countries enormously.”
But many are concerned the development element has been eroded, something which saps India’s enthusiasm for a deal. “Considering what’s on the table at this moment there is not much really for India to gain,” Kumar said.
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First Published: Thu, Jul 17 2008. 11 33 PM IST