Singapore: World Trade Organization (WTO) members are seeking a successful conclusion of the Doha round of global trade talks to counter an economic slowdown sparked by mortgage defaults, India’s minister for commerce and industry, Kamal Nath said.
“Everybody is looking for an antidote to the uncertain global economic output,” Nath, one of the four key partners in international trade talks besides the US, Europe and Brazil, said. “A successful Doha round will perhaps be a good antidote.”
US Trade Representative Susan Schwab said this week that a trade pact is possible in the next 14 months after repeated breakdowns in negotiations since 2001. The agreement could add $96 billion (Rs3.78 trillion) annually to the global economy, which the International Monetary Fund (IMF) forecasts may slow next year due to a housing recession in the US.
The WTO talks have failed to yield results so far because the US and Europe won’t lower farm subsidies fast enough, while developing nations including India, Brazil and South Africa say they would have to cut industrial tariffs more than developed countries.
Schwab, who was in Singapore to meet with trade ministers from the 10-member Association of Southeast Asian Nations, said the world’s biggest economy is showing more flexibility in the world trade talks, adding there’s “every reason to expect” the Doha round can be concluded before January.
“I think so too because of the flexibility the US proposes to show,” Nath said. “Probably, the flexibilities which she has in her pocket are the flexibilities which are needed to move forward on this. Certainly the US is the most important player on this and the moment the US shows flexibility the process moves on.”
IMF last month cut its projection for global growth next year to 4.8% from an estimate of 5.2% in July and warned that even its new prediction may be too optimistic given threats posed by the sell-off in credit markets.
The Doha round of trade talks has moved in fits and starts during the past six years as the 151 members of WTO squabbled over cutting farm subsidies in the US, agriculture tariffs in the EU and Japan, and industrial tariffs in large developing nations such as India and Brazil. “This round of trade talks is not just a question of tariffs and market access,” Nath said. “This round is also about correcting structural flaws. As more and more countries engage with the global economy, the rule-based multilateral system becomes very important.”
While the talks initially centred on agriculture, the focus shifted to industrial tariffs this year after the US and the EU got close to an agreement on a formula for agriculture subsidy and tariff cuts.
In July, WTO mediators issued compromise texts that spelled out ranges of tariff and subsidy cuts that each country would take as part of a final agreement.
“There is general optimism all round—the first text has been discussed and we are looking forward to a second text,” Nath said. “Since it’s a text-based discussion, the discussion is progressing much faster. We are now negotiating within some band of numbers.” Nath also said India’s move to provide tax relief to exporters to cope with the rupee’s biggest gain in at least 33 years does not amount to granting subsidies and violating WTO rules. India’s rupee has gained 12.4% this year, close to a nine-year high.
“The rupee has hurt our exports, undoubtedly,” Nath said. “The government has refunded some of the taxes and levies on exporters. We don’t subsidize exports.”
Nath said India is looking at providing more tax refunds as he prepares to review the nation’s merchandise exports growth in a month’s time. Bloomberg