WTO meet: Commerce minister Suresh Prabhu has his task cut out
In 2009, then Prime Minister Manmohan Singh took away the commerce and industry portfolio from Kamal Nath and handed it over to Anand Sharma. The reason was simple: Kamal Nath adopted strong positions on agriculture at the failed 2008 ministerial meeting in Geneva. The US was unable to advance its trade-distorting domestic subsidy programmes and secure new market access in India due to Kamal Nath’s inflexible positions.
Sharma, in his exuberance to make a new beginning and break away from his predecessor’s hardline positions, visited Washington first to deliver a message of truce. His pronouncements there caused confusion and embarrassment to his own officials in Geneva and New Delhi. But they were unable to convey their disapproval to him. Instead, they requested an analyst on global trade issues to explain to the new minister the damage he had caused to India’s negotiating positions. Thus, whenever there is a change of guard at the commerce and industry ministry, there is considerable anxiety.
The appointment of Suresh Prabhu as the new industry and trade minister on 3 September has come as a surprise after his innings in the accident-scarred Indian Railways. “Our manufacturing-to-GDP (gross domestic product) ratio has to improve considerably and to make that happen we are working on some initiatives like Make In India, (ease of) doing business in India,” he told CNN News18 last week. “So (my priority will be) changing the GDP profile of India, to make sure that it becomes more diversified and we get more manufacturing into GDP so that more jobs can be created,” he said. Prabhu said his ministry will work on developing a global chain for the agriculture sector, according to a PTI report on 5 September.
With continued headwinds in international trade and proliferating protectionist barriers in industrialized countries, it is important to closely survey global realities. With less than three months left for the World Trade Organization’s 11th ministerial conference in Buenos Aires, beginning on 10 December, it is all the more important to master the nuances as well as the historic details. The outcome of the Buenos Aires meeting will decide whether Prabhu is able to stand firm in safeguarding India’s core interests when push comes to shove. Given the sizeable majority of more than 400 million poor farmers who are dependent on agriculture for their livelihood, the task of protecting their interests must remain a central priority. Besides, he has to build rapid alliances with like-minded countries to beat back opposition from the dominant members that are not known for agreeing to equitable give-and-take results. He must negotiate directly with his major counterparts before or at the meeting and avoid any mediator like the current director general, whose track record remains controversial.
The failure to negotiate the interests of Indian cotton farmers properly during the December 2015 Nairobi ministerial meeting, for example, resulted in the termination of export subsidies for India’s poor farmers from this year. Such are the multilateral negotiating realities. Countries wage grim mercantile battles for each dollar-and-cent of gains and losses. More important, rules crafted during these meetings are invariably tilted in favour of dominant members like the US.
The controversial rules finalized in agriculture during the previous Uruguay Round (1986-December 1993) negotiations ensured that the US, the European Union, and other industrialized countries continue with their entitlements to provide trade-distorting domestic subsidies as well as other programmes until now without any change. In contrast, the developing and poorest countries, including India, are subjected to numerous restrictive limits which they cannot cross even if their populations are surging and prices are soaring in the international market. Consider, for example, the calculation of AMS (Aggregate Measurement of Support)—under which India is allowed to spend up to 10% of its value of production in the so-called de minimis (too minor to merit consideration) programmes—that is done on the basis of prices existing during the 1986-88 base period. Despite massive price inflation during the last 30 years, countries like India must ensure that their subsidy programmes based on 1986-88 prices do not exceed the 10% limit.
Sustained attempts to change these rules during the past 16 years of the Doha Development Agenda trade negotiations by India and other developing countries met with limited success. The developing and poorest countries were promised developmental outcomes for integrating into the global trading system. But there is little or no progress on developmental issues such as the permanent solution for public stockholding programmes for food security, the special safeguard mechanism, and movement of short-term services providers.
In sharp contrast, the industrialized countries and their allies in the developing world managed to pocket an outcome on trade facilitation for goods even though it was not part of the Doha agenda after it was dropped from the work programme in 2003. India’s then trade minister Arun Jaitley had opposed what are called the four Singapore issues which include trade facilitation. The other three Singapore issues are: investment, competition policy and government procurement.
But in 2004, trade facilitation was included in the Doha work programme after industrialized countries promised that they will address the developmental issues in agriculture, industrial goods, and services based on the principle of less-than-full reciprocity (LTFR). The LTFR principle mandated developed countries to commit to a sharp reduction of their trade-distorting farm subsidies as well as barriers in market access for agricultural and industrial products while the developing countries were required to undertake commensurate commitments.
Without addressing the unresolved issues of the Doha work programme, major industrialized countries and their allies in the developing world are now embarking on new issues such as e-commerce, and disciplines for micro, small, and medium enterprises (MSMEs) among others. In short, Prabhu’s tasks are cut out, at least, for the next three months. Managing an economic or transport ministry like railways is one thing. But navigating the trade ministry of a country with 1.3 billion people in a globalized world—where the winner takes all—is altogether a different challenge. So far, the current government’s track record of protecting the interests of its vital sectors such as services or even the pharmaceutical sector or renewable energy against continued threats from the Atlantic West is anything but bold.