If a major power does not want to play by the rules of internationally disciplined trade, the others will have to react," said Pascal Lamy, a former World Trade Organization director general. “Plan A for WTO members, the preferred option, would be to ask what the problem is and offer to fix it," he suggested. In case it doesn’t work, members must consider Plan B in which they can work without the United States. “The rumour that there might be a plan B might help make sure plan A works better," he said.
Speaking on the theme of Trade in crisis: Headwinds or Maelstrom at United Nations Conference on Trade and Development (UNCTAD) on 19 February, the former WTO chief suggested three outcomes following the recent US’ actions. The soft outcome is to reform the WTO’s highest adjudicating body, i.e. the Appellate Body. The second involves making the dispute resolution mechanism non-binding like the one that prevailed during the GATT (General Agreement on Trade and Tariffs) phase before 1995.
And “the third possible scenario is what I call the lonesome cowboy, which is either the US quits or the others, in order to resist the US offensive, build a WTO minus the US," Lamy said.
“Multilateralism is morphing from a Westphalian system to something I call poly-governance, built from coalitions with shared goals," he warned, implying the US reckons the MTS (multilateral trading system) to be a “zero-sum" game.
These remarks from the former director general seem pretty hard-hitting. But during his eight-year tenure as the WTO chief between 2005 and 2013, Lamy enabled the US to shift the goalposts in the Doha negotiations time and time again.
His arbitrary decision to suspend the Doha trade talks in 2006 ostensibly to help the Bush administration during the mid-term elections to the Congress was a body blow. That decision has been likened to what King Charles I did in the 17th century when he suspended the British Parliament. It severely undermined the WTO’s negotiating function. Perhaps, if Lamy had mustered courage then and called a spade a spade, things might have been different.
Nonetheless, there is a growing fear that “America might just rip up the rules on international trade and walk away" if countries attempt to challenge its protectionist binge.
The Trump administration is now poised to slap prohibitive duties on imports of steel and aluminium under the plea that they threaten national security. Surely, such actions are illegal and violate global trade rules.
“If lawyers in Geneva accept that, other countries might argue the same… If they do not, America might just rip up the rules on international trade and walk away," The Economist wrote in an article on ‘American Trade: Steel Yourself’, on 24 February.
On Monday (26 February), President Trump called the WTO “a catastrophe". In unsolicited remarks at a meeting with the governors of the American states, he said, “The World Trade Organization makes it almost impossible for us to do good business. We lose the cases, we don’t have the judges. We have a minority of judges," he thundered.
President Trump went on to criticize India saying America was “getting nothing" from India’s announcement that it had reduced import duty on Harley Davidson motorbikes to 50%. “We want fair trade deals, we want reciprocal trade deals," he complained bitterly. When Prime Minister Narendra Modi called him to inform that India had lowered the customs duties to 50%, “I said , okay, but so far we’re getting nothing," Trump said. “So we get nothing, he gets 50%, and they think they are doing us a favor."
Against this backdrop, India, which is a bit player in global trade, seems determined to transform the role of the WTO. “The question is whether we should make the WTO better or forget it," said Suresh Prabhu, commerce minister, at a Confederation of Indian Industry summit. “Organizations need reformation all the time and it needs to be changed with change in times," he added.
The WTO, according to Prabhu, was created on solid principles such as democracy. Even the smallest country had a say in the 164-member organization. “That is a very unique characteristic," he said. “Therefore, we must bring transformation in the WTO itself to transform the world economy."
Earlier, in the week after a stakeholders meeting on 20 February, Prabhu made some startling remarks. According to a PTI report, he said that “aspirational" India cannot ignore new issues such as e-commerce in the WTO. “We must work on new issues as well... The question is how do we articulate those issues and take them on board without compromising on some of the core issues that are important for the WTO," Prabhu said. “While some of the new issues being raised by others may also be of relevance to India, existing issues such as agriculture are critical livelihood issues, which are extremely important for India," he added.
These pronouncements from India’s chief trade navigator have caused confusion in Geneva. After all, it was Prabhu who told his counterparts at a plenary meeting of the WTO’s Buenos Aires meeting on 11 December 2017: “Turning to some of the new issues that are sought to be introduced into the negotiating agenda of the WTO, in India’s view agreeing to these would be extremely divisive. Many of these issues [especially investment facilitation] are neither trade-related nor have these been discussed in detail."
He also said: “India’s view is that gains from e-commerce must not be confused with gains from negotiating binding rules in this area. It is for this reason that we support the continuation of the 1998 Work Program with its non-negotiating mandate."
So, in a little over two months, a nation of more than 1.3 billion people, living amid extreme inequalities and absolute poverty worse than some of the poorest African countries, is open to “aspirational" issues.
The US, Germany, France, Japan, and Switzerland among others embarked on aspirational issues only after sustained industrialization and continuing subsidized agricultural production for over two centuries. China, which is now the global manufacturing hub and the emerging champion of artificial intelligence, adopted programmes that created a solid industrial and services base. Today, China is in a position to call for investment facilitation because it is a net global investor now.
Ironically, India acquired the rare distinction of letting its negotiating positions determine its domestic policy priorities. Instead of setting the domestic house in order before plunging into aspirational issues, India wants to cling to Marie Antoinette’s infamous maxim hurled at the people during the French Revolution: Let them eat cake if they cannot get bread.
Surely, the opposition might use the government’s latest switch to new aspirational issues instead of focusing on farmers and development ahead of elections next year.