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8/13/2019 Crisis Time for India Again at the WTO
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Economic & PoliticalWeekly EPW october 26, 2013 vol xlviii no 43 31
Crisis Time for India (Again)at the WTO
A Correspondent
The upcoming Bali ministerial
conference of the World Trade
Organisation threatens to
constrain the National Food
Security Act even before it is fully
implemented. Outdated WTO
provisions will severely limit
the extent of food subsidy India
can provide and the best the
United States is willing to agree
to is a two-year reprieve. More
generally, Bali is also expected to
see a very lopsided outcome with
a US-led initiative succeeding
in ramming an expensive trade
facilitation agreement down
developing countries throats and
refusing to address long-standing
issues in agriculture and rules
of origin.
There is a parallel between the par-
tial shutdown of the United States
(US) federal government in early
October and the negotiations at the
Doha Round of the World Trade Organi-
sation (WTO) ahead of the Bali mini-
sterial in December. The backdown
or shutdown strategy of a dominant
faction of the Republican Party brought
public ridicule at home and abroad.President Barack Obama has charged
the Republicans for extorting conces-
sions through the showdown. We cant
make extortion as part of [our] democ-
racy, he says. The Republican hawks
are lampooned for their unreasonable
demands, brinkmanship, incessant
and intimidating threats, pressure
exerted through powerful lobbies on the
administration, and lack of give and
take in negotiations.
The criticisms heaped on the Republi-
cans are echoed in the attitude of UStrade negotiators at the WTO. The US
remains determined to extract a multi-
lateral agreement on trade facilitation as
part of the Bali package at the ninth
ministerial conference beginning in
about six weeks.
The UShas also rejected the G-33 pro-
posal tabled by Indonesia, India and
China for either revising the methodol-
ogy or updating the external reference
price (ERP) of foodgrains, which is at the
heart of a flawed 1994 agriculture agree-
ment that would limit the food subsidy
India can provide. India therefore runs
the serious risk of coming away from
Bali without having its new and ambi-
tious National Food Security Act (NFSA)
kept outside future scrutiny by the Dis-
putes Settlement Body (DSB) of the WTO.
It seems that the best India can hope for
is a temporary two-year reprieve from
being taken to the DSB for exceeding
WTO-decreed subsidies.
Washingtons negotiating positions in
finalising the Bali package involving
trade facilitation, some elements in agri-
culture, and development flexibilities
for the poorest countries are often lik-
ened to my way or high way approach.
That the proposed Bali outcomes lack
internal balance and appear heavily
tilted in favour of a massive trade facili-
tation agreement is well known. The
trade facilitation agreement is supposed
to be about simplifying customs proce-
dures in both the advanced and deve-
loping countries, but in essence it is
about easing import procedures in only
the developing and least-developed
countries (LDCs).
The US remains strongly opposed tofinding legitimate solutions in other out-
standing issues in agriculture and devel-
opment that would benefit the develop-
ing countries and create a balance in the
Bali package with the outcome on trade
facilitation. Almost like the extremists
in the Grand Old Party (GOP) who
brought about the shutdown because of
the Affordable Care Act, also known as
Obamacare, the US says no to long-
pending issues such as on enabling the
developing and LDCsto secure an effec-
tive and enduring mechanism to con-tinue with public stockholding progra-
mmes for food security. This was actu-
ally provided for earlier in a footnote to
the 2008 revised draft WTOagreement
on agriculture,1but this is not something
the USis now willing to consider. The US
is also adamant about not implementing
a deal to gradually phase out most trade-
distorting export subsidies and export
credits in agriculture, a process that was
set out in the 2005 Hong Kong mini-
sterial agreement. Likewise it has
been unwilling to carry out the phased-
elimination of non-preferential rules of
origin as mandated in the 1994 Uruguay
Round (UR)agreement, and introduce a
duty-free and quota-free market access
for the LDCs.
Expensive Trade Facilitation
A major gateway issue to facilitate trade,
for example, is harmonising complex
and burdensome non-preferential rules
8/13/2019 Crisis Time for India Again at the WTO
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INSIGHT
october 26, 2013 vol xlviii no 43 EPW Economic & PoliticalWeekly32
of origin as well as enabling the LDCsto
have simple and effective preferential
rules for export to the advanced coun-
tries. The non-preferential rules ought
to have been concluded in 1998. But
negotiations remain perpetually bloc-
ked due to opposition from one member
who is now supported by her neighbour
Canada. But yet, as part of the trade
facilitation agreement, the USand other
industrialised and a few large deve-
loping countries want to harmonise
their customs rules and disciplines
for all members regardless of the
costs and weak technical capacities to
implement them.
Actually, the biggest beneficiary of the
import liberalisation or trade facilitation
measures is China more than the US. But
China is silent on trade facilitation whilethe UStakes the leadership for an ambi-
tious agreement in this area because it
will then have an expedited shipment
process for its pharmaceutical and auto
exports and be able to get advance
rulings from the WTO and introduce
penalty discipline if countries fail to pro-
vide the requisite infrastructure facili-
ties for customs clearance. The draft
trade facilitation agreement, which runs
into some 30-odd pages, involves many
amendments to the URagreement.
But when it comes to providing reliefto developing countries for continuing
with legitimate public stockholding pro-
grammes for food security, the constant
refrain from Washington, which is sup-
ported by the European Union (EU), is
that it would undermine the UR disci-
plines on agriculture. The URagreement
on agriculture is a special deal struck
between the USand the EU(called the
Blair House agreement of 1993) to shel-
ter their respective farm subsidies from
facing any trade disputes at the WTO.
The resulting WTO agriculture agree-
ment is a patchwork without legitimacy
and coherence. No wonder then that the
leading subsidisers continue to provide
billions of dollars either through income
support or income insurance or income
loss compensation programmes in the
supposedly non-distorting Green Box
(exempt from reduction), and in the
trade-distorting Amber Box, and Blue
Box and also by way of export subsidies
and export credits. Surprisingly, there is
an unholy pact between the leading
farm subsidisers (the EU, Japan, Norway,
Canada and Switzerland) and the cham-
pions of liberal farm trade (Australia,
New Zealand and Chile), and the USin
opposing any amendment to the disci-
plines on agriculture that are patently
flawed and outdated. While the devel-
oped countries managed to shield all
their subsidies in the Green Box, which is
protected from legal challenge and to
which they are shifting their subsidies
in a surreptitious manner, the minimum
support price (MSP) programmes of devel-
oping countries are subjected to strict
Amber Box disciplines.
Constraints on India
India, China, Indonesia, Philippines,Kenya, Nigeria and most other develop-
ing countries have no Amber Box or Blue
Box subsidy entitlements. They can only
provide de minimis support, which is a
minuscule (2%) part of their value of
production of a particular crop. The out-
lay on procurement through MSP that
India incurs has to be within the limits
of de minimis support and the method of
calculating the subsidy is basically
dependent on taking the difference
between the current MSPand a fixed ERP
of as long ago as 1986-88. The ERPof ricenotified by India is Rs 3.52 per kg while
the current years MSPis Rs 19.65 per kg.
Thus the Indian subsidy on rice per kg
according to the existing URagreement,
at present, will come to a whopping
Rs 16.13 per kg. By a rough calculation,
using the same methodology, Indias
entitlement to use MSPthis year would
be limited to 10 million tonnes, whereas
its requirement for procurement is being
projected by the government at around
34 million tonnes.
The G-33 coalition of developing
countries (including India, China and 43
others) has proposed either updating the
ERP to reflect current global prices or
deflating the current MSPto bring it to
the 1986-88 levels, by using World Bank
inflation figures, so as to have some
semblance of rationality restored to the
calculations. However, all that the
developed countries have offered so far
as part of the Bali package is a Peace
Clause, which will provide temporary
respite for no more than two years from
legal challenge at the WTOfor the NFSA
breaching the de minimis support levels
as decreed in the 1994 UR agreement.2
Another example of the lopsided pri-
orities in the WTOin point is the approach
to cotton subsidies which play havoc
with millions of poor people in Africa.
The 2005 Hong Kong Ministerial Decla-
ration called on the trade-distorting
members such as the USand the EU to
address cotton ambitiously, expedi-
tiously, and specifically in the agricul-
ture negotiations. It has long been estab-
lished that the cotton subsidies are a blot
on the global trading system and their
pernicious effects are felt in various
African countries. But the issue remains
in cold storage because it is a red line forthe heavily subsidised cotton farmers in
one country.
Little wonder that the charges hurled
at the Tea Party cowboys are now rever-
berating at the Centre William Rappard
in Geneva that houses what the Seattle
protesters of 1999 called Whose Trade
Organisation is it anyway? Indeed, the
USTrade Representative (USTR) Michael
Froman recently set out what his admini-
stration wants at the WTO. His clear
demand issued at the WTOPublic Forum
in early October was: if Bali fails to delivera binding trade facilitation agreement,
then, it is the end of the road for the
trade body. Make no mistake: The
choice of scenario lies with those of you
in this room, Froman told the partici-
pants at the meeting. The success or
failures of negotiations in this room [in
stitching a strong, binding trade facili-
tation agreement] over the next four
weeks will write the future of this insti-
tutionEvery member of this institu-
tion has its hand on the pen, he not-so-
politely warned the negotiators.
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8/13/2019 Crisis Time for India Again at the WTO
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INSIGHT
Economic & PoliticalWeekly EPW october 26, 2013 vol xlviii no 43 33
After years of efforts to deliver on
Dohas development mandate, we can
reduce costs of trade for developing
countries most of all, said Froman, even
suggesting that other areas of reform in
agriculture or rules in the Doha agenda
are inconsequential compared to the
gains from trade facilitation. By some
estimates, a trade facilitation agreement
is estimated to reduce costs for developed
countries by 10%, but for developing
countries by 14%, he has claimed.
The USTRgave no guarantee that the
USwill focus all its energies on the WTO
and multilateral trade liberalisation
once there is an agreement on trade
facilitation. Washingtons continued pre-
occupation with bilateral, regional, and
plurilateral agreements will continue.
The main attraction of plurilateralagreements, for many, is that they offer
a way forward, Froman has empha-
sised. Like minded countries the coa-
lition of the working [willing] can
come to open markets, set high stand-
ards and introduce new disciplines for
global trade, the USTRhas added.
But the USTRhas remained silent on
what the poorest countries want at
Bali. The LDC group has pressed for
favourable rules of origin, duty-free and
quota-free mechanism for their indus-
trial goods (which was agreed at the2005 ministerial), a waiver from under-
taking services commitments, and elim-
ination of cotton subsidies. The group
which is coordinated by Nepal at the
WTO said unambiguously that trade
facilitation is not their priority issue.
They challenged the new director gen-
eral Roberto Azevedo from Brazil to
show that their concerns can be treated
on a priority basis.
US No to Food Programmes
As regards the core issue of the members
of G-33 farm coalition who are seeking
an exemption for public stockholding
programmes for food security from the
flawed WTO disciplines, the USTR says
we support food security. But if
countries [India, China, Indonesia, the
Philippines] are going to take new steps
in this area, we call on them to do so in a
transparent manner and without dis-
torting the global market in a way that
creates food insecurity for farmers and
consumers in other countries, Froman
has demanded. Effectively, India and
other developing countries who are
demanding an amendment in the agri-
culture agreement are being shut out.
The USTRhas not offered any reasons for
why these developing countries with
huge populations cannot get a binding
mechanism to address food security at
the Bali meeting, while a group of indus-
trialised and some developing countries
can stitch a brand new binding trade
facilitation agreement that fails to
address the complex rules of origin.
Of course, the USand its allies have
maintained repeatedly that the G-33
issue can only be addressed after the
Bali meeting because of the paucity of
time before the December meeting. It issomewhat puzzling that while there is
no time to amend a flawed provision in
the 1994 agreement on agriculture con-
cerning the ERPprevailing in 1986-88,
which is at the core of the G-33 proposal
to continue with the public stockholding
programmes, there is enough time to
remove around 400 square brackets
(unresolved issues) in the draft trade
facilitation text in the next four weeks.
Is it any surprise, therefore, that the
prospects for a fair and balanced
agreement at Bali based on a give-and-take framework with which all the 159
members of the WTOcan live with seems
unlikely? The [Bali] Ministerial Confer-
ence must send an unequivocal message
to the world: the WTOcan negotiate and
deliver multilateral trade deals, the
director general said in a letter to minis-
ters a fortnight ago. The best way to
send this message is to have a successful
negotiated outcome at Bali in Decem-
ber, Azevedo has argued.
No Guarantees
Is there a guarantee that after pocketing
a binding trade facilitation agreement,
the trade majors will address the unre-
solved reform of agriculture and other
developmental concerns in the Doha
Round? Why is it always difficult for the
developing and poor countries to secure
credible outcomes for any of their con-
cerns at the WTO? More importantly,
why is it that the big boys who are now
pursuing a plurilateral agreement in
trade in services and an expanded agree-
ment on informational technology prod-
ucts are not ready to have a similar
plurilateral agreement in trade facilita-
tion, giving developing countries the
freedom to opt out since they have so
many concerns?
If the ongoing meetings convened by
the WTOdirector general on three areas
of the Bali package are any indication, it
is clear the pendulum has already swung
in favour of trade facilitation. The UShas
succeeded in bringing this pronounced
shift towards trade facilitation which
was never at the core of the Doha Round.
The Doha negotiations which were
launched 12 years ago were meant to
address the historical inequities in glo-
bal trade, particularly agriculture. Theformer Brazilian Foreign Minister Celso
Amorim would often describe agricul-
ture as the engine of the Doha talks. It is
another matter that under the leader-
ship of a former Brazilian trade official,
the WTOwill have a multilateral trade
agreement in Bali with little value for
removing trade-distorting export subsi-
dies and credits in agriculture or ensur-
ing public stockholding programmes for
food security for those living below a
dollar a day.
The ups and downs in Doha tradenegotiations which are caught in a
deathly cycle are largely due to the ele-
phant in the room. There was a flicker of
hope that the round would turn the cor-
ner during the period between the Can-
cun ministerial in 2003 and the Hong
Kong ministerial in 2005. But events
over the last eight years, especially since
2010, have put paid to hopes that the
Doha Round can be put back on the rails.
Several factors are at work but chief
among them is a concerted campaign
carried by some dominant members to
turn the Doha agenda upside down and
cause a final haemorrhage. Of course,
they are happy to harvest in the organs
of their choice from the Doha corpse.
China, India, Brazil and South Africa
and the other emerging economies have
been portrayed as responsible in the last
four years for the impasse in the Doha
Round, because they did not offer mar-
ket access at zero tariffs for industrial
8/13/2019 Crisis Time for India Again at the WTO
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october 26, 2013 vol xlviii no 43 EPW Economic & PoliticalWeekly34
products. Although the Doha mandate
did not provide an explicit mandate for
sectoral tariff elimination, the trade
majors took it on themselves to exert
unprecedented pressure on the emerg-
ing economies. Subsequently, when it
came to removing farm subsidies, the
major subsidiser for cotton would always
insist that China should remove its cot-
ton subsidies and provide market access.
The trust and confidence among
members was vitiated and ultimately,
the oxygen was sucked out from what
was called the Development Round.
The plaint former director general
Pascal Lamy played his part at the behest
of the dominant powers and declared in
2009 that the Doha trade negotiations
were at a grave impasse and could not
be salvaged. Come the eighth WTOmin-isterial meeting in 2011, the contours of
the blurring image of the Doha Round
were further changed. Effectively, a sig-
nal was given to dominant powers to
start negotiations in areas of their choice.
After cobbling a plurilateral agreement
in government procurement at the 2011
ministerial, the big boys chose to target
their energies on trade facilitation. Both
government procurement and trade
facilitation were part of what in 1996
came to be called the Singapore issues
that also included trade and investmentand competition policy. Although the
Singapore issues as a group died a vio-
lent death in 2003 Cancun, government
procurement and trade facilitation were
back on the agenda the former in its
current form as a plurilateral agreement
and the later as a multilateral trade
agreement.
Push to Plurilaterals
And in a further blow to Doha, the trade
elephants intensified negotiations on
two plurilateral agreements involving
the expansion of the Information Tech-
nology Agreement and Trade in Services
Agreement (TISA). While the ITA-II is
expected to be concluded at the Bali
meeting, the TISAnegotiations will spill
over into next year. So, the WTO will
become the hub for harvesting plurilat-
eral agreements in coming months.
The intensive consultations to tidy the
Bali package by the director general
have brought into sharp focus the intran-
sigent positions and the sharp differ-
ences in all three areas. In his letter to
the trade ministers in early October, the
director general has mentioned that a
number of issues that are not yet con-
verging in trade facilitation. According
to the WTO director general customs
cooperation, flexibilities for developing
countries and LDCsand implementation
plans, customs brokers, pre-shipment
inspection, consularisation, and cer-
tain transit issues were the most diffi-
cult issues in trade facilitation. Surpris-
ingly, the letter is silent on differences
on advanced rulings and various other
issues raised by the USand other mem-
bers of the so-called Colorado Group.
The Colorado Group is the engine for
trade facilitation agreement like thedefunct G-20 coalition was for agricul-
ture reform.
Essentially, the trade facilitation nego-
tiating mandate would involve new
rules for Articles V, VIII and X of the
General Agreement on Tariffs and Trade
with the objective of expediting move-
ment, release and clearance of goods
without hurdles, including goods in
transit. While the changes in Article V
call for creating smooth transit move-
ment of goods through the territory of
other WTOmembers, ArticleVIIIaims atharmonising border procedures, forma-
lities, and charges. Changes in Article X
call for creating prompt publication of
trade laws and regulations and also uni-
form impartial and reasonable adminis-
tration. The ultimate goal is to reduce
trading costs and facilitate trade for
exporters which, in turn, results in import
facilitation in the destination market.
As a sop for implementing the com-
mitments which are proposed by the
major industrialised and some develop-
ing countries in Section 1, the develop-
ing and poorest countries are promised
technical and financial assistance for
capacity building. But the USand the EU
along with their supporters of the
Colorado Group who are propelling the
negotiations on trade facilitation with
binding commitments, are not willing
to give binding commitments when it
comes to providing technical and finan-
cial assistance.
Conclusions
In sum, it is back to the old system at the
WTO, the advanced countries are push-
ing their agenda through a combination
of plurilateral and multilateral agree-
ments, without incorporating develop-
ing country concerns or, equally seri-
ously, addressing long-pending issues
in agriculture.
New Delhi wants to be a big player
and seems unable to stand up to
Washingtons pressures in core areas.
Going by current signals from New
Delhi, the country will come back from
Bali after accepting costly binding com-
mitments to create new customs infra-
structure at its major and minor ports in
order to facilitate imports. A temporary
Peace Clause deal for two years on pub-
lic stockholding programmes will leavethe NFSA marooned in no time, apart
from seriously jeopardising the future of
the food procurement programme,
which has helped India achieve food
self-sufficiency and provides an impor-
tant tool to provide price guarantees to
our farmers.
Notes
1 The revised draft of a possible agriculture dealthat was issued in December 2008, provided anexplicit footnote to enable the developingcountries to continue with their public stock-
holding programmes for food security progra-mmes. The footnote was a result of sustainednegotiations and a compromise solution bet-ween the key members such as the US, theEuropean Union, India, Brazil, Australia andChina.
2 There was a peace clause in the 1994 WTOAgreement on Agriculture as well, but thatwas between the giant subsidisers the US andEU and it decreed that the subsidy pro-grammes in the US and EU would not betaken to the DSB before end-2004 coincidingwith the implementat ion period of the URagreement. The idea being that in the inter-vening period the EU and the US would findways to reduce the subsidies. That did nothappen and that peace clause also stood for aslong as 10 years.
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