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The context
Launched in November 2001, the Doha Development Agenda has now entered a decisive phase. Heads of delegations met in Geneva between June 28, 2006, and July 1, 2006, for intensive negotiations on possible template agreements -- known as “modalities” -- for trade in agriculture and Non-Agricultural Market Access (NAMA). Developed countries failed to move forward on key issues relating to agriculture and accommodate the development concerns of developing countries. Subsequently, WTO director-general Pascal Lamy declared the WTO to be in “crisis”.
In this context, Centad and Oxfam International’s Make Trade Fair campaign thought it pertinent to bring together key stakeholders to share their views and concerns on the current state of play in the Doha Round. The symposium was held on July 25, 2006, in New Delhi.
Proceedings of the symposium
Biplove Choudhary, centre coordinator Centad, welcomed the chairperson, dignitaries and participants. He remarked that Centad could not have anticipated the events of the previous day, referring to the global commerce talks that had collapsed at the WTO, leading to the suspension of the Doha Round. Choudhary invited Professor Muchkund Dubey, former foreign secretary of the Government of India to chair the proceedings of the symposium.
In his introductory remarks, Dubey noted that the impasse in Geneva had highlighted a very important point: that the WTO negotiations had entered a new phase with the establishment of the G20. In the earlier phase, the agenda, both at the global macro level as well as in individual sectors, was entirely determined by developed countries. Distortions in the world trading system, especially in agriculture and services, were kept under wraps and issues that concerned developing countries, like Trade Related Intellectual Property Rights (TRIPS), rules of origin, etc, were pushed into the background.
In the new phase, however, the limelight had shifted to the real issues that cause the distortions. Also, earlier, the gap between developing countries entering an agreement and understanding its implications was as large as between five years to a decade! In this regard, Dubey said, civil society organisations like Centad were playing a key role in enabling developing countries to understand the issues and implications of agreements even as the negotiations are on.
As for the factors responsible for this new phase, Dubey said there was a high degree of convergence among developing countries on the main trade-distorting issues, as a result of which countries like India, China, Brazil and South Africa had gained considerable bargaining strength.
Moving on to the implications of the present state of negotiations, Dubey made three points:
- The damage that could have been done has, at least for the time being, been deferred.
- Pressure on developing countries to give in on certain issues would continue to be exercised.
- Developed countries offering sops like ‘trade for aid’ to developing countries weakened the latter’s negotiating position and should therefore be properly analysed.
Speaking about the Doha Development Agenda, Dubey said that it had, until now, been defined as ‘picking and choosing’ out of the full agenda. It was now time to draft an altogether new development agenda bringing to the fore real issues of concern to developing countries, like revisions in the TRIPS Agreement, removal of the three boxes in agricultural subsidies, etc -- all of which have so far been pushed into the background.
Dubey concluded his remarks by stating that the crux of the new special and preferential treatment package should be to ensure enough flexibility in trade policies to developing countries, enabling them to fulfil their own development goals.
Following this, the Chair released two Centad working papers, ‘Industrial Tariffs and South Asia', written by Prabhash Ranjan, and ‘Ensuring adequate flexibility through Special Products', jointly written by Linu Mathew Phillip and Ashutosh Tripathy.
The former focuses on giving developing countries the option of using industrial tariffs as a judicious policy tool to develop their industrial base. The latter emphasises that given the sensitivities attached to agriculture and its impact on poverty and development, it is imperative to ensure adequate flexibilities within broad commitments.
Abhijit Das, senior trade officer, United Nations Conference on Trade and Development (UNCTAD), was then invited to talk.
Das began by saying that impasses like this were neither new nor unusual in the history of trade negotiations, as every country tries to strike the best deal for itself. However, the impasse in the Doha Round was fundamentally different from similar occasions in the Uruguay Round in three respects.
First, it was significant pressure from stakeholders in the United States and the European Union that led to the launch of the Uruguay Round. Lack of such an offensive agenda and urgency in finalising the deal were factors that had resulted in the Doha Round impasse.
Second, when the Doha Round was launched it was expected that the European Union would give in terms of agriculture and, in return, ‘take' the Singapore issues. However, this important stake for the EU is no longer on the agenda, which further reduces the urgency, at least for the EU, to seek a quick conclusion of the trade round.
Third, during the Uruguay Round any little cohesion that existed among developing countries had almost entirely withered away; in contrast, the present scenario is marked by fairly cohesive coordinated action through different country groupings such as the G20, G33, ACP, etc. Thus, so long as all developing countries stick together it is extremely difficult to strike a deal that's favourable to all.
Talking next of time lines for the Doha Round's conclusion, Das linked the process to the US's ‘fast-track authority' mechanism under which any trade deal that is negotiated by the US President has to be either totally accepted or rejected by Congress without any piecemeal amendments. This mechanism expires in June 2007; if it is not renewed then the last practical date by which agriculture and NAMA modalities must be finalised is September 30, 2006 .
Given this scenario, Das envisaged three likely outcomes of the present impasse. In the first situation, the negotiations end in total failure, leading to increased protectionist action in developed countries and a drift towards bilateralism.
In the second scenario, a minimal package on agriculture and NAMA could be agreed upon, postponing services for future negotiations. India might not agree to this because it would leave its stakeholders high and dry.
In the third possible situation, some progress might be made by the end of this year, due to which the US fast-track authority could get an extension, followed by intense rounds of negotiations thereafter. For this to happen, the US Congress must be convinced that, in return for agriculture, the US would get something substantial for its stakeholders.
Speaking about specific areas of concern where India must exercise caution if and when the final stages of negotiations for this round are held, Das said that India would have to give something in services or in NAMA for its stake in agriculture. India 's trade minister has to ensure that whatever we give, we get back substantially in agriculture. Also, during the very final stages of negotiations, the negotiators must be careful not to be overtaken by fatigue and ignore the fine points in the legal text. Countries must know precisely what they are giving and what they are getting, because no deal is always better than a bad deal.
Manab Majumdar, team leader, WTO and FTA division, Federation of Indian Chambers of Commerce and Industry (FICCI), began by complimenting Centad for carrying out excellent research work. Moving on to the Doha Development Agenda, he said that at the risk of being branded over-optimistic, he believed that the Doha Round was not dead and would soon be resurrected, because a rule-based multilateral trading system like the WTO was every country's best bet.
Majumdar focused on the specifics of NAMA. He said that it was generally believed that NAMA issues involved less sensitivities, but this, according to him, was only because NAMA had been overshadowed by the preoccupation with agriculture.
Majumdar noted that many developed and developing countries continue to use phrases like ‘real market access' and ‘advanced, more competitive developed economies'. He asserted that India should reject outright any attempts to use such frivolous phrases and positions because these should simply not be there if negotiations go by the Doha mandate.
Commenting on the sectoral tariff, Majumdar said there was no clarity on whether sectoral outcomes would be multilateralised; that is, it was not clear how such initiatives would impact non-participating members. At its polar opposite stood the reverse sectoral initiative proposed by Turkey , wherein the textile and clothing sector is shielded from a general tariff reduction formula. Though the EU rejected it outright, the US government took an ambiguous position on this because US textile traders were in favour of the proposal. Majumdar believes that India should seek appropriate clarifications on such issues.
Next in Majumdar's line of attack was China 's proposal that Recently Acceded Members (RAMs) should have a tariff reduction coefficient that is one and-a-half times that of other developing countries. This proposal also asked for an amplified version of para-aid flexibilities for RAMs. On this issue, Majumdar said there can be no convergence between India 's position and China 's.
The final point of contention was a demand by small and vulnerable economies like Mongolia for special treatment outside the tariff reduction formula. Preference erosion issues like these, Majumdar said, should not be settled under the WTO negotiations at all because they were bilateral or, at the most, regional issues. Dealing with them within the WTO could prove counter-productive.
Majumdar concluded by reiterating that NAMA issues could lead to divisions even among developing country groupings and could prove to be a roadblock if not properly addressed.
The final speaker of the day was Biswajit Dhar, head, WTO cell, Indian Institute of Foreign Trade (IIFT).
Dhar felt that trade reform was a long process and the time frame of three years initially assigned for the completion of the Doha Round was unrealistic. With an onerous mandate on the table and large developing countries becoming active, these extensions of deadlines and impasses were imperative.
Dhar commented on the two most important market-distorting policies: non-tariff barriers and subsidies, the latter being the prime focus of his talk. He noted that there were imbalances in the Agreement on Agriculture (AoA) that provided de-facto Special and Differential Treatment (S&DT) to developed countries, especially in the area of subsidies. The ‘green', ‘blue' and ‘amber' box subsidy regime, that came into effect as an outcome of the Uruguay Round, display virtually no discipline in subsidies in the former two, and only a little discipline with regard to price support measures and input subsidies in the third (the amber box). By playing around with these boxes, developed countries gave themselves a huge advantage by shifting a major portion of their subsidies -- 70% in the case of the US -- to the green box.
Besides these flexibilities, there was a discrepancy in subsidies reported in the WTO and those calculated by the OECD (Organisation for Economic Cooperation and Development) secretariat, with subsidy figures reported to the WTO being greatly suppressed. Thus, most subsidies that should be disciplined do not even appear under the purview of those to be disciplined. In fact, a very recent WTO report itself states that there is no mechanism in place to effectively monitor subsidies in WTO member countries.
Dhar went on to discuss the effects of such a scenario and stated that all subsidies, regardless of their box, had distortionary effects on the market by conferring unfair benefits on producers who get these subsidies. Even the so-called ‘market neutral' infrastructure subsidies were not neutral because developing countries could not invest in infrastructure on a scale equivalent to that in developed countries. These subsidies have the effect of depressing domestic prices in developed countries and, because of the reduced prices, get easier access to international markets. In this scheme of things, to prevent cheap imports, developing economies are left with no option but to have high, effective tariffs.
Dhar wrapped up the discussion by stating that the challenge for all countries today was to address the problems of market access and subsidy distortions in the larger perspective.
An interactive session followed, where participants raised several questions.
Interactive session
The floor discussions started with Abhijit Das adding to what Biswajit Dhar had said about subsidies. He stated that in the US , just 10 firms account for 80% of subsidies given in the green box. Keeping facts like this in mind, the G20 has proposed that green box subsidies be given only to farmers satisfying the three criteria of being ‘low income', ‘low production' and ‘low landholding'. If this proposal were accepted, it would effectively exclude big agri businesses and substantially reduce the quantum of green box subsidies.
One of the participants, Mr Parthapratim Pal of Tata Energy Research Institute, added to Dhar's remarks about discrepancies in reported subsidies by the WTO and the OECD secretariat. He said that to calculate subsidies the WTO takes the reference price of 1986-87, while the OECD takes the current international price as the benchmark.
Partha raised an interesting point: No deal would necessarily mean increased protection abroad. In this situation, he asked, should one look for solutions inside the WTO or go beyond it? Das responded by saying that the WTO offered a number of advantages that one could possibly not get elsewhere. At which point Dhar said that India had exaggerated expectations of the WTO. The talks would only make headway, he said, once we lowered our expectations with respect to agriculture, and the US for market access. Another participant, Robin, raised a similar question about whether we had put our efforts into the right boat or were pedalling down a street with no end. To this, Dhar reiterated that given the merits of a multilateral system like the WTO, we would have to lower our expectations for the organisation to survive.
Responding to a question by a participant relating to export credit, Dhar said that using subsidies to dispose of surplus was not a viable option. More importantly, export subsidies form a very small portion of total subsidies. The real villain, he emphasised, was domestic support, and the best bet was to get all such distortions out of the way.
Answering one final point by Vir Singh, a journalist, to specifically name certain areas where India had developed an offensive agenda, Das enumerated three such areas: services, rules for negotiation and anti-dumping, and subsidies.
This stimulating interactive session was followed by concluding remarks from the Chair.
Concluding remarks
Professor Dubey concluded that the issue of bilateral arrangements had been discussed a number of times. He was of the opinion that there was great merit in such arrangements. Bilaterals, however, should not involve only preferential trading arrangements but also elements of deeper integration like joint development of infrastructure, cooperation in standards, etc. Such a win-win situation, he believes, is fully economically justified.
Regarding the present state of affairs, he told the floor that it was being reported that a note had gone from the Ministry of Food and Agriculture to the Ministry of Commerce saying that India could never be self-sufficient in foodgrain production and that we should import food to the tune of 1.5-5 million tonnes annually. Keeping this in mind, the note said, India should completely change its stance in the trade negotiations. This note, if it had indeed been sent, said Dubey, spelt complete disaster for the Indian economy. He added that to tackle the problem of food shortages, entering into regional agreements would be much better than going to the WTO with a begging bowl.
Muchkund Dubey ended by saying that it was time India formed a new development agenda wherein there would be a convergence of S&DT and implementation issues. For there to be any headway in the negotiations, Professor Majumdar said, the existing cohesion among developing countries should always be maintained.
The symposium ended with Kumar Gautam, on behalf of Centad and Oxfam International's Make Trade Fair campaign, thanking the Chair, the panelists and the participants.
(Centad thanks Deepti Tandon, lecturer, Miranda House, Delhi University, for her substantial contribution in preparing this report)
August 2006
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