South Asian Conference on Trade and Development

Introduction

The Doha Work Programme (DWP) of the World Trade Organisation (WTO), generally known as Doha Development Agenda (DDA) or Doha Development Round, is facing a severe crisis.

Negotiations between member countries were suspended at the end of July 2006, after a failure to arrive at a consensus on the modalities of negotiations on two key issues, agriculture and non-agricultural market access (NAMA).

While this is not the first time that WTO negotiations have reached an impasse, the current deadlock raises questions about the future of multilateralism itself, especially when viewed alongside a global proliferation of bilateral and regional trade agreements.

There is thus a need to seriously consider the future of multilateralism and developing country interests in trade.

To further this vital process, the Centre for Trade and Development (Centad) organised its second annual South Asian Conference on Trade and Development on the theme, `Multilateralism at Cross-roads: Reaffirming Development Priorities’.

Click here to read a background note on the conference.

The South Asian Conference, held on December 19-20, 2006 in New Delhi, was attended by over 100 academics, civil society representatives and media persons from Pakistan, India, Nepal, Sri Lanka and Bangladesh.

The deliberations were spread over eight sessions, each chaired by an eminent expert in the relevant field. Each session was followed by open discussions. There were also intensive informal discussions between delegates during the session breaks.

To view the agenda of the conference click here.

To read brief biodatas of all the main speakers click here

The conference witnessed the release of two important Centad publications:

• Trade in Services and India: Prospects and Strategies, a book co-published by Centad and Wiley India and edited by Rupa Chanda, an expert on services from the Indian Institute of Management, Bangalore. Click here to read more about this publication.
• Summary recommendations of the South Asian Yearbook of Trade and Development (2006), again a joint initiative of Centad and Wiley India, expected to be released in early 2007. Click here to read more about this publication.

An introduction to the summary recommendations of the South Asian Yearbook of Trade and Development (2006) was made by Mustafizur Rahman, Research Director, Centre for Policy Dialogue, Bangladesh. The services book was introduced by its editor, Rupa Chanda.

After Dr Samar Verma, head, Global Economic Justice Team, Oxfam GB, made the opening remarks for the conference, BL Das, formerly India’s ambassador to GATT, delivered the keynote address.

Chandrakant Patel of Southern and Eastern African Trade Information and Negotiations Institute (SEATINI), Switzerland, a leading think-tank, delivered the valedictory address.

Key issues of discussion
The deliberations over two days focused on the following issues:

• The current impasse in negotiations: Root causes, developing country options and ways forward.
• Key issues beyond the impasse: Agriculture, NAMA, Special and Differential Treatment (S&DT), concerns of Least Developed Countries (LDCs).
• Opportunities and threats to regionalism in South Asia: LDC concerns, operationalising South Asia Free Trade Agreement (SAFTA).
• Professor V Mohanasundaram, PSG College of Arts and Science, Coimbatore
• Trade in services: Implications of India’s services revolution for other South Asian countries, Emergency Safeguard Measures, LDCs in the services sector.
• Rules negotiations and South Asian interests; Antidumping, Rules of Origin (RoO), dispute settlement
• Trade liberalisation issues and concerns: Safety nets for agriculture, Aid for Trade, special economic zones, Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) Agreements.
• Environmental goods and services.
• Role of trade in achievement of Millennium Development Goals (MDGs).
• South-South trade prospects and problems.
• Global trade justice.

On each of these issues, presentations were made by invited experts, after introductory remarks made by the chair of the session. The presentations were followed by question-answer sessions and concluding remarks of the chair.

A summary of major points raised and issues discussed is given below.

Current impasse in negotiations: Root causes, developing country options and ways forward
Making the introductory remarks, Samar Verma, head, Global Economic Justice Team, Oxfam GB, noted that the current impasse in the Doha Work Programme is a serious cause of concern because the very future of a multilateral trading system is at stake. While all countries were anxious about a resumption of talks, only a “meaningful and substantial” resumption should be welcomed. At the same time, every day's delay was impacting the lives of millions of poor people across the globe, he said.

Delivering the keynote address of the conference, B L Das, formerly India 's ambassador to GATT, observed that the suspension of talks in July 2006 did not happen out of the blue. Rather, it was symptomatic of basic and structural problems in the WTO.

The core problem, which will not be resolved by the current round of negotiations, is that while GATT evolved on the premise of nations at a somewhat similar level of development, the WTO has a wide range of countries with widely different interests. Such a system cannot be stable unless each member country enjoys a feeling of shared advantage and mutual benefit. However, the reality is that a large number of countries feel their interests are not taken into consideration, B L Das said. The developed world expects the developing world to be “givers”. Since the Uruguay Round (UR), developing countries have aggressively resisted this pressure, with the help of think-thanks, civil society groups and industry federations. The resulting tension is the root cause of the current impasse, he noted.

Looking back at previous stalemates in negotiations, at UR , Seattle and Cancun , BL Das noted that each such downturn was resolved by developing countries making “drastic concessions”. Hence, there was need for “extreme caution and alertness” during the current impasse, he warned. Developing countries including India should think over the implications of the proposals they have already made, and submit new proposals, if they felt this was necessary, he suggested. There was no need to be embarrassed about this, he said.

In particular, he suggested that proposals should be amended to ensure that:

• Green Box subsidies in agriculture are disciplined by product-specific and individual beneficiary limits
• The Swiss formula is adopted in NAMA on the principle of “full reciprocity”
• There is cross linkage between sectors (Mode 1 to 4) in services negotiations
• S&DT becomes an “integral part” of the DDA, rather than a “dole out”.

Gopal K Pillai, India’s chief WTO negotiator, gave an overview of developments following the July 2006 breakdown in talks. There have been “intensive backroom negotiations” and developing countries including China have been under intense pressure to make major concessions, he revealed. However, the developing world has strongly resisted the pressure to “move first”, he added. This was a sign of “growing maturity” of the WTO, he remarked.

Pillai anticipated a “mild round” of negotiations followed by “mild concessions”. But the key to any substantial move forward was agreement between the United States and the European Union on treatment of sensitive products, he noted. The months of January and February 2007 would be critical and civil society groups have to be extra vigilant in observing the way the negotiations evolve, he said.

Speaking on India 's position, he said the country would not be worried even if negotiations are delayed by two years. The main issue was to keep the development dimension at the centre of negotiations. This may well be the last chance to ensure that this happens, he warned.

Beyond the impasse: Agriculture
In the first session that followed the inaugural session, Parthapratim Pal, Assistant Professor, Indian Institute of Management, Kolkata, provided an overview of the current state of play in agriculture negotiations, and the areas of concern.

Progress on agriculture was crucial as the US Trade Promotion Authority (TPA) expires in July 2007, he noted. The TPA allows the US administration to negotiate trade agreements that the US Congress can only approve or reject, but cannot change. Most countries obviously would not feel comfortable negotiating with the US in the absence of the TPA. An extension of TPA is possible but “less probable”, Pal felt, given the recent election victories of the Democrats in the US Congress; traditionally Democrats have been less “pro-open trade” than the Republicans.

Agriculture negotiations are stuck due to two reasons:

• Agriculture negotiations are stuck due to two reasons:
• The highly “aggressive” US position on agricultural market access.

Speaking on the first issue, Pal noted that the US proposal to cut TDS by 53% is projected to reduce its current spending limit from US$49 billion to roughly US$23 billion. But this is still higher than the US$ 20 billion it actually doled out in such payments in 2005. The US has been increasing subsidies over the years and a new farm bill due in 2007 is expected to increase the quantum of support.

Noting that there is a “distinct hardening” of the US position on agricultural market access, Pal observed that the latest US proposals on tariff rates, special products, sensitive products and special safeguard mechanisms are very ambitious--to the extent of being “unreasonable”.

One of the highlights of the Hong Kong (HK) Ministerial was a tentative agreement to phase out export subsidies by 2013. This was a positive step towards the reduction of trade distortion in agriculture. However, there was no cause for celebration as the deadline for reduction of trade distortion is conditional; it “will be confirmed only upon the completion of the modalities”.

Summing up, Pal said that the progress of the Doha Round depends significantly on US policymakers. Extension of the TPA and a more flexible approach by the US was required. In any case, developing countries should not compromise on issues of food and livelihood security. To quote India 's Commerce Minister, Kamal Nath, “No deal is better than a bad deal.”

In the discussions that followed, the following points were stressed:

• Net food importing countries will lose even if subsidies are lowered
• US agri-subsidies are linked to massive political funding. In these circumstances, India should have no hesitation in fiercely protecting the interests of its cotton and oil farmers.

Beyond the impasse: NAMA
Dr Biswajit Dhar, head of the Centre for WTO Studies at the Indian Institute of Foreign Trade,New Delhi , discussed the following critical issues in NAMA negotiations:

• Tariffs: comprehensive binding; reduction, particularly of tariff peaks and high tariffs; the problem of tariff escalations; conversion of non-ad valorem tariffs.
• Disciplining the use of non-tariff barriers (NTBs).
• Special needs and interests of developing countries and LDCs; less than full reciprocity in reduction commitments.

He also discussed the key features of the Hong Kong NAMA mandate and key issues raised by the NAMA 11 Group comprising Argentina , Venezuela , Brazil , Egypt , India , Indonesia , Namibia , Philippines , South Africa and Tunisia .

Dr Dhar then presented tariff reduction scenarios for select developing and developed countries using the Simple Swiss formula with two coefficients (one for developed countries and one for developing countries) that has gained broad support.

Discussing trends in submissions made by 34 member countries for identifying NTBs, he noted that Technical Barriers to Trade constituted almost half the total number of notifications. On the other hand, quantitative restrictions, trade remedies, government participation in trade and charges on imports constituted less than 5% of the notifications.

Summing up, he observed that the vexatious issues in NAMA negotiations were:

• Ambiguities on the tariff reduction approach
• No clarity on treatment of sensitive products
• No clarity on “mark-up” for unbound tariffs
• Disciplining the use of NTBs
• Implications of Paragraph 24 of the HK Declaration, which appears to suggest a trade-off between agriculture and NAMA deals.

In the discussions that followed, one of the participants from India felt that the government had been “complacent” in NAMA negotiations. Across-the-board tariff reduction would render the policy of protecting the small-scale sector meaningless, he added.

Dr Dhar agreed that the Swiss formula would hit many sections of industry badly. Developing countries had “played their hand too soon” on NAMA, he felt. The Argentina-Brazil-India (ABI) formula was still on the table, he noted. He also observed that while there is much focus on tariff issues, most countries are bypassing it through the bilateral route.

Beyond the impasse: S&DT
Chandrakant Patel of Southern and Eastern African Trade Information and Negotiations Institute (SEATINI), Switzerland , regretted that the rise of bilateral agreements and imposition of structural adjustment programmes by Bretton Woods institutions has undermined S&DT.

Hard won gains acquired in multilateral negotiations are being given away in bilateral agreements, he said. In this respect he questioned the commitment of developing countries towards the interests of LDCs. Developing countries were only “pretending” to support LDCs' interests, he felt.

The effort of the developed world was to impose high level of obligations on developing countries, without offering sufficient technical assistance or transition periods, he said. He concluded his talk by making a strong plea for extended transition periods for LDCs.

Beyond the impasse: Concerns of LDCs
Ratnakar Adhikari, Programme Specialist, UNDP Asia Pacific Regional Centre, Sri Lanka , discussed the various fundamental concerns of LDCs that have not been adequately addressed in the past and current round of WTO negotiations.

LDCs are “among the most vulnerable economies in the world”, he observed. Their export earnings are derived from a small, “concentrated” basket of products or sectors. They face severe supply side constraints, especially related to infrastructure. They are highly vulnerable to international shocks, and virtually lack any coping mechanism to deal with them. Further, they lack the capacity to negotiate trade agreements and implement their commitments

LDCs have opened their economies to the multilateral trading system more than developing countries. Yet, their share in global trade has declined from 3% to 0.6 % in the past 50 years. This is mainly due to high market access barriers. Bangladesh , for instance, paid 107 times higher duties than Canada for garment exports to the US in Jan-May 2006. Forty per cent of LDC exports in 2002 were subject to NTBs; in comparison, the figure for the developing, transition and developed economies was 15%.

Some efforts have been made to address the concerns of LDCs, but these have had little benefit, Adhikari remarked. Special and differential treatment has been of little use as it is mostly non-binding. Preferential market access initiatives have not helped due to rigid Rules of Origin and high standards; LDCs prefer to pay MFN (most favoured nation) tariffs. Trade related technical assistance given to LDCs has been limited to “software” like training programmes and support for studies; there has been no support to infrastructure.

In the run up to, and during, the HK Ministerial, LDCs recorded some minor gains. However, they were not substantive. For instance, 97% duty-free-quota-free (DFQF) market access does not mean much, as within 3% tariff lines, 100% of Nepal 's exports to Australia , Canada and EU are covered. As for Aid for Trade, it remains a “vague concept”.

Against this background, Adhikari urged South Asia LDCs to remain firm in ensuring 100% DFQF market access, substantive Aid for Trade and enhanced Integrated Framework initiatives. Non-LDCs like India , he said, should support LDCs in the region at multilateral discussions and provide non-reciprocal market access to LDCs, at least through regional trading mechanisms like SAFTA. On their part, South Asia LDCs have to urgently initiate domestic reforms to address supply side issues.

The pre-lunch ‘Beyond the Impasse' session on the first day of the conference was chaired by BL Das.

Regionalism in South Asia : Problems and prospects
The present status of regionalism in South Asia and its future was the focus of the post-lunch session on the first day.

The tone for the deliberations was set by the chair, Saman Kelegama, Executive Director, Institute of Policy Studies , Sri Lanka . He noted that South Asia has only two decades of experience with regionalism, with the formulation of SAARC; SAARC itself took up economic issues only in 1995. SAFTA had not lived up to expectations, he felt, for the following reasons:

• Actively traded goods have been left out of the agreement.
• The issue of NTBs has not been adequately addressed.
• Bilateral and trans-South-Asian agreements like BIMSTEC (Bay of Bengal Initiative for Multi Sectoral Economic and Technical Cooperation) and the India-Sri Lanka trade agreement undermine the role of SAFTA.
•   Issues of LDCs such as revenue compensation, rigid Rules of Origin and size of negative lists remain unresolved.

Against this background, the future of South Asia regionalism is “unclear”, he opined.

Echoing these views, Suhel Choudhury, former Commerce Secretary, Government of Bangladesh, said that limited export growth had been achieved within the framework of SAFTA by LDCs due to the problem of negative lists and huge disagreements between member-countries on RoO. Speaking on general concerns of LDCs, he highlighted the following:

• Bretton Woods institutions continue to impose conditionalities even in matters of trade, which LDCs are unable to resist.
• Think-thanks in these countries lack the capacity to help their governments negotiate better.
• Technical assistance programmes have been unsatisfactory.

South Asia LDCs, he said, can benefit from regionalism only when:

• RoO are relaxed.
• LDCs are given significant market access in RTAs. The Canada market access system with LDC-friendly formula is an example to follow, he suggested.
• Trade-related capacity development is given high priority.

Later, Dr Upali Wickramasinghe from Sri Lanka , who has worked as a consultant with the SAARC (South Asian Association for Regional Cooperation) secretariat, dwelt on the basic problems in operationalising SAFTA. As studies have shown, the case for SAFTA is inherently weak, he observed. SAFTA is “trade-diverting”, and offers only small efficiency gains.

There was a need to make a distinction between small and large players within SAFTA. For large countries like India , intra-regional trade is not very important, he observed. On the other hand, for Sri Lanka , India is a major trade partner.

Dr Wickramasinghe noted a peculiar trend in promotion of regionalism in South Asia : Even while SAPTA (South Asian Preferential Trading Agreement) was being negotiated, talks on SAFTA started. Likewise, there is talk of a South Asia economic union even before SAFTA gains a firm grounding.

He identified the following as the main problems faced in operationalising SAFTA:

• There seems no commitment among member-countries to phase out sensitive lists.
• There is no commitment to remove NTBs even on products requiring tariff concessions.
• Multiple trade agreements such as over 10 RTAs involving India cause enormous confusion over RoO among average exporters.

SAFTA, he concluded, has not yet gone beyond the framework of a preferential trade agreement. As it has not been notified to the WTO, it remains an unknown entity in global trade.

In the discussions that followed, the following points were made by different speakers and members of the audience:

• SAFTA can move forward if there is mutual recognition of standards and simple RoO.
• High degree of mistrust between member-countries and political disputes between Pakistan and India are major constraints.
• Member-countries do not even take common positions in multilateral negotiations.
• The experience of the North American Free Trade Agreement (NAFTA) and ASEAN (Association of South East Asian Nations) shows that a trade bloc requires visionary political leadership, as provided by Indonesia 's President Suharto and the American President Bill Clinton respectively.
• The proliferation of RTAs will throw up serious complications in dispute settlements.

A “realistic scenario” drawn up by Dr Wickramasinghe was that in the next few years, a South Asia economic union will be announced but it will have “no tangible effect”. Member-countries will show more commitment to bilateral rather than regional agreements.

South Asia trade in services
`Trade in Services: Scope for Convergence' was the theme of the third session of the first day of the conference. This session was chaired by S N Menon, formerly Commerce Secretary, Government of India.

In his opening remarks, Menon congratulated Centad for its working paper on services, which he said was a “commendable work” that he had strongly recommended to his colleagues when he was in the commerce ministry. Think-thanks like Centad can provide great support to government in multilateral and regional trade negotiations, he added.

Making a presentation on the services trade in South Asia, Prof Rupa Chanda, editor of the Centad book on trade in services in India, noted that though there has been a significant increase in share of services in output of all South Asian economies, there is “tremendous asymmetry” in South Asia services trade: The output and characteristics of this trade are largely driven by rapid growth of this sector in India.

In India , the structure of services trade has shifted from traditional sectors like travel and transport towards business services. But there has been no such major shift in the services trade of other South Asian countries.

However, Sri Lanka, Pakistan and Bangladesh could grab a share in the fast growing IT market with the help of India, which could enhance capacity and invest in this sector in these countries, she said. There were possibilities for reverse outsourcing by Indian companies, she added.

Speaking on other avenues for increasing South Asia trade in services, she suggested that:

• There could be joint development of tourist infrastructure and cross-country tourism promotion for specific purposes like religious tourism.
• There could be an integrated transport infrastructure that permits uninterrupted travel from Peshawar to Chittagong and from Kathmandu to Colombo .
• Telecom companies could make cross-border investments within the region.
• Pakistan , Sri Lanka and Bangladesh could invest in their education and health-care sector both directly and though collaboration with India to attract service seekers from within the region as well as globally.
• Pakistan could upgrade existing hospitals and institutions of educational excellence such as the Lahore University of Management Sciences to attract overseas clients to serve a regional and even global market.

There was also great scope for cross-border trade in energy services, she said. There could be a common energy grid across the region with integrated electricity and gas systems. India 's energy deficit could be met by energy exports from Nepal and Bhutan , which had huge hydro-electric potential. Bangladesh could export natural gas to India and Pakistan could be a transit point for connecting the vast energy reserves of West and Central Asia to South Asia .

However, political and security constraints will impede such integration, she conceded.

These would also be constraints to developing a framework for “managed migration” of labour across countries, she observed.

There is already a significant but irregular movement of people within the region, she noted. Many people come especially to India for higher education, seasonal work or employment in the unorganised sector. A large number of South Asians cross each other's borders as tourists, pilgrims, professionals, students and health care seekers as well as providers. While India is a major attraction for students and health care seekers from the region, Indian nurses and doctors work in a number of hospitals in Bangladesh , Nepal , Maldives and Bhutan . Indian managers and professionals are present in Nepal and Bhutan and Bangladeshi cooks and waiters work in tourist resorts in Maldives .

This movement can be expanded to include less skilled or unskilled service providers through instruments like special visas and authorised recruiting agencies, she said. South Asia is only one of the few regions in the world in which migration is not managed this way, she observed.

In the discussions that followed, Rupa Chanda debunked the belief that the boom in the BPO sector was benefiting people only from a certain class and educational background. Quoting from a study she is working on, she said that the BPO sector provides a lot of employment in other sectors like transport, housekeeping and catering. “There is a tremendous linkage between BPO and development,” she said.

Emergency Safeguard Measures
Following the discussion on services, Parashar Kulkarni, Research Officer, Centad, spoke on the feasibility and desirability of Emergency Safeguard Measures (ESMs) with reference to South Asian countries. ESMs can protect domestic industry in developing countries on a temporary basis. However, they are easy to circumvent (for instance, by registration of a company in another country) and impractical to implement in the absence of domestic regulatory capacity. Hence, Kulkarni suggested, South Asian countries should “embed” ESM in schedules, as has been done by Mexico in NAFTA for its banking sector.

LDCs in the services sector
In the last presentation of the day, Raghav Narsalay, Lead Economist, Economic Laws Practice (ELP), Mumbai, explained how LDCs are left behind in the services sector. There are systemic domestic factors such as poor quality of public spending in key sectors like education, and skewed direction of public spending -- in favour of services consumed by rich households. There also non-systemic factors such as the HIV/AIDS epidemic. Then there are systemic and non-systemic external factors like faulty economic assessments by multilateral lending institutions and wars, respectively.

Rules negotiations and South Asian interests
On the second day the first session focused on the following three aspects of rules negotiations, with reference to South Asia :

• Disputes settlement
• Antidumping
• RoO

Making the introductory remarks, the chair, B S Chimni, professor of International Law, Jawaharlal Nehru University (JNU), observed that the above three instruments could work as a “shield” or as a “sword” for developing countries.

Disputes settlement
Huma Fakhar, a lawyer from Islamabad who has considerable experience in preparing the argument for WTO dispute cases, dwelt on four problems faced in this respect by developing countries.

Firstly, case management is poor. Government continues to play the leading role without taking adequate help from the private sector. While only governments can argue before the WTO dispute settlement body, the private sector can greatly help a country's cause by collecting data, filling up complicated questionnaires and ensuring that necessary paperwork is done in the stipulated time. Citing the case of the EU bed linen case involving India , she explained how precious time was lost due to lack of government capacity. She strongly recommended the process adopted in Brazil , where the ministry of foreign affairs (which deals with international economic issues) has a special desk for working closely with the private sector.

The second problem faced by developing countries is that they lack resources—human and financial to argue a case well. There are no senior advisory centres on trade law in South Asia , Huma Fakhar pointed out. South Asian countries should take a cue from Africa which has set up regional centres in Brussels and Washington for data collection and coordination. Only such a joint effort of governments would help the South Asian countries' cause as they simply do not have the “economies of scale” in terms of number of disputes, to hire expensive lawyers and other resources on a permanent basis to fight dispute cases.

The third problem was political. South Asian countries continue to adopt what she called a “foreign office approach” to their disputes involving other countries in the region. Political relations colour what is essentially a commercial dispute. South Asian governments should learn to realise that there is no “friend nor foe” in commercial disputes, she said.

Finally, she said, South Asian countries have not realised the role of advocacy by working with international civil society groups. In this connection she gave the example of the UK Consumers Association which lobbied in the interests of Peruvian fishermen in one dispute. Similar lobbying could have been managed in the EU bed linen case, she felt.

The chair, B S Chimni, disagreed with Huma Fakhar's contention that there was insufficient intellectual capital in South Asian countries to present dispute cases. There was considerable in-house expertise, but it had not been given the opportunity to display and hone its skills, he said.

Chimni also spoke about the dispute settlement reform process, which had made little progress over a decade. Two serious proposals have been recently submitted by the US , he informed. As the reform process picks up, he suggested that developing countries should lobby for an alternative dispute settlement body to deal with their interests.

Antidumping
Discussing use of the antidumping instrument by South Asian countries, Prabhash Ranjan, law student at the School of Oriental and African Studies, University of London , said that India has been a “heavy user”. Often, it is the highest user in a year—surpassing the US and EU. On the other hand, Bangladesh and Nepal have not used the instrument at all. Not surprisingly, among South Asian countries, only India has made substantive submissions on antidumping.

Talking about legal aspects that are issues of concern, Prabhash highlighted the concept of “zeroing”, which is being used by the US , though it does not exist in the antidumping agreement. Even South Asian law does not prohibit it, he warned.

In the discussion that followed, Prof Chimni argued that it was wrong to view antidumping as a “protectionist” measure. Faced with sudden reduction of tariffs, South Asian countries should use antidumping as a positive measure to prevent “de-industrialisation” of their economies, he said.

RoO
Dr Chittaranjan Satapathy , who was India 's chief negotiator on RoO for several years, made a strong case for “simple, general and liberal” RoO. Research shows that such rules foster trade and take care of the problem of trade deflection adequately, he said.

Intra-region South Asian trade has been hampered by stringent RoO, he said. The SAFTA RoO were inconsistent with the free trade agreement goals, he added. He suggested simple tariff changes at the lowest level, establishment of a “tolerance level” and the formation of a specialised RoO organisation to deal with all related issues, train officials and traders and elicit views of stakeholders. Developing countries should also set up a “directorate of origin”, he said.

Complex RoO will create many problems due to the proliferation of preferential trade agreements, he warned.

Trade liberalisation issues
The second session on the second day of the South Asian Conference on Trade and Development focused on trade liberalisation issues, particularly trade safety nets in agriculture, Aid for Trade, Special Economic Zones, and Sanitary and Phytosanitary and Technical Barriers to Trade Agreements.

Making the opening remarks, the chair, Mustafizur Rahman of the Centre for Policy Dialogue, Bangladesh , said that trade liberalisation is a fact of life in South Asia . The key issue is not protectionism but the pace, sequence and phasing of liberalisation, to ensure that economies adjust to a liberalisation regime, he said.

Trade safety nets in agriculture
In his presentation on trade safety nets in agriculture, Linu Mathew Philip, research officer, Centad, pointed out that as they stood today, trade agreements were neither fair not free. High domestic support to agriculture in the developed world had led to “asymmetric globalisation”. As a result, all South Asian countries had negative trade in agriculture. In the case of India , the export value of agriculture trade had gone up, but the export unit value had declined. On the other hand, the import value as well as import unit value was increasing. In the case of Sri Lanka , there was high fluctuation and instability in values.

There have been some success stories of agriculture export from South Asia , such as gherkins from Karnataka, but farmers had not gained significantly, he said.

The developing world had lost ground on agriculture in the Uruguay Round, he noted. What is now needed is a drastic overhaul in the production system. There should be an effective mechanism to control price fluctuations in the domestic market and implement specific checks in the value system, with biodiversity factored in. To reduce the vulnerability of small holdings, cooperatives needed to be revamped and encouraged. Such measures, he noted, would not constitute income support to farmers, as is given in the West.

South Asian countries should build trade safety nets within the production system, with farmers' participation, he urged.

Aid for Trade (AfT)
AfT was a “right” of LDCs, stated Rishi Adhikari, Project Director, Rural Reconstruction Network, Nepal .

While AfT has been in existence for many years through various means and agencies, the aid has not helped much due to exorbitant adjustment costs, with loss of policy-making space, he observed. Besides, the aid has been insufficient. Hence, though the estimated potential gains for LDCs from full liberalisation was US$141 billion, the reality was that total imports from LDCs by developed countries fell from around 25% in 1999 to around 10% in 2004.

Referring to the acknowledgement of the role of AfT at the sixth WTO Ministerial Conference (Dec 2005), Adhikari said an AfT package would be successful only if:

• It matches real needs; it is demand-driven.
• Recipients have ownership over the package.
• The aid is sufficient and not debt-creating.
• The package is supplemented by other mechanisms such as low temporary tariff for products scheduled for liberalisation.

Arguing that existing multilateral organisations would not be able to give sufficient attention to AfT, he suggested creation of new units for aid assistance. These should be independent units within existing organisations, he said.

SEZs
Biplove Choudhary, Centre Coordinator, Centad, and Deepti Tandon, lecturer in Economics, Delhi College of Arts and Commerce, gave an outline of the evolution of Special Economic Zones (SEZs) in India and the several areas of concern.

The idea of developing SEZs gained ground after the then Indian commerce minister visited China in 2000. Subsequently, it found mention in the Exim policy statement. Finally the SEZ Act was passed in a “great hurry”, they said.

There are several issues of concern:

• There is no ceiling on amount of land to be given to SEZs or the number of SEZs.
• SEZs are essentially “foreign territories” for purpose of trade operations and duties.
• SEZ units enjoy generous tax breaks. But they are not expected to work too hard to earn foreign exchange.
• The revenue loss due to SEZs is estimated at Rs 100,000 crores by 2010.
• There is no clarity on how concessions given to SEZs would play out in the long term.

Reviewing the state of play so far, the speakers pointed out that SEZs are concentrated in Maharashtra , Andhra Pradesh and Tamil Nadu. The eastern zone of the country has little SEZ presence. That is, investment is being attracted by states that already have high investment. Regional inequalities and “economic apartheid” will be aggravated, they warned.

Arguing that the case of SEZs in a highly closed system like China was fundamentally different from the case of SEZs in India , they said the Indian policy should be modified to ensure that:

• Existing units are not allowed to move into SEZs
• Labour and environment laws are made applicable in SEZs
• The emphasis is on providing infrastructure support rather than concessions to SEZs.

SPS&TBT
Reviewing the progress made on Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) issues over the past 10 years, Mohammed Saqib, fellow, Rajiv Gandhi Institute for Contemporary Studies, regretted that there has been little movement. Developed countries achieved what they wanted, and the negotiations have made little progress.

As it stands the SPS & TBT Agreement is only an example of “good language”. It does not work at the multilateral level; it works only at the bilateral level.

Further, SPS & TBT often becomes a political issue. For instance, India used to export chilly powder to Spain for years. However in the last three years, all Indian consignments have been rejected. As it turns out, there was no quality issue. Spain simply wanted to give entry to chillies from Mexico due to its trade agreement with that country, he disclosed

Developing countries are ill equipped to negotiate on SPS and TBT issues, he opined. In India , for instance, around 11 different agencies are involved and there is poor coordination between them. Industry was also complacent and there was little participation with government on these issues, he said.

Saqib suggested the following measures:

• Setting up of a nodal agency to deal with SPS and TBT issues
• Active public-private partnership
• Setting regional SAARC standards

Environmental goods and services
In the post-lunch session on the second day, Aparna Sawhney, associate professor, Centre for International Trade and Development, JNU, demonstrated how the entire environment agenda in the WTO is pushed by the EU, which is the dominant global player in environmental goods and services (EGS).

She pointed out that there was as yet no agreement on what constitutes EGS. The EGS lists of developed countries include industrial goods, vacuum cleaners and coin sorting machines! These lists have been rejected by South Asian and Latin American countries. India advocated the use of a ‘project approach' to EGS, but though this found considerable support, it has not received a stamp of approval.

Speaking on the current state of play in EGS negotiations and business, she said that while the OECD (Organisation for Economic Cooperation and Development) countries want market access for environment services in developing countries, the latter want movement of labour. EGS in developing countries like India is dominated by the informal sector, which does not even know that it is an EGS industry. Developing countries today are net importers of EGS and environment goods most traded are items like floppy discs, which have little environment impact.

Linkage of trade with MDGs
Kailas Karthikeyan, Trade Officer-Legal, UNCTAD, India , then made a presentation on the role of trade in attaining the Millennium Development Goals (MDGs).

Noting that the language of MDGs is not adequately employed in trade negotiations, he gave examples of good and urgent grounds to bring in the MDG language into this arena: Developing countries were experiencing increasing casualisation of labour after liberalisation; Green Box subsidies in developed countries are highly trade distorting; the EU and US remain highly protected textile markets.

Against this background, developing countries should fight for adoption of pro-MDG trade policies, with focus on vulnerable groups and regions, he said.

MDGs 8 and 1, which influence all other MDGs, are tools to be used, he said.

The chair of this session, Jayati Ghosh, professor, Centre for Economic Studies and Planning, JNU, remarked that a lot of the Doha Development Round is already history. “We have to live in a WTO plus world.” There are now new rules of the game, with regional and bilateral agreements deploying TRIPS plus and TRIMS plus clauses.

Developing countries should expect a lot more unilateralism, she warned. Trade was being increasingly used to get strategic control over natural resources. Trade was also driving domestic technology choices. The shift is towards labour-saving technology. The employment-generation gains of trade were questionable and need to be looked at closely, she said.

South-South trade: Problems and prospects
In the valedictory session of the conference, Atiur Rahman, professor of Development Studies, University of Dhaka , reviewed the growth of South-South trade and the impediments it faced.

There has been continued growth in the share of South-South trade of developing countries since 1990s. South-South merchandise trade increased to 12.2% of world merchandise trade in 2001 from 7.7% in 1990. However, South-South trade is insignificant compared to North-North trade.

South-South trade is largely fuelled by rapid economic development in East Asia and China . Another important aspect is that the number of South-South RTAs has been increasing. Forty-three per cent of South-South merchandise trade comes under the umbrella of RTAs.

South-South trade faces many impediments.

Developing countries maintain high tariff barriers compared to developed countries. Around 70% of the tariffs faced by developing country exporters are actually applied by other developing countries. High tariffs in developing countries are a big barrier to South-South agricultural trade. For example, Korea has a 917% tariff on cassava and Morocco a 339% tariff on sheep and goat meat. There is also high level of tariff protection for automobiles and clothing.

Developing country exporters also face high transport, insurance and communication costs. Most international communication lines are North-North or North-South.

The Global System of Trade Preferences Among Developing Countries negotiations have suffered from the unwillingness of some members to make concessions in favour of poor and small developing countries.

Against this background, Atiur Rahman called for “huge political commitment” from all member-nations to make SAFTA work. In the discussions that followed, many participants emphasised the role that India and China have to play in the economic progress of LDCs. It would lead to a “win-win situation” for all nations concerned, it was argued.

Global trade justice
“There is no trade justice in the WTO,” declared Dr Samar Verma in his presentation on global trade justice made at the conclusion of the two-day conference.

The concept of trade justice, he explained, derives from economic justice, and included equitable distribution of opportunities and power. However, what we are seeing is that in case of the bulk of UR agreements, rules are rigged and double standards are employed by developed countries.

Nevertheless, the option for developing countries is not less, but more trade. It must be realised that poverty does not originate from trade but from domestic policy regimes. Trade cannot be a substitute for robust national and sub-national development policies. It must also be remembered that trade does not benefit all equally. Hence, government needs to play an active role in redistributing benefits.

“No matter where we begin the war on poverty, we have to win at the national level,” Dr Verma concluded.

SPEAKERS' BIODATA

Gopal K Pillai
Gopal K Pillai is the Commerce Secretary, Government of India. He has played a dynamic role in leading India 's trade negotiations at the WTO and other fora. He belongs to the Indian Administrative Services.

B L Das
B L Das retired as a Secretary to the Government of India. He was India 's Ambassador and Permanent Representative to the GATT and Deputy Permanent Representative to UNCTAD in Geneva . He also functioned as Chairman of the GATT Council and of the GATT Contracting Parties. He was also the Director of International Trade Programmes at UNCTAD. He has a number of books and articles on WTO-related issues to his credit.

Mustafizur Rahman
Mustafizur Rahman is the Research Director of Centre for Policy Dialogue, a leading civil society think tank in Bangladesh and is a Professor of Economics at the Faculty of Business Studies, University of Dhaka . He has a PhD from Moscow State University in Development Economics, and was a post- doctoral fellow at Oxford University and Yale University . He is also a Senior Fulbright Fellow and has authored many books, published in journals and consulted international organisations such as UNESCAP and UNCTAD.

Rupa Chanda
Rupa Chanda is a Professor in the Economics and Social Sciences Area at the Indian Institute of Management, Bangalore . She has a PhD in Economics from Columbia University and an undergraduate degree in Economics from Harvard University . Prior to joining IIMB, Professor Chanda worked as an economist at the International Monetary Fund. She has been consulting and researching for international organisations including the UN and the World Bank. Dr Chanda has published articles in international and national journals, chapters in books, working papers, and policy documents. She is a leading, internationally renowned expert on trade in services.

Parthapratim Pal
Parthapratim Pal is an Assistant Professor at the Indian Institute of Management, Calcutta . He has a PhD in Economics from Jawaharlal Nehru University , New Delhi . Before joining IIM, he worked with the Indian Council for Research in International Economic Relations, the Economic Research Foundation, and the Indian Institute of Foreign Trade. He has contributed in various books and journals published nationally and internationally on trade and macroeconomics related issues.

Biswajit Dhar
Biswajit Dhar is the Head of the Centre for WTO Studies of the Indian Institute of Foreign Trade, New Delhi . He holds a PhD from the Jawaharlal Nehru University , New Delhi . He is a prominent member of the Data Protection Committee of the Government of India and a leading figure in intellectual property rights issues. Prof Dhar has worked extensively on TRIPS-related issues.

Chandrakant Patel
Chandrakant Patel was a Director with UNCTAD and now represents the Southern and Eastern African Trade Information and Negotiations Institute (SEATINI) in Europe . SEATINI is closely involved with advisory and technical support to African delegations in the WTO Doha negotiations. Dr Patel was educated at King's College, Cambridge , and New York University .

Ratnakar Adhikari
Ratnakar Adhikari is a Programme Specialist at the UNDP Regional Centre in Colombo . He was the Executive Director of South Asia Watch on Trade, Economics and Environment, Kathmandu . He has seven years of banking experience and six years of teaching experience. He was a member of the Nepali government's delegation to the Cancun Ministerial Conference of the WTO. He has published extensively on trade, development and competition related issues. He holds a Masters of Commerce degree from the Delhi School of Economics, and a Masters degree from the World Trade Institute, Bern .

Suhel A Choudhury
Suhel Ahmed Choudhury is a former Commerce Secretary of the Government of Bangladesh. He set up the WTO Cell in the Ministry of Commerce in 2003. Several trade facilitation measures were initiated during his tenure as the Shipping Secretary and Commerce Secretary between 2000-2004. He was posted at the Bangladesh mission to the European Communities (now EU) in Brussels as the Economic and Commercial Counsellor from 1984- 1989.

Upali Wickramasinghe
Upali Wickramasinghe is Professor of Economics at the Department of Economics, University of Sri Jayewardenepura , Sri Lanka . He holds a doctorate in Economics from the University of Hawaii . He served as a consultant to a number of international organisations such as UNESCAP, UNCTAD, ITC, World Bank and the SAARC Secretariat. He has published extensively on diverse areas on trade and development.

Parashar Kulkarni
Parashar Kulkarni is a Research Officer at Centre for Trade and Development (Centad). His research interests include trade in services and income distribution. He has engaged in research assignments for organisations such as the UNDP and USD and has contributed to books and journals nationally and internationally. Prior to Centad, he has worked in trade research, academia and consulting. He holds a Master's degree from Mumbai University .

Raghav Narsalay
Raghav Narsalay is a Lead Economist with a law firm, Economic Laws Practice, in Mumbai. Recognising his contribution as a young economist to policy issues, the Financial Express named him Changemaker of the Year 2005. He is a graduate in Statistics and a postgraduate in Economics. He has carried out research for the Indian Ministry of Commerce and Industry, and the Ministry of Textiles, the Institute of Development Studies , Sussex , and for various UN bodies. He is a visiting faculty to the Tata Institute of Social Sciences and SIES College of Management Studies. He was also a member of the advisory body of the Insurance Regulatory Development Authority in 2005-06.

Prabhash Ranjan
Prabhash Ranjan is presently pursuing LLM at the School of Oriental and African Studies (SOAS), University of London . He is a Chevening scholar. Prabhash worked with Centad as a Research Officer prior to pursuing LLM. He has published articles on international trade and WTO issues. His main areas of work are trade and investment law.

C Satapathy
Chittaranjan Satapathy is a member of the Indian Customs Tribunal. He was India 's negotiator on Rules of Origin in the WTO for five years and was elected Vice-Chairman of WTO's Technical Committee twice. He has post-graduate degrees from IIT, Kanpur and the University of Bath, UK and a doctorate degree from Mumbai University . He has published widely on international trade issues.

Huma Fakhar
Huma Fakhar is the founding Chairperson of Market Access Promotion and is a partner of Fakhar Law International. She is currently advising the Government of Bahrain on NAMA and the Bahrain-US Free Trade Agreement, the private sector in Afghanistan on trade facilitation and the private sector in Pakistan in textile, agriculture, automotives and dairy sectors. She has consulted with trade organisations such as the WTO, the International Trade Centre, SAARC Chamber of Commerce, UNDP, UNCTAD and others. She received her Master's degree in Trade Law and Policy from the University of Cambridge .

Linu Mathew Philip
Linu Mathew Philip is Research Officer at Centad. An agricultural economist, he has been on the faculty of the University of Delhi . He has served as member of various committees of the Government of India. He has extensively worked on many domestic agricultural and international trade issues.

Rishi A Adhikari
Rishi Adhikari is the Project Director of Rural Reconstruction Network, Nepal.

Mohammed Saqib
Mohammed Saqib is a fellow at the Rajiv Gandhi Institute for Contemporary Studies, Rajiv Gandhi Foundation, New Delhi . He works on WTO, Foreign Direct Investment (FDI) and economic policy issues. He has been a consultant to many national and international organisations such as the World Bank, UNCTAD, EU, and WWF and to various ministries of the Government of India. He has published a number of books and contributed to numerous refereed national and international journals.

Biplove Choudhary
Biplove Choudhary is a development economist working as Centre Coordinator with Centad. He has a doctorate in foreign trade policy from the Jawaharlal Nehru University , New Delhi , India . Also, he is visiting faculty at the School of Journalism , Lady Sri Ram College , Pioneer Media School and the Institute for Human Development, New Delhi . His research interests include trade policy formulation and trade and gender linkages.

Deepti Tandon
Deepti Tandon is a Lecturer at the Department of Economics, Delhi College of Arts and Commerce at the University of Delhi, India. She has an MA in Economics from Jamia Milia Islamia and has published in dailies and journals.

Aparna Sawhney
Aparna Sawhney is an Associate Professor at the Centre for International Trade and Development, School of International Studies , JNU. She has a PhD from Columbia University and has engaged in consulting assignments with a number of international agencies including UNCTAD and ICRIER. She has published widely in international journals and has authored books. She is an internationally renowned expert on environmental services.

Kailas Karthikeyan
Kailas Karthikeyan is a Legal Officer at UNCTAD India Programme. He has published on international trade issues at national and international fora. He is a law graduate from National Law University , Bangalore .

Atiur Rahman
Atiur Rahman is a renowned Bangladeshi economist. He is a PhD from the School of Oriental and African Studies, London . He has since played a major role in the much publicised microcredit revolution in Bangladesh serving on the Mohammed Yunus National Task Force on Poverty Eradication and as Chairman of the Janata Bank, Bangladesh 's second largest bank, and on the Board of Sonali Bank, Bangladesh 's largest bank. He has worked for a long time at the Bangladesh Institute for Development Studies and is also the chairman of the non-profit research institute Unnayan Shamunnay. At present, he is a professor in the department of Development Studies in Dhaka University.

Samar Verma
Samar Verma is the Head of Global Economic Justice Team at Oxfam GB in Oxford , UK . He is the Chairman of Centad, New Delhi . He is an expert on trade policy in general, and the textiles and clothing sector in particular.

January 2007