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Day 1
Background
The debate on linkages between trade, development and poverty reduction is not new. Both the theoretical and political economic dimensions are changing and unfolding in this new trade and investment regime. The current international trading system has not been viewed as favourable towards developing countries, a situation that severely hampers development and ongoing attempts to eradicate poverty. Even the suspense at the WTO negotiation on Doha Development Round do not seems to cease and is adding to the woes of the developing countries. Talks are still on and a break through is expected soon. The reassuring part of the impasse is that developing countries are increasingly realising and believing in the pathways of trade to development. Most developing countries have benefited from this trade induced growth momentum as a result of strong demand for their exports of primary commodities and, to an increasing extent, of manufactures but the flip side of trade also seem to catch-up. This has been primarily attributed to global economic imbalances which continue to pose a risk to development. The large economic gap between developed and developing economies questions the sustainability of any trade agreements, which seem to acerbate the inequity as trade grows. Most often the developing countries are themselves to be blamed on their inability to adopt more proactive policies in support of capital formation, structural change and technological upgrading, and policy space available to them in international rules and disciplines. South Asian region with high incidence of poverty has a lot to gain. Its true potential has not been adequately harnessed. Trade can usher changes in the SAARC countries but their domestic policies need to be geared to meet the challenges ahead. This will be possible only if international trade rules too are framed in a fair manner to provide the legitimate opportunity to harness the gains from trade. Though efforts are being made to look at various dimensions of the issue. Centad in its third annual South Asian Conference on Trade and Development organised on 19-20 December 2007 has made an attempt to look at ways to harness gains from trade to make it more equitable for the developing and underdeveloped countries of South Asia.
The conference proceeded under the following sessions (Click for the detailed Agenda)
Session 1 Inaugural Session; Chair Charan Singh Wadhva
Inaugural Address Kamal Nath
Key Note Address B.S. Chimni
Special Address Ramesh Chand and Mohammed Saeed
Session 2 Trade Flows in South Asia: Assessing the trade gains; Chair K.T. Chacko
Session 3 Domestic Policy Responses to Trade and Development;
Chair Mangala Moonesinghe
Session 4 Climate Change and South Asia Trade: Is there a reason to worry?
Chair Prabir Sengupta
Dinner talk The World Economy in Turmoil: What to do? Ajit Singh
Session 5 Trade Law: Issues & Concerns; Chair A Jayagovind
Session 6 Harmonisation and International trade; Chair Rajesh Mehta
Session 7 Trade and Agribusiness: Opportunities and Concerns; Chair Gopal Naik
Session 8 Valedictory Session; Chair A.N. Ram
Special Address Gopal K. Pillai
Harnessing Gains from trade: Transition from a Developing to a Healthy Economy
One of the best defendants of the issue at the Doha round of WTO is Mr. Kamal Nath, Minister of Commerce, Government of India whose stand in the various Multilateral fora has been that 'trade should be a platform for development' but trade cannot be delinked from ground realities. His prescription for the negotiation has always been that country can "negotiate commerce but not the lives of people". Giving the Inaugural Address at the Conference the Minister of Commerce raised the concern that "structural flaws still exist when one talks of harnessing gains for developing countries". However, to harness gains from trade, it is important to ensure that even developing economies are healthy economies, since only healthy economies will provide a better market. The biggest Challenges confronting the region are with regard to "the two Fs - Food and Fuel". The rising prices of fuel and food are posing a serious threat and there is concerted need to address it both domestically and internationally. At the same time, the asymmetric growth in sectors is suggesting a need for structural adjustments with migration from farming to manufacturing and services. There is also a need for agriculture to take off as a source of commerce. The stagnation in agricultural productivities is beckoning a 'second agricultural revolution'.
FAO Food Outlook November 2007
Global food crisis looms as climate change and fuel shortages bite
(Source: The Guardian)
Record world prices for most staple foods have led to 18% food price inflation in China, 13% in Indonesia and Pakistan, and 10% or more in Latin America, Russia and India, according to the UN Food and Agricultural Organisation (FAO). Wheat has doubled in price, maize is nearly 50% higher than a year ago and rice is 20% more expensive, says the UN. Next week the FAO is expected to say that global food reserves are at their lowest in 25 years and that prices will remain high for years.
Yearbook and the Recommendations
Summary Report of the South Asia Yearbook on trade and development 2007-08 entitled 'Harnessing Gain from Trade: Summary Report of the South Asia Yearbook on trade and development 2007-08 entitled 'Harnessing Gain from Trade: Domestic challenges and Beyond' being currently published by Academic Foundation was released by Minister of Commerce, Government of India. The summary is collection of research papers from eminent academicians and professionals from the South Asia region on trade-related domestic and multilateral institutional constraints that limit the development process of South Asian countries (including, India, Pakistan, Bangladesh, Nepal and Sri Lanka). It tries to look beyond Doha negotiation and understand the current problems in the trade process and its impact on poverty and other development concerns. The yearbook calls for a more participatory trade policy formulation to usher in real gains from trade and development in the region and wider consultation and consensus, domestically. It reflects that the South Asian region is marked by a lack of technical, human and financial capacity. An urgent action on in-house expertise on trade policy making, both within the government and outside is needed.
Above: Shri Kamal Nath releasing the Recommendation of the Centad's South Asian Yearbook of Trade and Development 2007-08
Thrust on Inclusive Development
Giving the Key note address, Prof Chimni questioned the dominant paradigm of free trade and its embodiment in the international trade policies which leaves very little policy space for developing countries, and it then becomes difficult to harness gains from trade. Most trade developments gains are harnessed by a few, which calls for alternative paradigm with goal based on a 'weaker theory of free trade'. This will allow more inclusive development and better policy space. It is ironical that the first challenge to this dominant theory of free trade is coming from the first world which has gained maximum benefits. The reasons behind the need to challenge this idea of free trade are the colonial legacy of the phenomenon, where the India's experience with the British showed that "comparative advantage is always coercively structured". None of the developing countries practiced free trade in their initial days of development and this has contributed much to the present impasse in agriculture. There is also the "problem of adjustment assistance", where developed countries provide adjustment assistance to their citizens in the face of liberalisation of their economies in contrast to the developing countries who have no safeguards. This leads to the questioning of the utility of free trade and the way it is insitutionalised into bodies such as the WTO, leaving little space for developing economies.
Stagnation in Farmers Income
Issues that plague Indian agriculture are slowdown in agricultural growth as a consequence of stagnation in farmers' income and issues related to sustainability. A good trade policy, said Prof. Ramesh Chand, should ensure that the benefit of domestic process goes to farmers, quality seeds are made available to them, and investments in technological upgradation in agriculture is made. International trade is posing new challenges vis-a-vis food security arising from high international prices, slowdown in growth and sustainability. Future trade negotiations should focus on taking advantage of high potential technologies in partnership with private sector and removing bottlenecks in the transfer of technology and ushering in gains not to the economy but to the primary stakeholders, that is farmers. There is a need to revive the growth in agriculture which can come through complementary policies from both price and non-price factors.
Fig 1: Presentation by Prof Ramesh Chand in the Inaugural Session on Trade Policy and Challenges Facing Indian Agriculture
Mooting a SAARC Joint Negotiating Strategy
International trade remains 'structurally flawed' and the least one can wish for is to minimise trade distortion through a successful completion of Doha Round. Citing the example of Pakistan offering its surplus sugar for sale to Afghanistan in 2003, he said the price offered was at least Rs 3 less than the domestic price but it was not sold because the price offered by EU was even lower due to the subsidies received by their farmers. Since then, he informed, Pakistani farmers have stopped growing sugar as there was no availability of good prices for their crops. This reflects the developmental impact on developing countries due to the domestic policies of developed countries. The developing world has been strongly demanding a "freer trade and fairer trade". The current negotiations at the Doha round in WTO is divided between the developing world which insists that agriculture and NAMA should be the focus of negotiations, and the developed countries which insist that NAMA negotiations on industrial goods should be given prominence. SAARC countries have a lot of common trade interests and have been raising legitimate development concerns at various multilateral fora but there is no unanimous position at the WTO which according to Mr. Sayeed is a serious lapse. Multilateral negotiations are turning like 'elephant' difficult to push and move - the only way is to ride them but SAARC as a bloc has failed to do that.
Stagnant intra-regional trade: A cost borne by the people of South Asia
In spite of all sound economic welfare gains - calibration and arguments from trade these do not find place into the regional trade policy making the outcome highly sub-optimal in nature. The actual trade volume of the region is close to 315 billion dollars per annum. However, the intra SAARC trade forms just 4-5%. This clearly symbolises a lost opportunity and the region is not maximising trade welfare. According to the Chair, Mr. Chacko, the lost opportunity in the form of low intra-SAARC trade is a cost borne by the people of the region.
Fig 2: Presentation by Dr Mohammed Saeed in Session 2 on Trends in Trade Flows in South Asia: Special Reference to Pakistan
In 2006, 4.5% of Pakistan's exports were to SAARC region and only 1% of its imports originated from SAARC countries. However, Pakistan's global exports have grown from 12 to 17 billion dollars thus reflecting a 45% growth. While all countries in SAARC have increased their imports and exports as a percentage of their GDP, the trend of intra regional trade in SAARC is more comparable to African countries. Thus, while global trade has progressed, the share of intra-regional trade has remained stagnant and thus regional integration in SAARC at best can be rated as embryonic. The need, is for 'soul searching' as Mr. Sayeed said, in terms of geopolitical realities of South Asia where lack of trust and limited policy responses reign high. A holistic approach towards economic integration is required where India is poised to play the role of "big brother- as policy and not charity". The onus of any further forward movement in regional trade gains lies with political leadership and policy makers who till now have not shown the desired intentions. Role of media and civil society in opinion building and support, and corporate decisions of regional networks help in such an endeavour.
Answering on questions related to Pakistan's rationale for joining the Cairns group when it is not essentially an exporter of agricultural commodities, Mr Sayeed said that currently at the WTO Pakistan's binding on agriculture is 100% and applied tariffs on most major agricultural commodities is close to zero. Membership of Cairns Group has been taken with the recognition of a potential in export of agricultural goods and a long term strategy with an offensive interest.
Trade liberalisation has had a negative impact on employment and SME sector in Bangladesh. Also, while Bangladesh has witnessed an increase in export and import growth, its trade with South Asia is only 5% as compared to its total trade with only 3% of its exports going to SAARC. But SAARC is a major import destination of Bangladesh, with India playing a prominent role. The reasons for a low trade performance of Bangladesh with SAARC are, existing trade deficit of $2 billion, issues of TBTs, market access and trade facilitation measures with India, absence of regular shipping lines and issues of market access with Pakistan, and absence of trade facilitation measures with Bangladesh. The negotiation on FTA between India and Bangladesh started four years ago in October 2003 and is still continuing with 'apparently nothing happening'. These are some of the developments which need attention if the region is to harness gains from trade. Replying to the query on single visa, it was felt that the idea is revolutionary and one can start with a multiple entry for few years instead and move further steadily in the lines of EU for better movement of goods and people across the region.
Trade liberalisation in India got initiated in 1985 when high growth in trade volumes was witnessed. Today, India's export competitiveness has improved for a wide range of products like machinery and transport equipments, base metals, chemicals though in relative terms, improvement is smaller in textiles and garments, leather products. India's market destination is diversifying and with the high growth in trade in merchandise and services. The impact of this phenomenon is likely to be witnessed in increase in employment and reduction of urban poverty. Agriculture, however, is likely to be adversely affected. Areas of concerns according to Prof. Sinha Roy, are the slow diversification of exports, WTO related issues such as NTBs, market access, trade facilitation, high compliance costs, improvement in infrastructure, institutional reforms and other trade facilitation issues. To the question raised to Prof Sinha Roy on what were his views on the impact of Imports which generate unemployment, he said he had deliberately left it because the net gains would come from the exports.
Fig 3: Presentation by Dr Saikat Sinha Roy in Session 2 on India's Current Trade Flow Pattern and Concerns
The participants stressed the need for similar stakeholder consultations like the South Asia Conference on Trade and Development with people at the grassroot, which will go a long way in building awareness about the processes in international trade and their impact.
Highlighting the gains accruing to Sri Lanka Deshal de Mel commented that bulk of Sri Lanka's trade in South Asia is with India (81.66% of exports), though in limited products. He pointed that while India-Sri Lanka free trade agreement is encouraging in terms of potential for South Asia trade, the question is if SAFTA can produce similar results? The biggest challenge confronting the region is low levels of intra-regional trade and the limited diversity of trade. Some of the reasons for this are the lack of complementarities in trading partners, lack of market awareness, high transaction costs and NTBs. The India - Sri Lanka Comprehensive Economic Partnership Agreement have been looked as a follow up to the success of the India-Sri Lanka Free Trade Agreement. Though, in terms of protections and safeguards, the CEPA allows significant flexibility, regulatory weaknesses such as the lack of legislation and capacity of institutions pose serious challenges. These include lack of practice registration for architects, under mode 1 and lack of confidence among stakeholders in the regulatory framework. The disparities, whereby many of India's services and their size of operation, such as the BPO, IT, and health are more advanced than that of Sri Lanka makes the Sri Lankan participation weaker. The negotiating process is still continuing since May 2005, but there is little likelihood of any progress on account of lack of confidence especially in Mode 4 and lack of cogent studies available to support the developments initiatives. However, on the India and Sri Lanka CEPA the reassuring part is that the text is almost ready and possibly in '2-3 rounds' the deal should be finalised (Desha De Mel on Replying to the Question from the floor).
Nepal's trade share in SAARC is the highest, though its foreign trade growth is 12.5% on an average during the last five years but the volume is very low as compared to other SAARC member countries. Like most SAARC countries Nepal has the maximum trade with India. QRs and NTB continue to block trade leading to a steep rise in trade deficit with India. Bishwamber Pyakuryal opined that the uneven implementation of the trade treaty (between India and Nepal in 1996) and lack of harmonisation across the state governments in India have severely hampered Nepal's exports. India's announcement of zero customs rate from the end of 2007 to LDCs such as Bangladesh, Bhutan, Maldives, along with Nepal will further make Nepalese products face more competition. Nepal's excessive dependence on India for global connectivity necessitates the need to simplify and harmonise trade and transport related procedures and trade facilitation.
'Vision 2020', in the Tenth Five-Year plan of Bhutan, whose economy is mostly integrated with the Indian economy, has the prime objective to promote international trade on a sustainable basis with good governance. Priority sectors in the vision will be infrastructure, tourism, wholesale and retail services. Pema R. Rinchen informed that in the face of possibilities of Bhutan's conversion from a monarchy to democracy and accession to the WTO is at best a complement and not a substitute for the national task of legislative action plans and FDI policy.
Differentiated Domestic Response to international trade
South Asia has witnessed tremendous change in the last few years and regional integration has ushered in huge gains for example since 1998 when India and Sri Lanka entered into an FTA, the total value of India's exports to Sri Lanka was US $550 million and Sri Lanka was trading to the tune of US $35 million this has now increased many fold to $1,350 million and $359 million for India and Sri Lanka, respectively. Mr. Mangala Moonesinghe pointed out that these developments have arisen ever since barriers to trade have been removed, such as providing visa on arrival to Indian tourists and opening up "the skies" to India and Sri Lanka providing a win-win situation to both partners. Such initiatives can immensely benefit the participating economies through generation of employment and income. In agriculture too, a golden lining seem to be emerging wherein prices have started to increase and for countries it is indeed a time to utilise this scenario by way of increased investment and harnessing the gains domestically.
Though there is an increase in trade, developing countries are apprehensive of the impact of pursuing an open economy on the domestic economy. Keeping this in mind, reforms were initiated at the multilateral forum through the Doha round. Today it has been realised that the trade policy formulations in the Washington Consensus, that "one size fits all' is out of currency. Emphasising the differentiated response to the international trade Prof. Biswajeet Dhar stressed the need for a consistent policy framework which really ushered in gain to all stakeholders in trade. In spite of pursuing a liberal investment regime for more than two decades, the LDCs have only drawn less 1% of investment flows. In the current world trade, the SMEs and agriculture would 'require a judicious use of interventions' with important non-trade factors attached to it. The other need is prioritising government expenditure in favor of social and physical infrastructures. These are also the areas in which countries like India lag behind China. The areas of market failures that South Asia has faltered are in the areas of technology, access to information, and coordination. Falling share of agriculture in GDP and lack of contribution of services and manufacturing to absorb the extra population engaged in agriculture are other issues of concern which challenge the domestic response to international trade and it policy making.
Fig 4: Presentation by Iqbal Ahmed in Session 3 on Domestic Concerns & Trade Agreements: With Special Reference to Bangladesh
Challenge to domestic policies come from multilateral, regional and bilateral trade policies. Liberalisation in markets alone cannot ensure economic development and poverty reduction especially to least-developed and poor countries. The global market imperfection further skews the trade gains on account of supply side constraints, resource constraints, and procedural obstacles. In the multilateral trade agreements, Mr. Iqbal Ahmed said, Bangladesh's interests lie in NAMA, Agriculture, GATS (mode 4) and aid for trade. However, Bangladesh's exports are highly concentrated towards one item that is readymade garments and two markets of the EU and the US. Being a recipient to aid for trade as trade-related assistance, it has received aid on two heads: one for policy and regulation and the other on assistance for trade and development. The biggest domestic challenge for Bangladesh is uncompetitive domestic market of trade and services and there has been no pledge at the WTO in support of this need. Keeping the domestic interest there is a need to properly link aid for trade to sectors and institutional reforms. According to Iqbal Bangladesh is wary of any kind of trade deal to be linked to climate change deal when already it's struggling with its supply constraints.
Following the success of India Sri Lanka FTA, talks are on to extend the same through Comprehensive Economic Partnership Agreement on services and investments.
Benefits of CEPA for India and Sri Lanka
- Export interests
− Mode 1: BPO longer term interest
− Mode 2: Maritime services
− Mode 3: Retail, Air Services, Tourism
- Import interests
− Mode1: BPO Investment - Expertise (BPO etc.)
− Mode 2: Finance, Retail
− Mode 3 Health services, Telecommunication
− Mode 4: Skill gaps - health, IT, Maritime services
Greater integration with the Indian economy
Many of the services sectors of India are much more developed, posing challenges to domestic regulatory institution. The current negotiation follows a positive approach leaving lot of room for flexibilities. The provisions of Government procurement will not be affected which will not threaten the free medical and education programmes of Sri Lanka. Deshal argued for a slow and sequential liberalisation and felt the need for countries to be patient to harness the benefits of integration and spillover benefits.
Need for Greater South south Trade for effective CDM
Climate change is one of the emerging issues affecting trade and development and the session drew good participation and discussion. South Asia is increasingly realising the importance of climate change and impact it can have on the lives of the people. Developed countries agreed to take a lead in combating climate change at the UN framework of Convention on Climate Change, during the first conference of parties in 1995 in Berlin, it became clear that the developed countries had not initiated measures to reduce CHG emissions to the 1990 levels by 2000. India has increased its emissions, keeping in mind its development needs. Even then its per capita average is low compared to the world average. It's not right to compare "luxury emissions in the West with the necessary emissions of the South". Highlighting the benefits of clean development Mechanism (CDM), Mr. Kalipada Chaterjee said it helps developing countries achieve sustainable development apart from contributing to the ultimate objective of the convention that is stabilising of greenhouse gas concentration in the atmosphere in the atmosphere and assisting developed countries in achieving compliance with their Quantified Emission Limitation and Reduction Commitments (QELRCs). India has 283 registered CDM projects as of October 2007, he informed.
The need for autonomous reduction of carbon footprint was mooted as there is not much clarity on the level of commitments. The question is what regulatory system is required with respect to the activities where emission is high? There was suggestion to think of a road map for India and South Asia Region to autonomously become a more environmentally benign region irrespective of commitments. Technology transfer holds the key as a medium-term and long-term efforts to reduce carbon emissions and curb climate change. The rationale for technology transfer with regard to climate change is that developing countries be allowed to continue with their sustainable process and also to achieve the goals of emission reduction. Technology Transfer on issues of climate change should include the issues of costs incurred including social costs of adjustments. Mr. Tirthankar Mandal opined that there is need for technology sharing more than technology transfer on issues related to climate change.
Technology is the important issue in trade where TRIPS regulation will seriously limit the transfer of technology. There is need for using the CDM to have access to technology. Differentiate approach to CDM Technology transfer is needed as bulk of trade basket of South Asian countries are labour intensive unlike East Asian countries. To that extent the use and spread of technology in South Asian trade has been all along sub-optimal, and calls for renewed use of the CDM and extension of the carbon trade market. It is important to have access to new technology and in the process improve the technology base of South Asian trade. South South co-operation and technology transfer holds tremendous scope and possibly in subsequent negotiations demand for next door technology will increase as it will be cost effective and barrier free.
The World Economy in Turmoil: What to do?
Fig 5 Dinner Talk with Prof Ajit Singh, Life Fellow, University of Cambridge,
at South Asia Conference on Trade and Development on 19 December 2007
Professor Ajit Singh delivered a memorable lecture at the dinner talk throwing light on the developments on the globalisation impact on different economies. Since the early 1980s the world economy is being increasingly governed by liberalisation and globalisation. He cited three cases: one of the US economy doing well living beyond their means i.e. having current account deficits. Two, Germany and Japan living well within their means and having account surpluses and three, the reverse flow of capital where in flow taking place from poor to rich countries i.e. Indian corporate sector investments abroad and Chinese government financing US current account deficit. Raising the concern about the turmoil in the world economy purely pathological wherein world financial economy is so deeply integrated through all kinds of financial instruments, a relatively manageable sub-prime mortgage crisis in the US is having worldwide repercussions and may lead to a world recession. But the reassuring part is that India and China's growth is being maintained, which is not only good for the individual countries but also the world economy as these provide a stable source of growth in the world demand. For the current crisis it's important that world finds a co-operative solution in a co-operative manner and the challenge is to achieve it in a Unipolar world when the US is no longer the World's Economic Giant.
Day 2
Interpretative Flexibility: Incremental Scope for Development
Before the inception of the World Trade Organisation trade law might have never been brought to the fore in the manner it has reached now. It has infused lawyers to the forefront of debates relating to trade, and enriching the development discourse where earlier this had not been envisioned. The discussion on the Trade Law issues and concern was greatly appreciated by the Chair Jayagovind by the nature of its importance and relevance in the current context.
Prof. Ranjan spoke primarily upon the role of the Most Favoured Nation clause in international trade and investment agreements. He dwelt on the importance of MFN in ensuring the equality of competitiveness and also in ensuring that resources are allocated efficiently. He further spoke on certain key issues that have dominated the debate on MFN, for example 'Treaty Shopping' and mentioned how the same have been allowed in certain cases such as Maffezini v. Spain and not allowed in others , such as the Salini Construction Case. There were particular implications for India he said further as India is a country which signs several international agreements, where many of the same have extremely wide MFN clauses with the notable absences of 'like circumstances clauses' and other requisite safeguards. Ultimately Prof Ranjan concluded by saying that while MFN's could be extremely beneficial, there do remain several issues which the international community as well as policy makers within India need to take stock of.
Enlightening the policy oriented issues related to Free Trade Agreements and Intellectual Property standards Gopakumar was critical on the fact that while the TRIPS agreement sets a minimum standard for IPR, problems are three fold. Firstly, flexibilities within the TRIPS tend to get neutralised since only a few countries ultimately are able to use them. Secondly, this creates harmonisation of IPR standards which need not necessarily be a good thing. Thirdly, by acceding to these standards a state tends to reduce its bargaining power at the multilateral level. And fourthly, that the expectation of benefits as well gets neutralised. He further spoke on standards of protection for copyrights, trademarks, and geographical indicators where in particular he highlighted the fact that while GI's are labelled as being extremely beneficial for developing countries there are several legal and practical impediments such as the lack of organisation in several sectors where GI's could be used that are going to make GI's unsuitable. Careful examination needed before harmonising domestic laws with international agreements.
One of the serious challenges in trade law comes in the WTO Dispute Settlement Regime. The importance of dispute settlement regime arises from its mandatory jurisdiction, its wide control and its well established enforcement mechanism. It also deserves special importance because of hegemonic trading states bearing undue influence. The exercise of dominance in the mechanism comes in two ways. Firstly, by having vested interests codified into international trade legislations and secondly, on the interpretive side. And this gained additional importance in light of the fact that interpretation is left completely up to the Appellate Body and there were many instances of problematic interpretations arising, for example in the Shrimp - Turtle case and US Safeguard case. Prof. Chimni pointed out that since the WTO text itself is riddled with ambiguities, the role of appellate body and the way it functions in the application of complex laws becomes all the more a subject for incremental reforms. For development these issues need to be tackled. Firstly, negotiators need to adequately trained and, secondly by building capacity of lawyers in the region through scholarship and internship on the issue to broaden understanding. The need for closer examination of the composition of the appellate body also becomes extremely relevant. A strong partnership between legal firms, academic institution and government will enable more effective development in the dispute settlement mechanisms. In the context of the conference Prof Chimni laid special emphasis interpretative flexibility on Article 17.6 which can usher in development gains by a simple universalisation of the anti dumping provision, and benefits could be reaped by developing countries.
Bridging the regulatory framework and development gap
Harmonisation is one of the core objectives of international trade and globally several organisations are trying to bring about a certain cohesiveness in the way trade functions, and thus in this context the motives and behaviour of these organisations gain a new importance. Some concerns emerge in the context of harmonisation: whether the international institutions are trying to convert domestic policy to national commercial laws in name of harmonisation?
Trade facilitation is one of the processes which bring about some form of harmonisation. In South Asia several initiatives have been made in the SAFTA, ISFTA, PSFTA, BIMSTEC and even in SAARC as well. However, Free Trade Agreements have not adequately included specific measures for trade facilitation, for example most agreements do not contain any provisions that specifically mention implementation of trade facilitation measures. Further, to compound problems, in most countries in South Asia procedures which are to be followed by trading agreements are often extremely complicated, involving large documentation, and procedural complexities, discourage vibrant trade in the region. One of the biggest impediments is standard processing time for most goods which is not clearly regulated and no country except India has sought to deal with the same, further fees and charges remain quite high. Therefore, she concluded by stating that in terms of trade facilitation there existed a clear set of problems that needed to be addressed, and a balancing act would have to be struck between facilitating trade and ensuring that countries protect their own domestic rights.
'Rules of Origin' are another concept in international trade which limits the trade creation and is linked to the procedures in trade. There were primarily two schools of the thought, the first one calls for pro-harmonisation while the other one is against the same. Mr. Menon felt that the idea behind having rules of origin is that mentioning of origin would greatly affect rate of duty, entitlements to special privileges etc, therefore in light of the fact that today's articles often originate from various countries it's difficult to know exactly how to determine duty, a harmonisation while prima facie might make the process easier, the drive towards harmonisation could also greatly oversimplify the process thereby allowing for incorrect assessments of duties etc, which could prove to be highly problematic for most states.
Fig 6: Presentation by Bipin Menon in Session 6 on Rules of Origin: Is there a case for harmonisation?
Emphasising the physician Deficit in India Ms. Yadava chose to dwell primarily on statistical evidence to show the large trends associated with medical practitioners leaving the country, and linked these up with several social and economic factors, such as the amount that a doctor in India can expect to be paid as against the salary that they would be able to command in a developed country. Further she chose to speak on the experience of other countries, and the ways in which they have dealt with similar problems, such as the Canada, the US and the UK, there have been periods in which they have faced physician deficits, where concerted immigration and incentive creation strategies have been employed, all of which proved successful in dealing with the problem. There is need for South Asia countries to work in tandem to negotiate bilaterally on a mechanism where mutual recognition of professional qualification can be made and regulated migration can be initiated for solving the problem of health workers deficit in the country. This will include bridging the gap in regulatory framework and the development objectives which will go a long way in creating opportunities and usher good benefits to the population of the region.
Fig 7: Presentation by Sumiti Yadava in Session 6 on Domestic Regulation & Physician Deficits: Need For Harmonisation
Most often preferential Rules of Origin are used as a means of Barriers to Trade, and whether the WTO ought to be considering a bare minimum standard for Rules of Origin, to ensure that the rules do not facilitate restrictive practices. Mr. Menon felt that the idea is good but the problem with a minimum standard is that it could prove very easily to conceal in non preferential treatment. Question directed to Ms. Yadava, included whether in light of the higher salaries that doctors can avail in higher countries, since doctors have responsibility to themselves and their families as well, they could actually be prevented from going abroad. Also, Mr. Gopakumar, Centad, highlighted the issue of the public health perspective and mentioned that governments are spending large amounts of money on the training of midwives and barefoot doctors who are now forming an integral part of the health care system and would not be replaced by professional doctors easily. Ms. Yadava in response brought up the fact that while both questions were extremely well founded, the ultimate fact remained that there was a need for people to begin thinking on the issue and coming up with ways to deal with the problem, further that while midwives did have a very important role in the medical system, there skills would not be able to match those brought in by a professional doctor.
Prof Mehta felt that though harmonisation is desirable but it runs the risk of being unduly influenced by Multinational Corporations in domestic laws, and there is an ever present need to scrutinise which parties actually controlled the frameworks of the laws that govern our trade relationships.
Need for Value Chain Promotion but with Livelihood perspective
Agri-business does not find much discussion in the trade debate but the linkage is very relevant as the current condition of farmers is miserable with income stream nearly stagnant. Agri-business is important as it ushers in higher income and risk encountered is lower with better institutional arrangements. Therefore, the presence of a vibrant agribusiness in the form of cold chain, processing and reducing risk will provide the development opportunities. Agribusiness also provides the rural employment which is important to bring inclusive growth. The challenges are many. First, the lack of structural organisation, Second, that in spite of this in all instances where agri-business has been developed there has been a clearly noticeable benefit and a rapid turn around in the area. Third, there remained at this point the issue of how best to take advantage of situations in agri-business, and that there is a clear need to ensure that there is ability to access resources and technology.
Prof. Naik then handed over deliberations to Prof Sukhpal Singh, Indian Institute of Management, Ahmedabad, who spoke on Harnessing Trade Gains: Trade and Agribusiness. Prof Singh chose to emphasise primarily on the importance that trade itself has on poverty reduction and development, and concentrated on several mechanisms that could be put into place to harness maximum benefits from trade. He highlighted some key issues that we would need to keep in mind. Firstly, the importance given to processed food in trade could in some cases directly hamper basic food requirements. Secondly, there remained the issue of low competitiveness of domestic cereal production and livestock in South Asia. Thirdly, in most cases large chunks of products are controlled by specific players in certain countries and therefore there is a large amount of competition and rather tough standards, and higher costs of compliance to these standards as well. Prof. Singh stated that in the changing global agricultural market what mattered most was how to maximise competitiveness in terms of both cost and quality, and in this light we would need to focus on organisation and modernisation of our industries. Prof. Singh also dwelt on some key problems which are being faced at present. First, small producers are often excluded owing to high certification costs, the absence of local markets etc. Secondly, mainstreaming of organic production was posing to several serious problems such as not taking into account the role of gender divisions in labour etc. which again contribute to incorrect assessments of productivity.
Prof. Singh then chose to deal briefly with certain specific industries, such as the garment industry and the problems it faces, such as child labour, lack of minimum wages and social security. He concluded by saying that if gains are truly to be harnessed, then one must combine value chain promotion with the livelihood perspective and must enable the poor to be more participative. Further, we must have the correct market development strategies and must strive towards innovation in terms of both products and business models. In addition, we must ensure better access to both capital and management, strengthening of farmer groups and monitoring of international value chains.
Following this enlightening exposition was Prof. Sachin Chaturvedi, Fellow, Research & Information System for Developing Countries, India, who spoke on the Seed Industry: Key Issues and Concerns. Dr. Chaturvedi gave a comprehensive and pertinent overview of the policy regime as it has operated in the area of seeds. He first disambiguated the various stages that the state has gone through with respect to its seed policies and indeed its trade policies at large, beginning with the 1950s and '60s had a very clear view of the involvement of the private sector and this created a glut in the market, which then lead to a highly restrictive seed policy. This however began to change only towards 1988. Of late, consolidation in the global seed sector had increased a lot. Dr. Chaturvedi then provided an extremely interesting case study of the profile of Monsanto, the largest seed company in the world and highlighted the way in which the company had managed to effectively corner the seed market in most crops globally. This of course by implication could result in a list of issues and concerns for several states. However, ultimately, Dr. Chaturvedi felt that the key question was not of efficiency purely, but more that there was an ever increasing need to ensure that there is a balance in terms of access to research and development and technology to help prevent monopolies.
Fig 8: Presentation by Sachin Chaturvedi in Session 7 on Changing Structure of Indian Seed Industry: Policy Prospects and Emerging Lessons
The next speaker was Mr. Sushant Kumar Pal, Business Development Officer, International Financial Corporation, South Asia Enterprise Development Facility, India who gave a very informative presentation on issues related to Agribusiness and Trade: Opportunities and Risks. Mr Pal's presentation was highly statistical and formed a balancing act between the clear scope that exists for agri-business in several sectors in India and that were this potential to be tapped in a concerted manner then the benefits that could be reaped from the same were indeed phenomenal. However, Mr. Pal also sounded a note of caution stating that there did exist several risks towards proceeding with drives to increase agri-business, without ensuring that policies properly reflect the true ground realities in the sector.
Fig 9: Presentation by Sushant Pal in Session 7 on Agribusiness Opportunities & Challenges/Risks: Bangladesh and North East India
The floor was the opened up for deliberations. Mr. Kishan Bir Chaudhary, President of Bhart Krishak Samaj raised several pertinent questions to all the speakers present on food security and the fact that India is still importing wheat, further that with the introduction of crops such as Bt Cotton there has been a dramatic rise in farmers suicides in the country. Also, Mr. Chaudhary highlighted the need for a cooperative approach if any real gains were to be harnessed from agri-business and if the sector itself was to be brought to the fore. Mr. Chaudhary also enquired as to the reasons behind the decline of prices of agricultural goods since 2003, though this was unexpected after the formation of the World Trade Organisation. To these, the response from the panel were manifold, with Prof. Sukhpal Singh bringing out the fact that the expectation that prices would be stable was based on a large number of assumptions which ultimately did not pan out and this was primarily responsible for the decline in prices, further that there could be limited imports on wheat under a liberalised policy framework. Dr. Chaturvedi additionally mentioned that there was now a concerted effort directed by the Supreme Court into the assessment of Genetically Modified crops, such as Bt Cotton to gain a clearer understanding on the impact that the introduction of these goods is having on the Indian market.
Prof. Gopal Naik, wrapped up the session by mentioning that as exemplified clearly by the session the issues pertaining to agriculture and trade remained extremely complicated and currently there did not exist too many mechanisms to deal with these complexities effectively. Therefore, the need of the hour was a greater level of scientific research and scholarship which would generate both information as well as innovative approaches to the problems at hand.
India's Centrality in the region: core to development
Mr. Ram, in the valedictory session began by providing an insightful context to the deliberations that were to follow, stating that 'Connectivity' interdependence relationship mutuality of interest is the key to development, he felt the need for an unorthodox approach, and if measures and steps were taken to maximise the strategic advantages which are latent in the region then the potential benefit would be extremely large. Prescription Statement for South Asia is to dovetail the core competencies of the individual seven countries in the region in such a manner that full advantage is taken of India's size, markets, technology and wherewithal wherein indeed the connectivity should invariably be intertwined with the connectivity in the domestic systems of India. Highlighting that harnessing gains from trade is in fact not a zero sum game it can become 'win-win' situation wherein all stake holders have an equal role. Quoting Rehman Sobhan, "Even in the absence of perfect connectivity between the eight SARRC countries, including Afghanistan, the informal trade between the eight countries could be in excess of US $3 billion is not a small fraction of the formal trade". Moreover, if harmonisation is an objective that is to be truly realized, then there would have to be a recognition of India's centrality in the region, and that were the South Asian states truly able to realise these objectives then there would be a great deal of benefit to all SAARC countries.
Following this, the honourable chair, handed the floor over to Mr. Gopal Pillai, Commerce Secretary, Ministry of Commerce & Industry, Government of India, who spoke at length on the Future of the Doha Round, and also brought to light several of the discussions that had occurred around subject matter pertinent to the Doha deliberations at the official level. Firstly, Mr. Pillai dwelt briefly on agriculture and how there had much debate with the text being circulated in January, and the general trend of thought seemed to be a reluctance to accept the coefficients presently incorporated in the text. Secondly, with regard to fisheries, Mr Pillai highlighted a disturbing trend with regard to the Rules Text, and the 'zeroing in' provision, which had been held illegal by two WTO panels, had been once again brought into the text by the chair. Another disturbing development had to do with the unilateral removal by the chair of the 'lesser duty' provision which again was a move that would benefit only a minuscule number of countries. Mr. Pillai then moved on to the issue of climate change, wherein he clearly made the following observations. Firstly, while it certainly is a matter of global concern, there could be no doubt that developed countries would have to pay much more to rectify the damage. Secondly, with regard to the free transfer of technology, such transfer would have to be completely free of cost if India were to accept free access for environmental goods at zero duty.
The next speaker Prof. Ajit Singh, Life Fellow, University of Cambridge, gave an extremely insightful and informative talk on the role of the legal system in matters of trade and the development of a viable financial system. Prof Singh, chose primarily to talk about how the law itself has a role in determining how trade relationships are played out, and did so by highlighting the experience of common law countries, particularly the United Kingdom, where there has been a traditional history of favouritism towards monied classes. Prof. Singh stated that the basic assumption had been that if one wanted to develop a financial system one would need to have a common wealth system. In the Indian context, Prof. Singh felt that there was a drift towards socialism immediately after independence and now the very same legal system was being used to de-regulate, so the assumption that one would draw from this is that the legal system is compatible with both socialist and non socialist systems. Further, Prof. Singh highlighted the fact that in India long delays in the justice delivery system contributed greatly towards the ability of the justice system in being able to respond to the needs of society and in an area like trade where global developments were proceeding rapidly there was a real need to ensure that courts become an effective tool of protection of broad societal interests.
Interactive Session
Mr. A.N. Ram then closed the final session and opened the floor for discussions. The final interactive session was marked by a varied number of questions from a large section of participants. Prof. Prabhash Ranjan supplement the words of Mr. Pillai by bringing to light the fact that 'zeroing in' had in fact been initially upheld by the WTO panel but was later struck down by the appellate body. Prof. Jayagovind, of NLSIU raised a pertinent point pertaining to the fact that under GATT agriculture had been excluded earlier. However, there now appeared to be a tendency towards liberalising agriculture though it had become somewhat of a touchstone and there was a need for the global community to move forward to other issues as well. Dr. Samar Verma, Head- Global Economic Justice Team, Oxfam GB raised a further question on what was problematic with the notion of India following a common law regime. In response to the questions directed towards him, Mr Ajit Singh brought to the fore the following points. First, the legal system is central to the functioning of society and that since there existed a common law system India chose to go along with it but used it to achieve the politico-economic ends it desired. Further, the very legitimacy of Indian democracy rested upon the legal system and therefore there was an ever present need to ensure that citizens had faith in the functioning of the system.
The Third Annual South Asia Conference on Trade and Development was therefore brought to an extremely successful close. Ms. Kasturi Das, Research Officer, Centad proposed a vote of thanks firstly to the Honourable Minister for Commerce and Industry Shri. Kamal Nath for being present and also for the encouragement he had provided to the organisation.
(Prepared by Namrata Pathak, Suhasini Sen and Linu Mathew Philip)
Final Agenda
Backgrounder
Bio of Key Resource Persons
List of Participants
Presentations made during the conference
Press Release of the Conference
Press Coverage
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