(This article was originally posted in the net edition of the Financial Express on December 28, 2005. The views expressed are personal.)
“No deal is better than a bad deal”. That summed up the low level of expectations at Hong Kong at the beginning of the ministerial meet. Thanks largely to the assertiveness of developing countries, a widely anticipated and feared breakdown has been averted.
So what are being brandished as achievements? An end date to all forms of export subsidies just eight years down the line in 2013! While this may be a victory for negotiators, millions of poor farmers waiting for access to developed country markets have little reason to cheer.
There is no doubt that the Hong Kong Ministerial has ensured protection against cheap exports to developing country farmers. Special products—on self-selection basis—and special safeguard mechanism are two instruments which are now firmly embedded in the final declaration. However, the key issues of the scope and trigger-levels of such measures are yet to be decided.
For industrial products being negotiated under non-agriculture market access (NAMA), the good news is that there is still scope for discussing the formula proposed by Argentina, Brazil and India (ABI formula). This, too, may be counted as a victory for negotiators, but cannot yet be seen as pushing the cause of development.
Unfortunately, the good news almost stops here. While the multilateral trade system has survived at least for now, there is not much to celebrate. For one, this declaration is an incremental improvement over the July 2004 framework. Progress has been impeded by the intransigence of developed countries, particularly with regard to reforming their domestic and export subsidies regime that is denying millions of resource-poor farmers the opportunity to trade their way out of poverty.
The inflexibility of developed countries on all major issues leaves little reason to be optimistic about reaching an agreement on all modalities in the next five months as scheduled and completing the round by the end of 2006.
While India’s defensive interests in agriculture predominates today, the appropriate timeframe to look at is around 2010. India’s agriculture exports stand at $ 7 billion.
However, given the rising export competitiveness in select agricultural products, combined with the huge employment they generate, agricultural market access would be an increasingly important issue for India. The high levels of ambition being talked about in agriculture market access are both a threat and an opportunity for India. Much would depend on how the negotiations progress in the next few months.
Besides, the domestic subsidies of the US and the EU—which are significantly higher than the export subsidies—are yet to be touched. The real dangers of India celebrating the victories at Hong Kong precisely lie here. Every additional decibel proclaiming victory for developing countries would strengthen the bargaining position of the developed countries.
In NAMA, no matter what the negotiators would like us to believe, the fact is that the text which was not agreed to at all in the July framework (it was included with an explicit opening paragraph mentioning it as a ‘vehicle’), is now a firm, and agreed, basis for negotiations. Moreover, contrary to widespread belief that India fears no reduction in tariffs since the country is committed to moving towards ASEAN levels of 5-10% voluntarily, there would be serious consequences of deep tariff cuts, especially for the small-scale sector.
The average Indian producer is not yet prepared to face open competition because of the huge transaction costs and infrastructural bottlenecks in the country which blunt the global competitiveness of Indian industrial exports.
The global contours are rapidly changing. Chinese and Indian markets are now attracting attention, not only of developed countries, but also of our Asian neighbours. The framework of global economic analysis is not as simple as North-South, or even South- South. And India’s relatively aggressive posture in the services negotiations—in common with the US and EU—is a welcome acknowledgement of this reality by our negotiators and policy makers.
Overall, let not negotiating victories be brandished as victory for the cause of development. The war has just begun. |
