EDITORIALS

In a Hurry
Why is India so eager to reactivate and conclude a dormant Doha Round that has little to offer the country?

eturning from the G -20 meeting inSeoul, Prime Minister Manmohan Singh told reporters how happy he was with the outcome reached at the summit. The Seoul Action Plan, the prime minister said, comprehensively addressed some burning economic, trade, climate and even social problems. Manmohan Singh suggested that his plenary statement helped evolve an impact on consensus on divisive issues in global finance and trade, including his call that now was the time to wrap up the comatose Doha Development Round. It is difficult to believe that it was only two years ago that India was projected as the villain of the Doha Round when it refused, in July 2008, to give up on adequate protection for agricultural imports, though it was the United States and its intransigent stand on a range of issues revolving around the modalities of subsidy and tariff reduction commitments in farm products that put paid to that meeting. In an attempt to change that image and demonstrate that Indiawas not the problem, the government has embarked on several initiatives on theDohafront. It hosted a G-20 ministerial summit in September 2009 to send out the message that India was willing to catalyse the negotiating process that was otherwise blocked by the United Statesbecause of its egregious demands in a developmental round. Subsequently, the trade dialogue between the US and India, including on the sputtering Doha talks, assumed a new dimension. Union Minister of Commerce Anand Sharma has made numerous visits to Washingtonto convince the paralysedUStrade administration which is yet to secure trade promotion authority to enter into any serious negotiations with its trading partners and jumpstart theDohatalks. In short, the Manmohan Singh government has left no stone unturned to demonstrate its zeal and commitment for an early conclusion of theDohaRound. (The recent joint Indo-US bilateral agreement issued by President Barack Obama and Prime Minister Manmohan Singh mentioned bilateral negotiations between the two countries to advance theDohatrade negotiations.) Indeed, it is unprecedented in the history of Indian trade negotiations that Indiahas gone out of its way to mobilise support to conclude a trade round! From Nehru to Vajpayee and even during the first term of Manmohan Singh government, positions on taking fresh commitments in trade negotiations have been debated and weighed carefully before any commitment has been made. After all, agreeing to binding trade commitments have their repercussions for years to come. For example, it is an open secret that after India agreed to a zero tariff duty on information technology products in 1998, the hardware sector suffered irreparable damage to the extent thatIndiacould never develop its domestic hardware industry. On the other side, the US, whose domestic farm subsidies are wreaking havoc on the cotton producers in the four west African countries of Mali, Chad, Benin and Burkina Faso, is unwilling to lower its trade distorting domestic subsidies below the real and

effective level of $9 billion. Yet, it is hell-bent on extracting concessions from a new category of countries called the emerging economies (a term not legally accepted in the United Nations or the World Trade Organisation) China, India and Brazil that are several times larger than what the Doha agenda dictates. It wants these countries to enter into an aggressive bilateral process for securing unprecedented commitments in trade in industrial goods and services. Though theDohaRound is supposed to be conducted on a multilateral basis, the UShas succeeded in creating new templates, including its demand thatChina,India andBrazilmust reduce their industrial tariffs from theUruguayRound-bound levels to below their current applied levels. This is unheard of at the WTO negotiations.Washingtonhas almost succeeded in forcing tariff cuts of between 60% and 70% on industrial products in the developing countries during the DohaRound on the basis of the Swiss formula which the developed countries refuse to accept for reducing their agricultural tariffs! In return, the USwill not only safeguard its sensitive tariff lines in textiles, leather and other items through preference erosion but commit itself to a reduction of only around 30% in its bound tariffs on its industrial goods. The principle of lessthan-full-reciprocity in tariff cuts between the developed and developing countries of theDohaRound has been thrown to the winds. In services, where India has made a big case for securing market access for its Mode 4 of short-term services providers in computer and software services, including outsourcing, the US has simply turned its back saying it is an emotive and politically volatile issue that it cannot address. But, at the same time, it wantsIndia,China, andBrazilto provideenhanced levels of commercial presence in retail and distribution services, telecom, and insurance. Despite its escalating demands on the so-called emerging countries,Washingtonis not willing to concedeNew Delhis demands for defensive measures on farm products. TheUSnegotiators have seriously challengedIndiain the recent meetings at the WTO on issues such as the special safeguard mechanism in agriculture, patent disclosure provisions for genetic material, special and differential treatment flexibilities and so on. If a balance sheet is ever drawn onDoha,Indiawill have large presumptive losses to show in every area. Therefore, it is puzzling as to how the government is ready to accept a Dohaagreement from which it will emerge with few benefits and many losses. Against this backdrop of an unyielding and hard line stance of the US, which has made the Doha Development Agenda, the WTOs July 2004 framework agreement, and the Hong Kong Ministerial Declaration of 2005 redundant, it is unclear why the Government of India is in such a hurry to favourably consider the demands raised by Washington.TheUStaught the world the most important lesson in global trade: a country has to pay for what it wants at the WTO and interests in trade should never be clubbed with other strategic goals. India, for some inexplicable reason, is turning a blind eye to these lessons and is letting theUSsecure a Development Round for free!
november 20, 2010 vol xlv no 47 EPW Economic & Political Weekly