India should learn from the US how to drive a hard bargain while simultaneously pursuing its own agreements
Flush from the excitement of having concluded the first-ever trade agreement after the World Trade Organisation was founded, Roberto Azevedo, its director-general, declared in Bali in December 2013: “We’ve put the world back into the WTO.” This was at the 9th ministerial.
Last fortnight, the 10th ministerial at Nairobi managed to achieve the opposite: take the “world” out of the WTO. By effectively consigning the Doha Development Round to history over protests from India and the Group of 33 developing countries, the Nairobi Ministerial Declaration has probably pushed the WTO one big step towards obsolescence and irrelevance in matters of global trade.
Too Utopian?
Pious statements in the declaration of the need for multilateralism and how that alone can drive global development and prosperity notwithstanding, the developed world has effectively widened the schism with the developing world by refusing to concede on at least two major issues of vital interest to the latter — a permanent solution for food procurement subsidies and Special Safeguards Mechanism (SSM). In effect, the Nairobi ministerial has probably achieved the exact opposite of what it set out to do — promote and protect multilateralism. The post-Nairobi world may well see intensified efforts for bilateral and plurilateral trade agreements on the lines of the Trans Pacific Partnership (TPP) or the Regional Comprehensive Economic Partnership (RCEP).
Is that a bad thing? Economics text-books would say ‘yes’. An agreement on multilateral trade is the best, in theory. Yet, in practice, it is clear that multilateralism is an Utopian ideal. At least, that is the inference that can be drawn from the experience of forging such agreements whether under the GATT earlier, or under the WTO now. It is simply impossible for a large group of countries with diverse interests which mostly conflict with one another, to arrive at an agreement acceptable to all.
Trade-offs make happen
Multilateral agreements can be forged only when every negotiator agrees to trade-offs. In other words, a negotiator concedes ground on an issue that is important to him but not crucial, in return for a concession on the crucial issue. Unfortunately, this principle of negotiation has been completely given the go-by in the 14-year long Doha Round, especially by the developed world.
You need to look no further than the manner in which the caucus of developed countries led by the US refused to play ball with the bloc of developing countries — G33 — over the issue of agricultural subsidies even while forcing the latter to agree on issues of interest to them. The Trade Facilitation Agreement (TFA) finalised in Bali was part of a package that assured India and the G-33 that the WTO would work towards a permanent solution to the niggling issue of food procurement subsidy.
Yet, what happened in the months following Bali was that even as negotiators in WTO’s Geneva secretariat worked energetically to tie up the TFA, they refused to even begin talks on the subject of food subsidy. The story of how India refused to sign the TFA and managed to secure a permanent peace clause is too well known for elaboration here.
The point is that the developed countries refuse to concede on issues of concern to the developing world even as they push forward their own agenda. It is not that the developed world’s agenda is not important. Both, the TFA and the issue of export subsidies, are certainly important in the global trade context and will help the developing countries as well. Yet, the latter cannot be expected to agree on the agenda unless their point on the critical issue of food subsidy — given the levels of under-nourishment and poverty prevalent in these countries — is addressed simultaneously.
Context gives meaning
The ambush in Nairobi by the developed bloc has to be seen in this context. Writing in the Financial Times ahead of the Nairobi meeting, the US Trade Representative Michael Froman said he wanted a “new chapter” to be written for the WTO that “reflects today’s economic realities”. “It is time for the world to free itself of the strictures of Doha,” he declared.
And the Nairobi ministerial obliged. Yes, the declaration speaks about “strong commitment” among members to advance negotiations on the remaining Doha issues. It also makes the right noises on the principles of special and differential treatment, which, ironically, has never been respected. The responsibility to advance negotiations on the Doha issues has been assigned to officials at Geneva who have been told to “find ways” for the same.
Yet, these issues cannot be taken up for negotiation unless all the members agree. With the inclusion of “new issues” into the agenda by the developed bloc, it will be bargaining season all over again. Clearly, in the post-2008 crisis world, the developed countries are in no mood to offer concessions. Given this, it would be unwise for countries such as India to bank on any more progress in the WTO.
The US is following a clever strategy of extracting as much as it can from the WTO even while pursuing its own plurilateral and bilateral deals. The recently agreed TPP and the ongoing negotiations with the EU over a trans-Atlantic agreement are clear proof of this strategy. India should borrow a page from the US book.
It should continue to bargain, and bargain hard at Geneva. Simultaneously, it should proceed with its own bilateral and plurilateral agreements. It should give impetus to the RCEP, which can be a formidable trade agreement when it is eventually finalised. India should also quickly begin negotiations with the EU, which have been delayed far too long, and with others such as Canada and Australia who are keen to work with India.
Eventually, India will have to lock horns with the US and finalise a Comprehensive Economic Partnership. That, of course, means addressing the tricky issue of intellectual property rights and drug patents, very important subjects for both countries.
Granted, it is not going to be easy but the writing on the wall is clear: the WTO end-game has begun and the sooner India and other developing countries accept this and prepare for the new order, the better for them.
