ECONOMIC HIGHLIGHTS

New Delhi, 25 January 2006

For Developing Nations

WTO MINISTERIAL: NOTHING TO CELEBRATE

By Dr. P.K. Vasudeva

There has been mixed reaction in various countries after the conclusion of the sixth Ministerial of the World Trade Organisation (WTO) at Hong Kong last month.  The 149-members of the developed and the developing countries who participated in the proceedings for six days are celebrating their victories. But the fact remains that the developing countries have not been able to achieve any concrete results.

The biggest success is that it has been able to produce a unanimous Declaration which reflects, apart from anything else, a strong desire among all members of the WTO to pursue the Doha Development Agenda in the future times to come.  The actual results of the WTO in future discussions can be gauged only the time will tell.  But the need to continue under the WTO auspices has been given more importance than the route of regional arrangement and free-trade agreements which are gaining ground among the South Asian countries, including India.

This is disappointing for the developing countries, considering the demands made by the bloc in the run-up to the meeting. Among other things, it was repeatedly said that the key to the Ministerial was agriculture and its success would be decided on whether the developing countries extract their pound of flesh in the sector vis-a-vis the developed economies (notably the US, the EU and Japan), specially in the areas of reduction of domestic subsidies (green and blue box subsidies), export subsidies and market access. Nothing of the sort was achieved in any of these areas.  This can be interpreted as a victory for the developed nations.

The greatest success for the developing countries has been getting together of 110 developing countries (including LDC) for the first time on a “common minimum platform” and act as a “development thrust” on the developed countries that made a small dent on the draft agenda.  This unity, if continues can deliver substantial dividends in the future times to come.

Among other things, the draft approved by all the 149 signatory countries decided the deadline for the elimination of export subsidies in the Agreement of Agriculture and “disciplines on all export measures with equivalent effect”.  This will be achieved in a progressive and parallel manner, to be specified in modalities, so that the substantial part is realized by the end of the first half of the implementation period.

The deadline was made by the EU for its convenience.  A close reading of the draft will indicate that there is no finality of the schedule as it has been made dependent on the “completion of modalities” – the deadline for which is April 30, 2006.  Given the record of the failed deadlines, there is no certainty that this date will be kept as final.

It has also been decided that discussions on Geographical Indications / Geographical Appellations and Biological Diversity would be further intensified so as to be completed by June 30, 2006.  The second draft is concerned with the reduction of subsidies on cotton demanded by the five cotton producing African countries.  The developed countries have agreed to reduce the subsidies on cotton after completing the modalities by April 30.

Commerce and Industry Minister Kamal Nath, who attended the Ministerial said the agreement on the elimination of export subsidies would help protect Indian farmers from unfair competition in the domestic market even while opening up new opportunities for the export of agricultural products.  This seems to be wishful thinking unless the final agreement is signed in 2008.

The Ministerial draft allowed the developing countries to declare an appropriate number of special products – that would remain outside the ambit of the tariff reduction formula – on a self-selection basis. It was decided in the Framework Agreement also on July 31, 2004 Geneva meeting, however, India has still not been able to decide and declare on the special products so far.

The developed countries had already extracted substantial concessions in the ‘July Framework’. The document had signalled acceptance of the continuation of the ‘Blue Box’ with five per cent reduction and 80 per cent of reduction of Green Box subsidies. The Declaration has completely ignored the problem of “Box Shifting” or transfer of trade distorting support into forms conveniently defined as non-trade distorting.

The only issue up for negotiations was the extent of and timeline for import tariffs and domestic subsidy reduction by different members and the date and the modalities for elimination of export subsidies on agriculture products, which has not been identified.

It also decided in this Ministerial for a Special Safeguard Mechanism under which the developing countries would be able to raise their import duties on agriculture products in the event of a surge in their imports or a fall in their prices. One has to wait and watch for this provision for its implementation while addressing the concerns, Kamal Nath said that India would draw up a list of 90 special products, which would be outside the tariff reduction formula and enable Indian farmers to safeguard their crucial crops from global competition.

On the non-agricultural market access (NAMA), the proposal submitted by ABI (Argentina/Brazil/India) has been preferred but there is no indication whether the “coefficients” mentioned in the Declaration relate to just two (the choice of the developed countries) or many (preferred by the developing countries, in particular India), which would take into account the different requirements of the poor economies, though it had been ensured that flexibilities for the developing countries would be included in the final package.

In this area, contentious issue was the degree to which developing countries would have to give up their right to protect the domestic firms in order to build and strengthen their domestic industrial base and face the threat of de-industrialization by opening up their markets to imports of industrial goods. The thrust of the developed countries was to demand that all industrial tariffs have to be bound in all countries except the LDCs and these bound tariffs must over the time cover across countries and products. The developing countries’ position was that this amounted to ignoring the implications of international inequalities in industrial history.

On services sector, the setback for the developing countries is true of the services area.  In the draft declaration Annex C, which argued for accelerating the liberalization of services, was bracketed, implying that there was no agreement on the area.  In a surprising development the whole of Annex C has been unbracketed, albeit with some changes.

This shows that the developing countries are now willing to engage in sectoral and plurilateral negotiations, though Cuba and Venezuela have formally expressed their reservations on the issue.  India’s role in mobilization of developing countries’ support for the inclusion of Annex C, driven by its own interests, was crucial.  India had asked for Mode 4 – movement of natural persons – concessions; the Declaration makes a special mention of such allowance only for the Least Developed Countries.

In sum, even at this framework stage, developing countries have given too much when they are in majority for little in return.  The exact level of the gains and the losses will be clear when the modalities have been fully worked out. ---INFA

 (Copyright, India News and Feature Alliance)