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P.P. Prabhu

New Delhi's objective at the Cancun WTO ministerial should be to strive for an outcome that will help India obtain greater market access, and benefit from its export potential and greater participation in international trade, says P. P. Prabhu .

The Commerce Minister, Mr Arun Jaitley, inaugurates the national symposium on "Trade and globalisation: The agenda towards Cancun 2003" in New Delhi... Will India be a leading light at Cancun II?

THE next WTO ministerial conference at Cancun is barely a fortnight away. There have been many articles in recent days on the various issues involved, the dangers inherent in the many proposals tabled by different countries, the stand that India should take on each of them and so on. Some have been cautioning against any compromise at Cancun except on our terms. There have been some articles bemoaning that the WTO agreements have affected our agriculture and sidelined our small-scale industry. A critical examination would reveal that the WTO agreement on agriculture has little impact on our agriculture (domestic policies and failures are the causes of the myriad problems of Indian agriculture).

As for the small-scale sector, it is the units in gem and jewellery, garments, leather and footwear, carpets and other sectors that are driving the export growth. (The small units do deserve much more focussed help from the government; and the WTO agreements do not come in the way of such help either). Also we are becoming competitive in many other sectors such as auto components, and drugs and can confidently match world competition.

The impact of the WTO agreements on our international trade has been on the whole favourable. In the last seven years, our exports have improved from $31.79 billion in 1995-96 to $52.23 billion in 2002-03, a growth of 64.29 per cent, while imports have grown during the same period by 92 per cent, from $36.68 billion to $61.29 billion. But an analysis of the import data would show that much of the increase is on account of larger import of petroleum fuel and products as well as gold and silver, both of which have nothing to do with any commitments under the WTO agreements.

If these imports are excluded from the calculations, the import growth comes down to 39.34 per cent. Further, a part of the increase in import is also on account of edible oil consciously being permitted to be imported at lower duty to ensure stability in consumer prices. The WTO regime, thus, has not caused any surge in imports; on the other hand has been beneficial to merchandise exports.

The increase in commercial services exports has been more robust. Far from industry and agriculture being affected by trade liberalisation following the WTO agreements, it is the developed countries which are feeling threatened with trade liberalisation, and the labour in those countries is crying foul.

There is a hue and cry over software and BPO (business process outsourcing) jobs shifting increasingly to India and other countries. Now resentment is building over jobs in the manufacturing sector migrating to China and India. There was a news item recently that pressure is building up on the US Government to take remedial measures to halt this trend.

The Cancun ministerial has to be viewed in this context. Its outcome will have substantial consequences for world trade. The issues before the ministers are contentious and there is also wide divergence in the positions of developed and developing countries on most issues. The four mini-ministerial conclaves held so far have not been able to narrow the differences. There has been little progress on the major decisions taken at the previous conference at Doha owing to acute differences among members. At Cancun, the ministers will be confronted with and will have to reach an understanding on the outstanding issues, including on the modalities of negotiations in the new areas called Singapore issues.

The issues for consideration can be grouped under four broad categories though it is not that the responses and decisions on one set of issues can be independent of the decision on others.

These include negotiations in three areas where negotiations have started: Market Access for non-agricultural products, services and agriculture; implementation related issues and concerns, review of all special and differential treatment provisions to strength them and make them more precise, effective and operational, and TRIPS agreement - access to medicines; the so called Singapore issues and others including trade and environment.

Given the importance and complexity of the issues involved and the varying and conflicting interests of members, a favourable outcome will be possible only if most countries perceive the final outcome to be balanced and beneficial overall. A stalemate following lack of agreement on key issues cannot be ruled out.

Agriculture is a key issue on which some compromise among the major countries would be essential before any understanding on other issues can be reached. The framework agreement that has been recently thrashed out between the US and the EU falls short of India's expectations. The major bone of contention would be the extent of subsidy elimination given in different forms by the EU and other rich countries; the issue of tariff reduction by developing countries including India may also become a debating point.

Apart from agriculture, investment anµd the issue of public health are likely to be contentious issues. If all countries are not prepared to show flexibility, a stalemate and a repeat of Seattle conference will be inevitable (that meeting ended in a fiasco due to acute differences among members). That would be unfortunate, given the vital role that growth of international trade can play in boosting the world economy, which is not in good shape at present. .

There is a distinct possibility that major trading nations will not want the meeting to fail and agree to meet the expectations, and accommodate most of the concerns, of the developing countries and may come out with alternative acceptable proposals.

Concessions may be offered in key areas, including agriculture, implementation concerns and public health issues to wean away most of the developing countries to their point of view, in which case the stand of countries like India on Singapore issues may be the deciding factor.

If the EU were to be forced to yield in the area of agriculture and there were to be satisfactory outcome on most other issues, definitely the EU would insist on a positive decision on commencement of negotiations on Singapore issues also. If a single issue, like investment, were to become a stumbling block to a settlement, then there could be pressure on developing countries like India, to accept a compromise.

Creative solutions would need to be explored to avoid the odium of being the wrecker of trade liberalisation. Obviously fall back options and alternative formulations that are acceptable on the contentious Singapore issues, especially investment, may need to be worked out.

The other possibility to overcome an impasse may be a suggestion that unwilling and disinterested countries could be given the option of "opting out" of the settlement, though that would be contrary to the single undertaking concept followed from Uruguay Round and reiterated at Doha.

It may be a face-saving formula, but the long-term implications can be dangerous. Not only the benefits of improved market access that would follow the negotiations and implementation of the eventual agreement would not be available and therefore would place the left out countries at a competitive disadvantage in most markets, but also the entry price later, as China's experience has demonstrated, would be high.

Further the WTO has followed a consensus approach so far and it is in the interest of all countries that it remains so.

Given these possibilities, what could be the appropriate strategy for India? The Indian delegation will naturally put forth its views effectively and try to drive the best bargain. As strength lies in numbers, India has been trying to enlist the support of like-minded countries on issues of interest so as to be able to articulate the voice of the developing countries effectively.

India has been carrying on this process of coalition building admirably well so far and Cancun will again provide the challenge. But it needs to be kept in mind that each country would be interested in looking after, and safeguarding, its own interests and, that on many issues, the interests of most developing countries may not, in fact do not, coincide. New Delhi's experience at Singapore and Doha should caution it against placing too much reliance on other countries to fight its case or stand by it.

In the past our aim has always been to minimise the scope of WTO agreements. Perhaps a time has come for us to become proactive about trade liberalisation. Cancun provides an opportunity to overturn our country's image of being negative and minimalist.

Our industry and the services sector are becoming globally competitive and have developed confidence to take on the world. We have a lot to gain from trade liberalisation and improved market access. Hence, it may be in our interest to vigorously pursue greater market access and genuine free trade.

India would benefit from the effective restoration of the development focus of Doha Declaration. We should be aggressive in demanding the fulfilment of commitments in the area of implementation concerns, special and differential treatment provisions and the declaration on TRIPS and public health.

But mere demanding will not impress any one nor carry weight, if in turn we are not prepared for progressive liberalisation and to offer some concessions and show movement in some areas. While we may not be able, nor need, to compromise on basic principles, flexibility on some issues or group of issues may be possible and will have to be shown.

Trade-offs are inevitable in any negotiation and the potential gains and benefits in some areas against possible disadvantages in others, needs to be weighed and our positions nuanced accordingly. Given the wide variety of subjects for consideration, it is necessary to be realistic that on all issues we may not get satisfaction and have our way. The objective of multilateral negotiations in international trade is to facilitate the orderly growth of, and ensure, fair and free trade which is crucial for the economic progress of developing countries.

The major problem confronting the nation today is unemployment and poverty. International trade will provide an opportunity to generate millions of productive jobs. The increasing employment opportunities that one sees in many places from Tirupur to Surat to Bangalore is account of the surge in export enterprises in such locations.

The spectacular economic progress of China only confirms that exports could become the engine of growth for our country also. Our objective at Cancun should be to make an effort towards an outcome that will help our country to obtain greater market access and benefit from our export potential and greater participation in international trade.

(The author is a former Commerce Secretary.)

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