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G. Srinivasan

As the EU has spelt out its stance and offered some flexibility in the issues figuring in the modalities for negotiations of the Doha Development Agenda, India too should adopt a pragmatic "give and take" stance to gain in numerous negotiations that are likely to be resumed.

IN LESS than a fortnight, the World Trade Organisation (WTO) is scheduled to convene its General Council meeting in Geneva, following the fiasco and loss of momentum of the Doha Round at the Fifth Ministerial in Cancun, in September 2003. No doubt, there were serious underlying problems behind the Cancun fiasco, which ought to be addressed if the Doha Development Agenda is to succeed as a negotiation. The emergence of new groups such as G-20, a broadband coalition led by Brazil, India and China and the G-90 (mostly developing countries), driven by fears their priorities are not getting due attention; the unwillingness of a number of members either to engage in further trade liberalisation or to extend the WTO-rule book; differences in substance too gaping to be overcome in the time available, and the importance of China and its huge economic potential can all be the reasons why the Cancun meeting ended the way it did.

In the interregnum, the WTO Director-General, Mr Supachai Pantichpakdi, chairman of the Cancun Ministerial, and Mexico's Foreign Minister, Mr Derbez, the IMF chief, Mr Horst Kohler, and the World Bank President, Mr James D Wolfensohn, have all made serious efforts to emphasise the importance of re-launching the stalled trade talks so that the benefits of further liberalisation of trade in goods and services can be shared by all — developed, developing and less developed countries. Even a dozen African countries, as well as the WTO Director-General of the WTO and the Trade Commissioner of the Economic and Monetary Union for West Africa met in Cairo on November 13-14 to underline the importance of resuming trade talks under the WTO umbrella.

The European Union (EU), however, went a step further by circulating a strategy paper, after duly adopting it in the European Commission, that spelt out a revised strategy in the form of a refreshed and updated negotiating position in several areas including the contentious ones. Considering that global trade negotiations require meticulous planning and a menu of options to fall back if negotiations turn tough or where one is expected to give out even as one is getting, the EU is a past master and its latest paper is something which other serious negotiating members would do well to read and reflect.

The nub of the 18-page strategy paper is that in the realm of market access on agriculture, services and non-agricultural market access, development gains will only be reaped if developing countries themselves also make a contribution to the liberalisation process according to their level of development and to begin to open markets to each other. For developing countries, including India, which always demand special and differential treatment and "less than full reciprocity" status for liberalisation, the new EU paper categorically cautions them that "economic growth and integration will not take place through non-participation" or obstructive or stonewalling strategies.

The Commerce Minister, Mr Arun Jaitley, asserted in Cancun that "the net effect of subsidising agriculture in developed countries at the expense of products of the relatively poor in developing countries is to aggravate global income inequalities. On the other hand, against equity, justice and fair play, developing countries are being asked to liberalise their agriculture". As the G-20 alliance was too hot to handle, the EU has now injected a new demand by which "other countries including the largest and most advanced developing countries — should also provide preferential access in their markets to the larger number of developing countries in need". It said the EU's "Everything But Arms" (as the epithet captures, the EU allows duty-free entry of products from the poorest countries into its markets) initiative should be "followed by others and we consider that in addition to the OECD countries, the G-20 should, for example, be invited to offer trade preferences to G-90 countries."

Considering that the vanaspati industry in India complains much against cheap imports from one of the least developed countries of South Asia, Nepal, would New Delhi allow duty-free import of agricultural items or industrial goods from the less developed countries of South Asia, Africa or Latin America, even as it fights fiercely for the right of the livelihood of 650 million farmers, as claimed by Mr Jaitley?

Thus, the EU paper notes that "while the EU has always supported special treatment for developing countries in the area of domestic support, it considers that such treatment should be targeted particularly to the poorer, less competitive developing countries as opposed to the most advanced. This appears to us the most appropriate means to fulfil the development objectives of the Doha declaration".

Even on the question of tariff rate quotas (TRQs), while India refused to accept any form of harmonisation of tariffs in agriculture or obligations to create and expand the TRQs, the EU said "the distribution of TRQs across the membership is very uneven, reflecting the situation prevailing at the end of the Uruguay Round and therefore proper burden sharing of further market opening can be achieved only if all countries are put on the same footing, with appropriate special treatment for developing countries". Here the EU pleads for "preferential access for the weakest of the developing countries, in combination with sound economic policies and supply capacity" which could be "vital for their integration in world markets. Ignoring this fact is ignoring the lessons of Cancun".

So, in the area of agriculture, even as New Delhi has been stridently demanding sharp reduction of export subsidies and domestic support in the EU countries, the European Commission has unmistakably said negotiation is a two-way street and that the "concept of less than full reciprocity" does not equate to non-participation of developing country members in the liberalisation process by asking the developing countries to open up more towards their less-unfortunate brethren before demanding total reforms in the farm sector of the rich world.

Others might dub this a clever ploy to divide and rule but trade negotiations demand astuteness, alertness and assessing the pros and cons of policies before spelling them out so that they do not boomerang to the consternation of protagonists. Repetition of entrenched positions and not responding to the fast-moving dynamics of evolving developments in international trade scenario would lead India nowhere, particularly when it does not stop preening on its status as a lender to the IMF, a country with massive foodgrains and foreign exchange reserves and desirous of joining the league of developed countries.

It is also significant in this context to note that the US Under Secretary for Economic, Business and Agricultural Affairs, Mr Alan P. Larson, said in Washington on November 16 that "the blame" for agricultural barriers does not rest exclusively with rich countries and that developing countries have high tariffs. "By reducing their own barriers to trade in agricultural products, developing countries would raise incomes, increase investment and ensure that food products flow to where the need is greatest," Mr Larson said.

On the contentious issue of non-agricultural market access (MAMA), India took exception to the suggestion for mandatory tariff harmonisation and elimination as being iniquitous to developing countries. Here the EU said the negotiating process leading up to Cancun and at Cancun itself was "disappointing" as the proposed "modalities were so riddled with exclusions and exemptions that they might have well resulted in a very low level of engagement, especially on the part of some influential developing countries, including the more advanced and competitive among them".

In a deft statement, the strategy paper contends that given that nearly 70 per cent of the trade of developing countries is in industrial products and that they raise the highest barriers between themselves, important trade and development benefits will only be found if there is serious market opening within the developing world, particularly on the part of the more advanced developing economies, which are perfectly able to make a meaningful contribution".

The EU goes a step further to claim that the concern of several weaker developing countries about the impact of preference erosion can to a considerable extent be mitigated through the creation of new markets for their goods in the South.

On the Singapore issues of creating rules on competition, transparency in public procurement, investment and trade facilitation, the EU dangles flexibility by considering each issue on its own merits rather than treating them as part of the Doha package.

This opens the door to the possibility to exclude any one or all of the issues from the single undertaking and to pursue negotiations among those (many) members willing to do so, still within the WTO but not formally linked to the other issues on the DDA. This tack will allow the WTO to develop rules on these issues while accepting the reality that not all WTO members are ready to take this step now. But India and a few developing countries have fiercely opposed the inclusion of Singapore issues on the trade agenda.

In sum, as the world's articulate trading bloc the EU has spelt out its stance and offered some flexibility in the issues figuring in the modalities for negotiations of the DDA, India too should adopt a pragmatic "give and take" stance to gain in numerous negotiations that are likely to be resumed. This is important as talks are being put back on the rails with only one year lingering to plan how to wrap up negotiations by the end-of-2004 deadline. One only hopes that the savvy Mr Jaitley will seize time by the forelock to make India a gainer in the development round.

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