Financial Daily from THE HINDU group of publications
Friday, Oct 17, 2003
Cancun failure is nobody's gain
B. S. Rathor
A logical expectation from Cancun was a win-win deal. But this would have necessitated `pre-Cancun' discussions between leaders of the G20+ and the G-8, led by the EU and the US. True the agenda of both groups was in conflict, but here is where good negotiators leave their mark. A prior engagement of the North-South leadership to evolve a common minimum agenda was completely ignored.
A negotiator's primary role is to create such platforms. This is where India seems to have failed. It is debatable if we have even scored a political point. The economic advantage has been frittered away. It is to be seen whether the G20+ maintains its solidarity until Geneva. On hindsight it appears that India, with its newly-formed friends, had a firm intent to obstruct the final draft. Several eminent leaders and political analysts have lauded the Commerce Minister, Mr Arun Jaitley's singular achievement of burying Cancun.
How did Cancun unfold? The G20+ totally rejected the continuance of domestic support and export subsidies in agriculture by developed nations. The G-8 turned its back on the meet as soon as the Caribbean and African countries walked out over the Singapore issues. And as though waiting for an impasse, the Mexican Trade Minister, Mr Luis Ernesto Derbez, abruptly brought the curtains down on the meet.
The G-8 is cautious to safeguard its interests, knowing exactly where its `munificence' ends. Though geared up at Cancun, what the group did not expect was the unity among the widely diverse developing economies. Cancun saw the emergence of a strong G15 and G20+, the latter led by Brazil, China, India, Argentina and South Africa to resist the bulldozing tactics of the G-8.
Cancun witnessed a type of arrogance reminiscent of the raj. The statements made by some officials were in poor taste, not quite up to the decorum expected at such a forum. While the US Trade Representative, Mr Robert Zoellick, astutely kept himself backstage, the EU Trade Commissioner, Mr Pascal Lamy, and the EU Agriculture Commissioner, Mr Frank Fishcler, were in the limelight. Mr Fishcler said in a TV interview that while the EU and its allies were trying their best to keep the Cancun agenda on, the G20+ was a serious headache. Mr Robert Zoellick's deputy, Mr Peter Allgeier, was curious if the G20+ would stay together even as the EU silently sent warning signals in an attempt to break the alliance. Mr Pascal Lamy went to the extent of talking about the irrelevance of the WTO format, calling it a medieval organisation. Some of the G20+ nations Colombia, South Africa, Thailand and Egypt are in discussion with the US for entering into free trade agreements (FTAs). Their efforts could well be obstructed in case they continue their anti-G-8 tirade at the WTO.
The well-orchestrated notes of the G20+, opposing farm subsidies and allied issues, were in complete harmony with the G15 refrain on the Singapore issues. Both combined well to stall an agreement at Cancun, but have they evaluated the impact of the failures at the meet on their respective economies. There is no escaping the fact that the G-8 accounts for bulk of the global trade.
India went to Cancun with a preconceived strategy, a negative tactic to begin with. Cancun's failure is nobody's gain. The developing and least developed countries will suffer the most. Developed nation's will enter into bilateral pacts and strike hard bargains in their favour.
India, on the threshold of sustained economic growth, will be affected by the stalemate at Cancun. Also, it is neither a part of any significant trade bloc that governs bilateral trade or party to multilateral agreements. The latter, though slow in finalisation, opens up the avenues to large volumes of business. The accruing benefits can be leveraged by `more' developing countries such as India.
The growth economies of the world have based their economic model based on reforms. Consider a situation where India's exports are blocked or made difficult by developed countries through quantitative restrictions (QRs) and other non-tariff barriers and, in retaliation, we block imports. Who is the ultimate loser? India requires foreign technology to keep its core engineering, manufacturing and research programmes going, and to develop its large domestic market further.
Compliance with WTO norms on tariff and reforms has only increased India's competitiveness. Ten years back, who would have expected the Tatas to export a made-in-India car to the UK and Europe? And that the company would make large investments in an integrated steel plant to supply skin panels to global auto OEMs. Did anyone forecast that TVS Motor would buy out Suzuki's equity? With reforms, India is emerging as a potential exporter in the auto segment. These gains will be marginalised if some of the global markets are shut on us.
And what if BPOs of large MNCs shift to other regions? Can the IT industry grow to its full potential without the support of the West? Economic backlash takes several subtle forms. If at all the country has gained an electoral advantage, a larger economic one, on which depends the welfare of the masses, has been lost.
The Commerce Ministry will have to accept moral responsibility for not mulling over the modified agreement, which was much in line with India's thinking with the biggies accepting to drop two of the four Singapore issues. Why did Mr Jaitley ignore this critical support? It could perhaps be because of comments made by some African nations blaming India and others for attempting a secret trade-off with the G-8 for individual gains. This has sown seeds of suspicion in the developing and lesser-developed world, which does not augur well for future WTO deliberations.
One cannot rule out `hidden' economic sanctions and pressures on countries that have been vociferous at Cancun. India has earned the dubious distinction of being a ringleader of the South Block and one that is consolidating the alliance. But the G-8 can obstruct the economic growth of any developing nation at will and, therefore, the euphoria over the Cancun `failure' is ill-conceived. India's other partners Brazil, China, Argentina and South Africa are much too involved with the EU and the US and will escape their wrath, whereas India's economic growth be it on the FDI, FII or IT fronts is still very dependent on them. The impact of 9/11 on the IT industry is all too well-known. India's military shopping has the US as a major source, especially for critical space technology, and these are in danger of being affected.
Though the sceptics may not agree, can India sustain long-term economic growth and alleviate poverty without external support? At Cancun there was lot of talk about small farmers. But how much have our leaders done for them since Independence? It is time the `political showmanship' ended.
Again, not much has been said on the differences between the US-EU combine and Japan and South Korea on the Singapore issues. Mystery shrouds the Indo-Malaysian agreement on this matter. Perhaps Cancun failed because India's leadership did not anticipate a breakaway bloc among the poorer nations. Any advantage at Cancun was lost owing to complacency and lack of strategic thinking. The polity, among others, seemed to be in a hurry to extol the Cancun outcome rather than wait and watch the developments and analyse the economic implications.
If Mr Jaitley is to succeed in the next round, he has to get a buy in from all those concerned on a basic format that will pave the way for a more equitable society. But this requires considerable economic vision that is not influenced by political compulsions.
(The author is Regional Director, Quorum-ITP World Wide. He can be contacted at firstname.lastname@example.org and email@example.com)
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