The Hindu Business Line : `India must be more proactive in WTO'

INDIA should take "a much more proactive and constructive engagement" in the negotiating processes of the World Trade Organisation (WTO), currently under way, by persisting with its "liberalising" approach domestically in all key areas including agriculture, according to Lead Economist of the Development Research Group, World Bank, Mr Aaditya Mattoo.

Mr Mattoo, who was here for the release of a book on "India and the WTO" which he edited along with Mr Robert Stern, University of Michigan, a joint publication of the World Bank and Oxford University Press, told Business Line in an interview that more recent research suggests of an interesting paradox on India's stand on agriculture. "On the one hand, India has a comparative advantage in agriculture. But the net sum of all our policies seem to penalise rather than help this sector," he said. He added that "yet our position in the WTO is focused on retaining the right to protect our agriculture — so it is not simply credible to participate in the WTO process based on the notion of special and differential treatment".

Elaborating, he said, "WTO is a process about bargaining and about negotiating and that is where one should take advantage. We do not have a lot in common with the least developed countries. We are an emerging power in terms of our stakes across-the-board and that role naturally suggests taking a much more proactive and constructive engagement in WTO."

He said India has significant and actual potential agricultural exports in rice, sugar, dairy products, cotton and processed foods and in the long run even in cereals. India's sugar and dairy exporters have already expressed a serious interest in reducing barriers to their exports.

Instead of seriously considering to align it with the Cairns group of agricultural exporters, consistent with an overall strategy of forming coalitions based on a liberalising ideology, he deplored India's defensive position on agriculture as it is "continuing to focus on the freedom to safeguard food security."

Mr Mattoo recalled traditionally India had very inward-looking policy and that perhaps translated into a defensive position in the WTO.

But today things have changed as domestically too India had undertaken reforms in several areas, he said. Alongside, India has a growing interest in securing access to foreign markets that is most strikingly evident in services and also in manufacturing and potentially in agriculture.

These two things of domestic reforms and improved market access call for much more active engagement in the WTO to reap substantial gains, he added.

"Where the WTO process is valuable is in basically pushing reforms beyond that level which is unilaterally possible because when you get access to foreign markets you can use that as a leverage domestically and the need to have a domestic leverage makes you a credible bargainer abroad. That dual relationship is not an argument for holding your own but as in going further on the reform road," Mr Mattoo said.

Mr Mattoo noted that the dramatic growth in the services sector particularly in business process outsourcing is beginning to provoke protectionism.

But, "WTO regime on services offer an opportunity to lock in the current openness and pre-empt the protectionism. This is an obvious area where India has an aggressive interest and it could propose and not go by sector by sector or trading partner by trading partner but actually induce across-the-board that all members lock in openness" in this regard.

Mr Mattoo said that the WTO dispute-settlement system has so far enabled developing countries to enforce their rights. He said "our ability to enforce our rights in WTO by actually threatening credible retaliation" is feasible if the required elimination of quotas on textiles and clothing is not to supervene in time by the end of 2004 or might be difficult to enforce. "In WTO the way you enforce your right and that of trading partner who does not fulfil obligation, you are allowed to suspend equivalent concession. In such an eventuality, India could enforce its rights by threatening to wield an effective retaliatory weapon - withdrawing its obligations under trade-related intellectual property rights (TRIPs). Ecuador threatened to do it in the context of the banana dispute with the European Union in the area of services and IP and was granted authorisation by the WTO to retaliate, he said. However, he said, India needs to change IP legislation to ensure that TRIPS benefits could be withdrawn in the event of non-compliance by partners with commitments that affect India's exports adversely in areas like textiles and clothing.

While stating that India is trying a gradualist path in reform, Mr Mattoo cautioned, "it would be a mistake to hold back the domestic reform process simply to retain negotiating coinage. Rather the converse. Negotiating process must facilitate growing faster than you can."