The Hindu Business Line : WTO: The next bargaining phase

While the WTO's future is a debatable point, as far as the stand likely to be adopted by the rich at the ongoing Doha Round negotiations is concerned, the signs are that any drastic change is unlikely.

THE Hong Kong ministerial ended a week ago and after the fireworks the negotiators have gone home — to relax during the seasonal holidays. In the meantime, no stone has been left unturned to examine what exactly the outcome has been. In particular, the questions being asked relate to whether the developing world has been able to achieve anything of consequence to their interests as it is more or less clear that the developed world has not sacrificed anything of importance as far as the three critical areas of agriculture, industrial tariffs and services are concerned.

These areas are, of course, crucial because on them will depend the future health of the international economy. But there is another area which was not quite an issue before Hong Kong but which today has assumed a role which could act either as a welcome catalyst for change for the better or turn out to be the last nail in the coffin of multilateral cooperation to liberalise trade This is the unity that was forged among the developing economies (including the least-developed countries) which, at the conference, led to the coalescing of around 110 poor countries, a grouping which, if it survives, will have great influence on the working of the 149-member WTO.

The all-important question is whether the grouping will survive, not merely because of internal pulls and pressures which continually wrack the developing world (the differences drawing their sustenance from the varied micro requirements of the individual economies forming the mega group) but also because of the tremendous pressure the rich will now start putting on select members of the G-110 (loosely defined) to break away in return for tempting economic inducements.

While from the point of view of the poor countries, such action by the rich is indefensible and even reprehensible, from that of the developed economies it is nothing unusual if they are to safeguard their narrow economic interests, as they perceive them. The implication of this is that it will be difficult to get the developed countries to alter substantially their negotiating stances, more so because they would not like any change to be seen as capitulation to the demands of the poor (in the shape of the G-110). It may be argued that this is too dismal a view to adopt at this point of time, especially because no one would like the WTO to die an early death. While the WTO's future is a debatable point, as far as the stand likely to be adopted by the rich at the ongoing Doha Round negotiations is concerned, the signs are that any drastic change is unlikely. Indeed, both the sides (assuming some degree of homogeneity) have taken up hard positions, so to speak.

Thus, it is reported that even the cotton-growing economies, which stood to gain a lot from whatever was being offered by the US at the ministerial, made no bones about the point that, no matter how much they gained from such concessions, "they would still side with other poor countries on many other issues".

As for the developed countries, at least one analyst has reported (in The New York Times) that on December 17 (the penultimate day of the Hong Kong meeting), "American officials were so worried about the talks that they were preparing to defend a public call for more bilateral and regional agreements," adding, "they had readied numerous charts showing... that 42.5 per cent of American exports already go to countries with free trade arrangement with the United States."

While it is to be hoped that the G-110 will survive in whatever form to fight future WTO battles — marking a significant departure from the past — the fact remains that the focal point of the Doha Round struggle has shifted to the first half of next year. Among other things, the Hong Kong Declaration says in Paragraph 10: "However, we recognise that much remains to be done in order to establish modalities and to conclude the negotiations. Therefore, we agree to intensify work on all outstanding issues to fulfil the Doha objectives; in particular, we are resolved to establish modalities no later than 30 April 2006 and to submit comprehensive draft Schedules based on these modalities no later than 31 July 2006." The central issue is: Will it be possible to achieve in four months what has eluded WTO negotiators over the past couple of years?

Turning to specific areas, the Commerce Minister has been saying that Hong Kong has protected the interests of the Indian farmer. To quote him: "The agreement fully secures the concerns of our farmers. It ensures that no subsidy-ridden farm products are exported to India... The phase-out of export subsidies by developed countries would also give Indian farmers a chance to compete in the world market." Regarding the export of subsidy-ridden farm items to developing countries, Paragraph 7 of the declaration says in part: "We recognise the need to agree on treatment of sensitive products, taking into account all the elements involved. We also note that there have been some recent movements on the designation and treatment of Special Products and elements of the Special Safeguard Mechanism. Developing country-members will have the flexibility to self-designate an appropriate number of tariff lines as Special Products guided by indicators based on the criteria of food security, livelihood security and rural development. "Developing country-members will also have the right to have recourse to a Special Safeguard Mechanism based on import quantity and price triggers, with precise arrangements to be further defined. Special Products and the Special Safeguard Mechanism shall be an integral part of the modalities and the outcome of negotiations in agriculture."

This clearly marks some progress as far as protection of the livelihood of farmers in the poor economies is concerned. But the nagging doubt remains on whether this `concession' to the poor was won at the expense of `deferred progress' in the export-subsidy sphere, where even the effectiveness of the cut-off date (2013) has been made dependent on success on the modalities negotiations by April next year.

This is made clear in paragraph 6 which reads in part: "The disciplines on export credits, export credit guarantees or insurance programmes, exporting state trading enterprises and food aid will be completed by 30 April 2006 as part of the modalities, including appropriate provision in favour of least-developed and net food-importing developing countries as provided for in paragraph 4 of the Marrakesh Decision. The date above for the elimination of all forms of export subsidies, together with the agreed progressivity and parallelism, will be confirmed only upon the completion of the modalities."

On industrial tariffs (Non-Agriculture Market Access or NAMA), the Indian stand was spelt out clearly by the Commerce Minister when he said that developing countries "needed flexibilities to protect their domestic industries, such as offering less-than-formula reduction or making no reduction at all on a specified number of tariff lines covering their sensitive items or sectors."

The US and the EU backed a `Swiss formula with two coefficients' as against the Indian preference for multiple coefficients. The Hong Kong declaration (paragraph 14) adopted the Swiss formula (which is weighted against developing countries like India which have high tariffs on certain items) with coefficients which would "reduce or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs and tariff escalation, in particular on products of export interest to developing countries; and take fully into account the special needs and interests of developing countries, including through less-than-full reciprocity in reduction commitments."

If the Swiss formula issue can be overlooked for the moment, this certainly is a concession to the developing countries which, however, cannot be said of the achievement in the services sector where the Indian stand was a specific commitment by the developed economies to liberalise Mode-4 (skilled professional) movements. What the Declaration said instead (Paragraph 27) was that liberalisation would be effected keeping in mind "the size of economies of individual Members, both overall and in individual sectors."

New Delhi would do well to keep this stipulation in mind before blowing up the part of the paragraph which says, generally, that "particular attention will be given to sectors and modes of supply of export interest to developing countries".