The Hindu Business Line : WTO negotiations

It is simplistic to think that the Potsdam failure signals the end of G-4 or of the Doha Round. For, the WTO negotiations will be resumed, sooner of later, as the advantages of free multilateral trade are too substantial and the desire for freedom too indomitable to be allowed to die, says SHARAD JOSHI.

Potsdam made history in 1945. Seven days after the surrender of Hitler's Germany, Josef Stalin, first Winston Churchill and then Clement Attlee, and Harry S. Truman met at a conference from July 17 to August 5 to deliberate on the administration of the defeated Germany and Austria as also to re-draw a new world map after the end of the Second World War.

The Potsdam Agreement represented the first draft of the new world order. Later, after the fall of Japan, China's Chiang Kai-shek joined the leaders of the United States and Great Britain to sign the Potsdam Declaration. The task before the statesmen was formidably arduous. They did not have the benefit of any previous conferences between subordinate officials, resolutions or studies. The relations between the superpowers were so strained that they soon turned into Cold War. Yet, these statesmen crafted an agreement with the concurrence of all.

A folkloric story brings out the essential spirit of the 1945 Potsdam Conference. At the end of a gruelling day's work, the statesmen were sitting by the lakeside. There was a friendly wager as to who could catch more fish. Stalin took out his revolver and started shooting at the fish in the water. Truman got into the water and tried to catch the fish by fiercely moving his hands. Churchill took a teaspoon and started emptying the lake spoon by spoon with the conviction that one day the lake will be emptied and all fish will come to him. Finally, all joined Churchill in emptying the lake spoon by spoon.

Differing perceptions

Sixty-two years later, in that very German town, Ms Susan Schwab, Trade Representative of the US, Mr Peter Mandelson, the European Union Trade Commissioner, Mr Kamal Nath, the Minister for Commerce and Industry and Mr Celso Amorim, Brazil's Foreign Minister, abruptly ended the negotiations in the Doha Round of the World Trade Organisation (WTO), two days ahead of the schedule.

"The failure of rich nations to accept effective cuts in farm subsidies and yet they asking for greater market access for their agricultural produce in the developing world resulted in the recent break down of global trade talks," explained Mr Kamal Nath. "It is the end of the road for G-4. The G-4 is no more," he added.

The perception of Ms Susan Schwab was quite different. "India and Brazil's fear of growing Chinese imports was behind the decision to help prompt the collapse of the G-4 trade talks in Potsdam," she said. "The Indian and Brazilian Trade Ministers were less flexible in their offers on their manufacturing tariffs at Potsdam than at previous negotiations. Although India has a small trade surplus with China, many in India fear it will turn into a deficit in the near future," she added. In her opinion, India and Brazil lacked flexibility in negotiations because of the process by which they reached a common negotiating position through G-20 and G-33.

Mr Peter Mandelson was very clear that the differences emerged from the discussions on industrial goods and we would not be able to point to any substantive or commercially meaningful changes in the tariffs of the emerging countries.

From these statements, it is not very clear what the developing countries were defending in exchange for reduction in levels of domestic subsidy in the US and Europe. Were they keen on defending Customs tariffs on industrial goods or agricultural commodities? It would appear that there is a difference in the perception.

Maybe, the G-33 was keener on resisting reductions in the tariffs on agricultural commodities while their leaders, India and Brazil, had greater stakes in resisting the opening of doors to import of industrial goods. Mr Manuel T. Geershankee, the Philippines Ambassador to the World Trade Organisation, reacted: "This is not statesmanlike for the G-4".

The tractation at Potsdam appeared to have one clear consequence: The US and the EU appear to have closed ranks. "Brazil and India offered no serious access to manufactured goods markets in return for the reduction in the US farm subsidies and European agricultural tariffs."

Trade-distorting subsidies

Mr Kamal Nath admits that the US offered to reduce its overall spending on trade-distorting domestic support to $17 billion while Brazil and India were pushing for an annual spending limit of $12-15 billion. The actual level of subsidy, at present, is around $10.8 billion. Evidently, the US was trying to hike the level of subsidies which was not acceptable to the developing countries. All the same, the gaps were fairly thin and certainly not unbridgeable.

Farm tariff is a politically volatile issue in a number of European countries, particularly France. Mr Kamal Nath and spokesmen of the Congress party are making it look as if they were defending the tariff levels on agricultural commodities.

Mr D. Raja, the national secretary of the Communist Party of India, did not appear over-concerned about the collapse of the Potsdam meeting. "The developed nations now clearly know that they cannot ignore the demands of Brazil, Russia, China, and India," he said.

It is a moot point if Mr Kamal Nath, as a representative of the Indian Government, which has maintained a policy of negative subsidies for its own farmers for the last 50 years, has the moral right to talk about the elevated levels of positive subsidies in any other country. Negative subsidies are as pernicious to the Indian farmer as the positive subsidies of the US or the EU. Only time will tell whether the unfathomable difference of opinion arose out of reduction by developing countries of tariffs on manufactured goods or on agricultural commodities.

The question that still remains is whether pressure tactics to the extent of letting the negotiations break down behoved a country like India, which aspires to be a global power. There is no disputing that the level of domestic subsidies for agriculture in rich countries is pernicious. But the more important question is: What is the best instrument for the developing countries to bring them down?

In the pre-WTO era, the US had nobody to answer to regarding its agricultural subsidy policy. If the WTO collapses, that would once again be the situation. Like the Super 301 and Special 301, the US could impose its will, given its preponderant share in international trade.

The only thing going for the developing countries was the fact that the US had accepted, in the Marrakesh Agreements, to scale down its policies on farm subsidies. It is wiser for the representatives of the developing countries to keep the instruments of Marrakesh in tact and not let the US escape from their discipline. Nothing is gained by making theatrical announcements about the end of the G-4 or of the Doha Round. That may impress the Left and the NGO lobby. That might also give an impression, in some of the developing countries, that India and Brazil are valiantly fighting the battle in the WTO.

Pressuring the US

There may be a tactical advantage in pressuring the US by creating a stalemate at a time when any further progress will presume that the US Congress would renew the fast-track trade authority given to the Bush administration that expires in a week's time. That will also be good political gimmickry on the eve of the US presidential elections and the parliamentary elections in India.

The question is: Should these considerations be allowed to imperil the fruiting of the saplings of the world order that were so painstakingly planted in 1945 and so lovingly nourished through all the negotiations of GATT till Marrakesh and Doha.

If the Left parties, the swadeshi lobby and the NGOs that have opposed the WTO think that this is the end of GATT and the WTO, they need to be a little patient. All said and done, the G-4 was only a timesaving contraption adopted to facilitate negotiations. It did not have the formal plenipotentiary powers delegated by the member-countries.

The WTO negotiations will be resumed, if not immediately, after the next administration takes over in the US. The advantages of free multilateral trade are too substantial and the desire for freedom too indomitable to permit the lofty objective of an open world as an alternative to World War to be permanently buried.

(The author is Founder, Shetkari Sanghatana and MP. Email: sharad.mah@nic.in)

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