The Hindu Business Line : Multilateralism is here to stay

Will the collapse of the Doha Round lead to the end of multilateralism? Not necessarily, as there is every likelihood of a transparent, non-discriminatory framework for international trade emerging. In this system, nation states are likely to play a subordinate role.

Luckily for multilateralism, the end of the intergovernmental phase is marked by the emergence of information technology and e-platforms of the futures markets.

Sharad Joshi

Wiser by the experience of the 1920s and 1930s, nations of the world after World War II rejected economic nationalism, beggar-thy-neighbour devaluation and tariff hikes by creating post-war economic institutions that fostered rules for a multilateral system of development and international banking.

In the bipolar world, multilateralism was more difficult to achieve. It was only after the fall of the Soviet Union that the Uruguay Round of the GATT negotiations succeeded in taking shape. For the first time, the nations of the world were ambitious enough to include even trade in agricultural commodities in the multilateral system.

Diversity in agriculture

That was a fishbone that was bound to get stuck in the throat of the multilateral system. Industry and the financial institutions the world over had a certain degree of commonality. Agriculture, on the contrary, varies not only from country to country but also from region to region even within a country.

The agricultural interests of all the regions within a political nation are not necessarily similar. Often certain regions have greater commonality with regions in neighbouring countries rather than the neighbouring provinces within the country.

Further, the policies followed in respect of inter-sectoral terms of trade vary from country to country according to the geographical, social, historical circumstances. Briefly, national governments represented a highly heterogeneous bundle of interests and could not, by their very nature, be valid representatives of the whole political nation.

Till the end of the 20th century, the national governments were the only recognised players in international agreements. The United Nations and its specialised institutions provided the model for multilateral agreements. The GATT and the WTO had perforce to follow the model and developed an intergovernmental regulator for multilateral trade. The intergovernmental structure had its inevitable consequences.

The agreements had to be thoroughly legalistic to stand the test of legal challenges and interpretations. Apart from the jurists, yet another category of professionals which dominated the WTO agreements was the econometricians.

Fairly simple concepts such as agricultural subsidies were translated into complex measures like the Aggregate Measurement of Support (AMS). The WTO became a favourite playing field of jurists and mathematical economists. The negotiating teams of most countries on the Agreement on Agriculture (AoA) were packed with lawyers and mathematicians rather than people who had practical experience in agriculture. No wonder the farmers had difficulty in understanding even the stipulations that went in their favour and took positions inimical to the WTO. According to all available indications, this epoch is coming to an end. The collapse of the Doha Round of the WTO negotiations would probably mark the beginning of a new epoch.

Agreement on Agriculture

The Agreement on Agriculture was the stumbling block in the WTO negotiations. The WTO has many accomplishments to its credit. Tariffs imposed by the richer countries have fallen dramatically to an average of 4 per cent. The WTO, with 151 members, is the most universal of international organisations. No member-country has sought to distance itself after joining it. Disputes between the WTO members are almost always amicably settled. The twin principles of non-discrimination and transparency have come to be accepted as basic principles of multilateral systems.

The successes of the WTO were partly responsible for the problem that it is facing today. The WTO is essentially a democratic system with no nation enjoying a veto power or even a “first amongst equals” status. The dispute settlement mechanism worked in a manner that won the confidence of most members of the organisation.

The ministerial negotiations were, therefore, taken seriously by all participants. After Marrakech (1995) even the more powerful states refrained from making commitments they had no intention of fulfilling. The richer countries stuck to their stand on providing hefty subsidies to the farmers and demanding easier access to markets in the developing countries. The stymied the Doha Round negotiations.

Global warming

It was a cruel coincidence that the breakdown in the Doha Round negotiations coincided with the first and early experiences of the phenomenon of global warming/climate change. All countries, both in the South and North, are experiencing extreme vicissitudes in temperature and highly skewed precipitations.

The crop maps of the world are about to undergo major transformations. In India and other tropical countries, foodgrains production, as also that of milk and dairy products, will face a serious threat. Further, the entire technology of refrigeration is coming under serious criticism. It is likely that foodgrains production will be limited mostly to temperate and cold regions.

This is a double blow for the Doha Round negotiations. The situation in developing countries, especially those in warmer climes, are almost certain to deteriorate. The richer countries in the more temperate regions would find a new strength added to their fledgling argument about the need to protect agriculture, forests and the environment. While eventually technology should help postpone the disaster, the WTO negotiations have in the meanwhile received a fatal blow. Does it mean the end of the WTO and multilateralism?

The end of WTO does not necessarily mean the end of multilateralism, much to the disappointment of the WTO-baiters. It is only fading out of the intergovernmental phase of multilateralism in trade. This is probably a good thing.

The trader is the intermediary between the producer and the consumer. National governments ought to have, at best, a marginal role in the operation. The role of the government in trade, at best, is that of a traffic cop. Unfortunately, in most cases this cop happens to be a corrupt one interested in self-aggrandisement rather than regulating traffic. This phase of intergovernmental multilateralism was also accompanied by rather outdated systems of transport, finance and settlement.

Role of IT

Luckily for multilateralism, the end of the intergovernmental phase is marked by the emergence of information technology and e-platforms of the futures markets. At present, the futures markets are mostly a national phenomenon. It is, however, only a matter of time before the national platforms get interlinked leading to a global e-marketing system. Even in India some of the recent government decisions had reference to the Chicago Board of Trade futures quotations.

. It is perfectly conceivable that a multilateral system of transparent and non-discriminatory trade system may emerge out of the ‘de-statisation’ of the multilateral system of international trade.

The emergence of intergovernment institutions for global systems was an unfortunate necessity given the historical background of the two world wars and two depressions. The failure of the WTO might actually mark the beginning of true multilateralism.

(The author is founder, Shetkari Sanghatana and Member of Parliament (Rajya Sabha). He can be reached at sharad.mah@nic.in)

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