The WTO must unite on core issues

India will host an informal WTO ministerial meeting in New Delhi on March 19-20. Trade ministers, senior government and WTO officials from Africa, Asean, the EU, the US, China, Japan, Korea, Brazil, and many other countries will brainstorm over crucial global trade issues in an informal setting. The WTO is not moving. No business-relevant decision has emerged from it in the past two decades. The trade facilitation agreement signed in 2013 at Bali was just an over-hyped face-saver. The 11th WTO ministerial conference (MC11) that took place at Buenos Aires in December 2017 concluded without any significant decision.

A look at the seven core trade issues will help us appreciate the logic of conflicting country positions, and why breaking the impasse would require revisiting the WTO objectives.

The basic issues

Agriculture . An annual subsidy of over $260 billion by developed countries enables their farmers to export at a low price. This is catastrophic for the poor country farmers. They cannot sell even in their own countries because of cheaper imports. They are forced to give up farming, leaving their countries at the mercy of imports. Negotiating battle lines are clear. Developed countries want poor countries to lower import duties, so that they can export more subsidised produce while poor countries say cut subsidy first. For the rich, the issue is trade; for the poor, it is survival.

The Indian government buys crops like rice and wheat from the farmers at the minimum support price which is generally higher than the prevailing market price. The Government then sells these at a low price to the needy. This way the programme ensures food security to more than 600 million poor people. However, this does not meet all conditions of the WTO rules. Seeking a permanent solution to the issue of food security is India’s foremost concern. It appears as though the WTO deals with trade in a cold, heartless manner with no respect for basic human needs.

Digital Business . Most online business is owned by the likes of Google, Amazon, or Facebook. Developed countries want rules that ensure a free run to these companies across the world. But many countries feel that the digital business is still evolving. Today there is no consensus even on the definition of e-commerce or digital product.

Governments are also coming to terms with the power of large online firms in influencing public opinion and the business landscape. Some activities of online firms are a threat to human values and democracy (they give a free run to porn and terror groups). And if the WTO makes rules, countries will forego the rights to regulate the digital sector.

At MC11, it was agreed to continue zero import duty treatment to electronic transmissions until 2019. A group of 70 countries proposed to work on future WTO negotiations. The battle lines with respect to digital business are clear. Developed countries want to freeze the lead taken by them in the digital space. Others seek time to understand and catch up.

Fisheries Subsidy. Fishermen in EU fishing vessels catch fish from far-off Africa, but the EU lectures that traditional fishing vessels used by small fishermen deplete the global stock. Rich countries oppose subsidy granted by developing countries to poor fishermen for whom fishing is the only source of livelihood. These countries led by the EU, the US and Japan provide the most subsidy — 65 per cent of the total annual $35-billion fisheries subsidy. But as these subsidies are largely non-specific or Green Box, they are in the clear. Poor countries mostly give direct subsidy which the WTO considers bad. The WTO will take up the issue at the next ministerial conference in 2019. Like agriculture, this is also a market access vs livelihood issue where fish catch for domestic consumption is seen to be violating WTO rules.

Services. The sector contributes to 70 per cent of the world GDP, but only 20 per cent of world trade. Country-specific domestic regulations (DR) act as the primary barriers to services trade. In the same way, high tariffs hinder goods trade. Developed countries have a clear lead over others as they have a robustly implemented DR set-up. Now they want others to use these. So at MC11, 60 countries supported a joint statement to intensify discussions on DRs. As expected, the proposal contained the DRs already implemented by the developed countries. So there were no new obligations for them. India and other developing countries must rush to create their own DRs.

Investment. The inclusion of investment as a subject in the WTO was rejected in 1996 because the WTO makes rules for trade. At MC11, a group of 71 countries led by the EU issued a statement calling for discussions on developing a multilateral framework for investment facilitation. But most countries feel this is only a small part of the investment regime and hence should be left as it is.

Trojan Horses. At MC11, joint declarations were adopted on promoting the participation of MSMEs and women in trade. But African countries, India, and many others stayed away apprehending that these could lead to a discussion on market access issues which are already being discussed in other negotiating groups.

Institutional Crisis. President Donald Trump’s use of the ‘threat to national security’ provision of the WTO for imposing tariffs reveals his disdain for the WTO process. This clause empowers a country to take any action to counter a threat to its national security. It is like pressing the nuke button, which is the last resort, and hence rarely used. The entire WTO membership must confront and oppose Trump before it is too late.

The final objective

Improving the standard of living of people and ensuring full employment are two of the important stated objectives of the WTO. Many countries need to reconcile their negotiating positions with these.

It is hoped the WTO Delhi 2018 event will create goodwill, and lead to the development of a common position on important trade issues.

The writer is an Indian Trade Service officer. The views are personal

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