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Persistent divergence of stands at trade talks

CHENNAI:

There is a feeling of déjÀ vu in the news that trade talks have stalled yet again The G - 4 group representing four important trading blocs — India, Brazil and the U.S. as well as the E.U. — meeting in Potsdam, Germany, last week, failed to break the deadlock that has paralysed the multilateral trade discussions .

In April, a slightly bigger group — the G-6 (Japan and Australia were the additional members) — met at New Delhi. At the time, the outcome was basically similar but there was a glimmer of hope that a settlement of sorts — a breakthrough — was still possible. A deadline of December 2007 was set. It was hoped that the draft of an agreement would be worked out by representative countries by end July that could be then taken up for adoption by the larger WTO body. All the trade ministers present then felt that it was achievable.

In fact, even now after the latest failure, the official stand everywhere is that there is still a chance of hope of a breakthrough and a successful culmination of the development rounds. But for at least two reasons that may be mere wisshful thinking.

One, with each successive failure there is greater acrimony among the negotiating countries. There is bound to be political grandstanding on an even greater scale. Any success in trade talks cannot come about without political support in the respective countries. No trade minister can risk political opposition at home by agreeing to controversial trade proposals. All these are in evidence after the failure at Potsdam. Commerce Minister Kamal Nath has once again stressd India’s well known stand and accused the U.S. and the E.U. for their unyielding positions. The E.U. and the U.S. have in turn blamed India and Brazil of inflexibility .The stalemate continues but the heightened bickering does not augur well for any spectacular breakthrough in the coming weeks

The second reason has to do with the imminent expiry (by end June) of the U.S. President’s fast track authority to negotiate trade deals without the U.S. Congress having to discuss the proposals in detail. There are indications that in the prevailing political atmosphere the Congress may not restore the special authority soon. That means member countries of the WTO will have an additional reason to stay away. Without a guarantee that the U.S. lawmakers will not tear a negotiated deal apart, not many members will be forthcoming at the discussion stage. Practically all the Doha round deadlines were built around the need to conclude an agreement before June.

The main agenda for the talks was a deceptively simple sounding one point action plan — to somehow revive the Doha development round. As everyone connected even remotely with the WTO and multilateral trade knows, the single point agenda is anything but simple. The Doha development round, started in December 2001 soon after 9/11, was a bold attempt at reworking the multilateral trade rules and rectify the several distortions that have been working against the less prosperous countries in matters of trade.

The round has had a chequered history with a number of missed deadlines. After the Hong Kong meet (December 2005) in which all 148 member countries of the WTO participated but failed to take the Doha round forward, it became clear that much more than an endorsement of the spirit of multilateral trade was necessary.

From then on, smaller groups comprising important trading nations have been at the task of arriving at a broad framework, mostly in backroom discussions but also in well publicised talks as well as in other international economic fora. On all those occasions, the outcome has been the same with the U.S. and the E.U. sticking to their stand and developing countries including India and Brazil refusing to budge in the matter of increased access to developed countries’ products.

While industrial goods have always been a bone of contention, it is the opening up of markets in agriculture by countries such as India that was particularly controversial. The Indian Government stand has been consistent throughout — livelihood issues of subsistence farmers and the larger question of domestic food security can never be compromised at the altar of free trade. Specifically, the heavily subsidised agricultural products from the U.S. and the E.U. cannot be allowed to swamp Indian agriculture.

Trade talks such as the Doha round pose certain special challenges to the negotiators. Even if the talks yield some agreement, it becomes the task of the trade minister to sell it to a domestic constituency. Any liberalisation is bound to hurt special constituencies and interest groups. On the other hand, the positive benefits of the trade agreements would flow after considerable time.

It is highly unlikely that the present set of trade negotiators will be around by, say 2012, or thereabouts when the benefits of a possible breakthrough in the Doha round will be felt. Failure of the Doha round will lead to a serious setback to multilateral trade under the aegis of the WTO. The rule of law that the WTO has brought to world trade may be devalued. And the rush to bilateral/regional pacts will stand in the way of future multilateral agreements and in any case they are only a second best option.

C. R. L. NARASIMHAN

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