A message on labour linkage for Mr Zoellick and Mr Maran

Pradeep S Mehta

It might surprise him to know this, but commerce minister Murasoli Maran could be doing US Trade Representative Robert Zoellick a big favour if he says a resounding “No Way” to the very mention of labour standards in connection with the World Trade Organisation (WTO).

In doing so, Mr Maran would also be defending the fundamental national interest of India as the country awaits the promised gains from integration into the world trading system. India’s abundant skilled labour is the source of its riches, a thought which India’s representatives should vigorously reiterate at the upcoming negotiations.

Introducing a social clause in the WTO would open the floodgates for trade measures against developing countries. One only needs to look at the strident demands for the social clause by the US’s textile unions to understand that the real motivations are not humanitarian. They are narrow and selfish.

But the members of the Bush Administration are free traders at heart who find themselves up against these parochial demands of regions and sectors for protectionism. Many Democrats in Congress and a handful of Republicans have taken up the agenda of certain constituencies and have set the labour linkage as the price for trade negotiating authority. But why should broad national interest be held to ransom by lobbies?

Mr Zoellick and his colleagues have some powerful arguments for resisting the labour linkage. One is the prevailing view among the world’s most prominent international trade economists that the linkage is harmful. Well known economists Jagdish Bhagwati and Jeffrey Sachs, among many others, see the linkage as an impediment to the gains that free trade can bring.

Two, developing country academics and civil society are overwhelmingly against it. Evidence of this can be found in the TWIN-SAL statement of 1999. In the run up to the Seattle meeting, 103 people from all over the world signed on to the Third World Intellectuals and NGOs Statement Against Linkage. Two years on, experience has only fortified their arguments. How convincing are the ‘humanitarian’ arguments put forward by northern NGOs for the social clause in the light of this?

Three, is that developing country governments will not accept the linkage at any price. In the tug-of-war of WTO negotiations, there are some issues where developing countries are willing to give ground. Labour linkage is not one of them. If the US wants to restore the confidence of developing countries in the multilateral trading system, it will have to be the one to show flexibility on this issue.
It is in relation to this last point that Mr Maran can help. If he comes out with a clear message that developing countries will not let a WTO Round go ahead if linkage is on the agenda, then Mr Zoellick can take this message home with him to Congress to buttress his case.

This outward opposition should not, at the same time, cloud over many other WTO issues where the US and India have much scope to co-operate. Both have a clear interest in getting the European Union (EU) to open up agricultural and reduce their enormous farming subsidies. Both have an interest in blocking the introduction of the unnecessary and unscientific environmental standards that the EU is pushing for. On reducing industrial tariffs, the core business of the WTO, both countries have much to give and much to gain.

India, then, should focus its resistance. Rather than saying ‘No’ to almost everything, including the new Round itself, it should say ‘No’, pointedly and selectively to linkages. Elsewhere, it can say a judicious ‘Maybe’. After all, at this stage India is only committing to start talking about the issues, certainly not to agreeing to whatever treaty may finally emerge, a process which could take years, even decades. A country with 4,000 years of history can certainly hold its own in drawn-out negotiations.

India could even try saying ‘Yes’ and laying its own proposals on the table. One of these items on India’s proactive agenda could be freeing up workers’ ability to provide services in foreign countries. Movement of “natural persons”, as this is known in the WTO jargon, was one of the methods of trading in services identified in the General Agreement on Trade in Services (GATS), since downplayed and forgotten. India has brought it back into the limelight with a concrete proposal for liberalisation of the temporary movement of labour.

It is not clear at the moment which issues will be on the table for the Doha Ministerial. The last meeting of the General Council before the WTO’s August holiday forced a reality check revealed how wide the gaps between members’ positions still are on agriculture and environment? Where the EU stands exposed? And on implementation and anti-dumping. India’s energies are much better spent shaping this agenda and forging issue-based alliances with its trading partners.

If Mr Maran can strengthen Mr Zoellick for his return to the Capitol, then Mr Zoellick can fortify Mr Maran to be active rather than reactive.

The writer is the secretary-general of the Jaipur-based CUTS Centre for International Trade, Economics & Environment