FICCI-CII perspective on WTO strategy

Rahul Bajaj & N Srinivasan

“Aside from war and preparations for war, ...... Trade is what most international relations are about. For that reason trade policy is national security policy.”—T C Schelling

India is committed to multilateral trade policy negotiations within the framework of the World Trade Organisation because this is in our national interest. We are committed to a liberal, market-friendly environment for trade and investment. However, we must at all times remain alert in defending our national interest in trade negotiations.

We must be pro-active, not reactive, have an agenda of our own and canvas support for it among all WTO member countries. On every issue where our interests are hurt, we must have a negotiating brief with a hard line and a fall back option. On issues where we can go along with the developed countries we need not make unilateral declarations of support but must exchange such support against concessions elsewhere. We must approach these negotiations in a spirit of “give and take”. On our part, we must strengthen the governmental machinery for dealing with WTO and for sector-specific trade negotiations and vigorously pursue internal policy reform to enhance the competitiveness of Indian industry.

We should express our legitimate concern over the imbalance in implementation of the Uruguay Round Agreements. A systematic review of the implementation of the Uruguay Round Agreements is imperative. We must seek a re-evaluation of the MFA phase-out schedule and of the TRIPs agreement within this perspective.
India must re-assert the relevance of ‘special and differential’ treatment for developing countries and seek commitment to increased liberalisation of mode 4 service exports, i.e. in the movement of natural persons (MNP). The principles governing the movement of capital and commodities should also begin to govern the movement of natural persons. The idea of a GATS visa has been mooted for service providers temporarily working overseas. This idea should be canvassed by India.

In the case of industrial tariffs, we must demand a substantial reduction of tariffs by industrialised countries on labour intensive and low technology manufacturers where we have a comparative advantage. This should include the reduction or elimination of tariff peaks, conversion of all specific duty rates into ad-valorem rates and removing tariff escalation. If there is no agreement on conversion of specific duties into ad-valorem rates, we should seek the option to levy specific rates of duty for industries where production is highly cyclical and subject to sharp fluctuations.

Even while ensuring food security and protecting the interests of our farmers, we should seek greater market access for our exportable agricultural products and negotiations should be conducted on a product basis, e.g. for rice, wheat, sugar, etc. and not for all agricultural products.

We must seek a substantial and credible liberalisation of the agriculture sector by those countries whose current AMS (aggregate measurement of support) levels are far above the de minimis levels prescribed under the existing Agreement on Agriculture. India should seek significant reduction in tariffs prevalent in developed countries, in case of agriculture, along each tariff line and not on average tariff levels for product groups.

While we should ask ultimately for the abolition of tariff rate quotas, in the interim, we should seek the setting up of a separate agency for ensuring fair and transparent administration of tariff rate quotas in agricultural products. All trade-distorting domestic subsidies must be eliminated and only non-trade distorting forms of domestic support for the farm economy must be permitted.

We must ensure that the sanitary and phyto-sanitary (SPS) measures do not hurt our agricultural exports and must ensure an effective, credible and unified domestic mechanism for SPS certification. It is essential to have a thorough review of the “Due Restraint Clause” (Article 13 in the Agreement on Agriculture). Since most developing countries do not have access to special safeguards (SSG), the issue of its universal application will have to be considered. Special and differential treatment (S&D) provisions are required to be operationalised and made an integral part of the rules and disciplines governing the multilateral trading system.

We should demand changes in the Anti-Dumping Agreement to effect the following changes: raising the existing de minimis dumping margin of 2 per cent to 5 per cent for developing nations; increase the threshold volume of dumped imports from 3 per cent to 7 per cent for developing countries; abolish the cumulative clause of 7 per cent, seek a time gap of a minimum of one year before initiation of repeat investigation for the same product.

The S&D provision for developing countries in the Anti-dumping Agreement must be implemented and ‘constructive remedies’ sought before the application of anti-dumping measures with respect to developing countries. The Directorate of Anti-dumping in the Ministry of Commerce should process cases faster so that provisional duties can be levied quicker, wherever warranted.

We must launch a global intellectual campaign against TRIPs and seek support for the idea that IPRs should only be the purview of the World Intellectual Property Organisation (WIPO). India should seek an extension of the transition period for implementation of the provisions of TRIPs for developing countries beyond January 1,2000. We should also seek better consideration for S&D treatment for developing countries under TRIPs.

In the review of TRIPs, it can be suggested that IPR claims based on the biological or genetic resources and traditional knowledge of developing countries can be granted only after ensuring that the prior informed consent and the views of the source country or countries of those resources and knowledge have been obtained and taken into consideration. A mechanism should be put in place for the recognition and remuneration of the contribution made by rural and indigenous communities of the source countries through their conservation of bio-diversity and traditional knowledge. The scope of ‘geographical indicators’ should be widened to include items of concern to us like Basmati rice, Darjeeling tea, etc.

While there has been a Committee on Trade and Environment in the GATT/WTO for some time, it should be ensured that “eco-dumping” duties are not levied by developed countries to set off their higher environmental standards. We feel that the need for a global multilateral agreement on investment has not been established and strongly oppose its inclusion in the future work programme of the WTO. A multilateral agreement on investment should not go beyond the framework of existing bilateral investment protection treaties.

Regional trading agreements (RTA) have spurred protectionism. RTAs should be made WTO-incompatible. Till that happens, and since India has not gained much through SAARC and the SAPTA process, we must seriously explore other RTA options for ourselves.

Demand for including all consumer electronics products under ITA-II is not legitimate. As a policy-option, only capital goods, machinery and critical raw materials/inputs having no indigenous manufacturing base, could be selectively considered to be included in the ITA-II.
We can be pro-active and propose an ITA-III which covers movement of natural persons in IT-related exports, and includes a competition policy for IT sector.

While India’s strategic bottomline in the WTO will have to be a resolute opposition to any link being established between trade policy and non-trade issues, we must pay greater attention to internal policy reform, particularly internal liberalisation and privatisation to enable Indian industry to compete more effectively at the global level. Unless the cost of doing business in India is reduced, domestic industry will not be able to fully meet the challenge of globalisation and external competition. Internal economic reform is a pre-condition for the success of external liberalisation.