Column : A done deal

Written by Bibek Debroy | Updated: Jun 19 2009, 03:20am hrs
What I saw is Ron Kirk and Anand Sharma clearly engaging in a process that should lead to the conclusion of the round sometime next year. This quote has been attributed to Pascal Lamy, after the Cairns group meeting in Bali. Ron Kirk is United States Trade Representative (USTR). Sharma of course is Indias Commerce Minister. China, Japan, US, India and EU arent part of Cairns group, which primarily consists of agro-product exporters. However, these countries were present in Bali. Sharma, visiting the US now, said in a recent interview that the impasse is over. So where do we stand

The Doha impasse has been over agriculture, issues over NAMA (non-agricultural market access) and services are relatively minor. There was a July 2008 package, designed to complete Doha Work Programme (DWP) by end-2008. And in July 2008, Lamy had a to do list of 20 items. This is what we were told then, the he referring to Lamy. He told a press conference afterwards that out of a to-do list of 20 topics, 18 had seen positions converge but the gaps could not narrow on the 19the special safeguard mechanism (SSM) for developing countries, which would allow developing countries to raise tariffs temporarily in order to deal with import surges and price falls.

The difference boiled down to some wanting a high trigger (a large import surge needed to trigger the tariff increase) in order to avoid the safeguard being triggered by normal trade growth, while others wanted a lower trigger so that the safeguard could be easier to use and more useful, he said.

Incidentally, item no. 20 was cotton subsidies. Cairns group and those who want faster agricultural liberalisation may complain about limited liberalisation on domestic support and export subsidies in the July 2008 package (and recent protectionism in US and EU), but ambitions, so to speak, had already been lowered in July 2008. Increases in food prices prior to financial crisis also dampened some enthusiasm for agricultural trade liberalisation, both among agro exporters and importers.

Thus, the July 2008 impasse was between India (supported to some extent by China) and US and it was about SSM. At that time, the then USTR (Susan Schwab) had categorically blamed India for the collapse. This is what Indias then Commerce Minister (Kamal Nath) had said in July 2008. We cannot put at stake the livelihood security of 1 billion people from all countries. And if developing countries want to guard themselves against a surge of subsidised products, of course, they need a special safeguard mechanism. You need a special safeguard mechanism in any event and more so to protect yourself against subsidised products.

The basic principle is simple and logical. Domestic support and export subsidies can make agro products from developed countries artificially competitive, making it difficult for producers in developing countries to compete. Therefore, one cannot liberalise access to markets (tariffs and even quantitative restrictions), without eliminating such subsidy-driven distortions. This is the classic G-33 and developing country position. However, Doha has already agreed to limited liberalisation of domestic support and elimination of export subsidies by 2013, not before that. Consequently, it is necessary to protect producers in countries like India from import surges. Safeguards permit precisely that, temporary deviations from WTO liberalisation disciplines.

The problem was never existence of SSM as a concept, but when it could be triggered. One should also remember any tariff reductions in agriculture India has to implement (the precise figure will only be known after the complete Doha package) will apply to bound rates, not applied ones, and Indias bindings are fairly high. Therefore, SSM impasse is really about negotiating positions, not actual threats, not even for items like dairy and edible oils. Nor should one forget that some such agro exports originate in countries (Australia, New Zealand) that dont have domestic support or export subsidies and also that regional agreements (ASEAN) have already reduced import duties.

Thus, even if India had agreed in July 2008, there would have been no great loss. The point however is a negotiating position is about quid pro quo and reciprocity, in-built into the GATT/WTO framework. Why should one agree without getting something in return Sharma said that the impasse has been broken. There has been no meeting other than Bali. So the impasse could only have been broken because what transpired between India and US, with more to come in the course of the Indian Ministers US visit.

There are OECD, G-8, APEC and G-20 meetings later this year, followed by a WTO Ministerial. Assuming one doesnt stumble over cotton subsidies (unlikely), the WTO Ministerial should therefore announce successful conclusion of DWP. The question that has to be asked is what is India getting in return

The author is a noted economist