Engaging in a reality check

Written by Sumanta Chaudhuri | Updated: Aug 27 2009, 04:01am hrs
Kickstarting the jinxed Doha Round will not be an easy task. India has taken the lead in calling a meeting of around 20 leading countries in early September leading up to the WTO Ministerial Meeting in November. This is apparently a tentative feeler about the mood and appetite for real negotiations, after the recent spate of statements of the world leaders in G-8 and G-20 meetings calling for resumption of talks and concluding the round by 2010.

The global economy is on its first signals of a small, albeit, still uncertain recovery. The after effects, both globally and domestically, of the worst recession since the 1930s, are still telling and politically difficult. Hence, the ability to hint, leave alone to negotiate, any real or even apparent sacrifice by any of the major players is still extremely limited. However, in case the global economy can come out of this phase in 2010, it might be a reasonable setting for re-launching the round meaningfully. Consequently, it is crucial not to sound or act over-ambitious in the next few months in Geneva and capitals but to slowly engage in a reality check and preparations for the year ahead.

A look at the major economies, the US in particular, does not provide great hope of early revival probabilities. The US economy is still in a state of nervous tension, the stimulus plans not bearing expected results on the employment front so far. Domestic troubles on health care reforms and external threat perceptions in Afghanistan are restricting parameters for any show of flexibility in the area of trade by the US at this stage. EU too has its own internal paradigmsthe imbalance in the German economy arising from a drastic reduction in exports, the fairly disastrous Spanish deficit and property meltdown effects, the rundown of the British financial system, the collapse of the economies of some of the newly emerging East European nations etc. Consequently, its attention is far more on putting its own house in order and on contentious issues relating to the future of EU rather than a multilateral trade deal. Japans recession is far too deep and prolonged for it to make a difference, and in any case its say in WTO is no longer the same as was in the previous rounds.

Brazil, which till recently has been one of the lead pushers for the Doha Round has less reason to do so now. Commodity prices have hardened significantly since 2006, when the round was practically abandoned, though not as high as the peaks reached in 2007-08. The oil price hike and then the drastic fall have not been matched in food prices, which have remained much higher than the 2006 levels. All estimates suggest very little possibility of declines in the next few years. On domestic agricultural subsides granted by the US and EU, Brazil has partially won its battles through WTO disputes. This is also less threatening due to the resource crunch, which prevents any possibility of steep increases from the current levels in both the US and EU, and hence less pressure or need to cap it at the current applied levels.

China, apparently, is best poised to overcome and eventually benefit from the global setback. However, one does not foresee China leading the pack for an early completion of Doha Round, as it may not have any significant additional gains from completion of the round. True, it may not also come in the way of an eventual successful outcome.

India, on the other hand, is far more confident of emerging out of the global crisis. This is borne out by two recent historical signingsthe CEPA with Korea and the FTA with Aseanboth of which will involve tariff cuts domestically. However, drought like conditions in several parts of the country have led to fears of food security, even though India seems to have adequate buffer stock to cover expected fall in output of food grains. But, surely, to expect any change in Indias position on special safeguard mechanism to protect against surges in agricultural imports is least likely. Similarly, while two of the long pending FTA negotiations are clinched, to expect any softening on our stand on sectoral NAMA negotiations in WTO also seem difficult as they could lead to serious fears of unemployment from destruction of many SMEs in these sectors, given that vulnerability is still prevalent in them.

On the gains side, services have been rightly regarded as the major hope. But given the heat on outsourcing in the US and other developed countries and the reduced potential for freer temporary movement, these two areas of potential gain remain clogged. Similarly, the global trend of greater powers being provided to domestic regulators (though more relevant for all financial ones) is likely to put a thaw on developing specific disciplines on domestic regulations, as this would be projected even more as loss of sovereignty, which the regulatory mechanisms can ill-afford. Disciplines governing qualification and licensing procedures and requirements were again an area of aggressive demand for facilitating movement of professionals from India.

On the other major demand of India for bringing about consistency of Trips agreement with the bio-diversity convention so as to require members to reveal the source of traditional knowledge in relevant patent applications, positions remain as strongly entrenched as ever.

Consequently, too much should not be expected and read into these initiatives. However, this is by no means to discount such initiatives, as this is possibly the best that can be achieved under current circumstances. Faith in multilateralism, paradoxically, has been restored after the financial crises and global slowdown, plus the political changes emerging from a Barrack Obama-led US revival of interest in UN institutions. The same faith, hopefully, will not be missing for the Doha Round trade deal since this is possibly the best option for many countries, particularly developing ones. Lets hope that the Delhi meet reposes this faith and belief in the multilateral trading system.

The writer is secretary, department of public enterprises and industrial reconstruction, government of West Bengal. These are his personal views