Montreal, Cancun To Decide Fate Of Indian Exporters

Written by Malcolm Subhan | Brussels, July 29: | Updated: Jul 30 2003, 05:30am hrs
How Indian exporters fare in the coming years is likely to be decided in two distant cities. The first is the Canadian city of Montreal, the second the Mexican resort town of Cancun. Trade ministers from some 25 countries, including India, started an informal meeting in Montreal from Monday to prepare for the September meeting in Cancun of the trade ministers from 146 countries that belong to the Geneva-based World Trade Organisation (WTO).

Both meetings have but a single aim: To see how to give a much-needed political impetus to the multilateral trade negotiations launched in Doha by the WTO in November, 2001. The Doha Development round is scheduled to end just 17 months from now; but progress to date has been very slow, and the negotiators have already missed some key deadlines.

Cancun is not a make or break meeting, but a number of important decisions need to be taken, the European Unions chief trade negotiator Pascal Lamy told a meeting of Asian and European trade and economic ministers in Dalian, China, on July 24. Chinas foreign trade minister, Lu Fuyuan, put forward his solution to the assembled ministers.

At a time when the world economy is facing a slowdown, it is more important than ever before that the countries of the world do more to pool their resources and bring their economies closer together, he declared. But this is easier said than done, as was made clear at the Dalian meeting, which brought together ministers from the 15 European Union (EU) countries, China, Japan, South Korea and seven Asean nations.

The fact that it was the host country did not spare China from being attacked by its neighbours for its refusal to revalue its currency, the renminbi, which has been pegged to the US dollar at an exchange rate fixed in 1994. They pointed out that Chinese exporters enjoyed a 20 per cent advantage over their competitors as a result. China was also criticised as the industrial centre for counterfeit goods.

The Chinese commerce minister is unlikely to face similar charges at the informal meeting in Montreal, which will be dominated by the need to give a strong push to the WTO negotiations on trade in agricultural products. Alth-ough these negotiations are of crucial importance to developing countries, the main protagonists are the EU and the United States. The EU maintains that it has opened the way to rapid progress in the agricultural negotiations with the recent reform of its common agricultural policy, which should result in a fall in the quantities available for export at subsidised rates.

The ball is now in the American court, is how an EU spokesman put it on Friday. Indeed, on the key issue of agricultural tariffs, the EU feels itself vindicated by a recent study which it commissioned from a French think tank, the National Institute for Agricultural Research. The study shows that the average tariff actually applied by the EU to its imports of agricultural products is 10.5 per cent, and not the frequently cited figure of 30 per cent.

Those who cite the 30 per cent figure, the study points out, fail to take into account the fact that many of the EUs imports of agricultural products enter duty-free or at preferential rates under, for example, its generalised system of preferences (GSP). Not surprisingly, therefore, the EU is not only the worlds number one importer of agricultural products, but also the leading importer of farm products from developing countries.

Thus 60 per cent of the EUs agricultural imports originate in developing countries, as against 40 per cent in the case of the United States, the study points out. It notes that the amount of customs duties collected by the US on its imports from Bangladesh alone is higher than the duty collected by France on all its agricultural imports!

But this rosy picture takes on a much darker hue when it comes to three commodities of particular interest to developing countries - rice, bananas and sugar. In the case of these three items, duty-free entry will become a reality only from 2009. This has led Australia, Thailand and Brazil to challenge the legality of EU sugar production and export subsidies in the WTO. The EU has so far succeeded in blocking the creation of a panel of independent experts by the Dispute Settlement Body in Geneva.

A successful outcome to the agricultural negotiations will clearly be welcomed by developing countries. The Montreal meeting of the core group of 25 or so trade ministers will indicate just how much progress can be expected at the Cancun meeting of trade ministers from all 146 WTO countries.

The problem is that even developing countries view success very differently. All of them will welcome the elimination of export subsidies and export credits by the EU and the US. But they are sharply divided over the issue of market access. Some are ready to open their markets to agricultural products; others are unwilling to do so. This is the case as regards Indonesia and the Philippines, who fear that by opening their markets to agricultural imports they will destroy the livelihood of many of their own small farmers.