Nath had an extra burden at WTO: his constituency

Written by Arun S | Geneva, Jul 30 | Updated: Jul 31 2008, 05:34am hrs
Impending general elections and a possible backlash from farmers back home must have played in the mind of commerce and industry minister Kamal Nath as he refused to give in to pressures from the rich countries, particularly the US, to dilute a measure called the special safeguard mechanism (SSM) meant to protect poor farmers from import surges, according to official sources.

Even a near isolation in the select group of ministers from seven countries and the responsibility of shouldering all the blame for the failure of the talks, did not deter Nath from scaling down his demand that the SSM must be simple and easily made operational.

Though the US tried to persuade Nath with good offers in more marke access for Indias services industry in American markets in return for a weak SSM, he was not keen on any compromise on livelihood issues. Another reason was that since Trade Promotion Authority of the US President had expired, all the US offers would have to be ratified by the US Congress and therefore there was no certainty whether the offers would stand.

The SSM enables developing countries like India to hike agricultural tariffs by imposing additional duties to protect the livelihood of millions of its poor farmers from import surges and price declines of sensitive agricultural products.

Nath represents the Chhindwara constituency in Madhya Pradesh that is a major soyabean producing district. In farm products like soyabean, pepper, cardamom and apple, Indias bound tariffs (tariffs that India committed to in Uruguay Round talks of the WTO) and the applied tariffs (those applied by the finance ministry) are more or less same.

Therefore, in the event of an import surge and price decline in those products, the government would hardly have any room to apply additional duties if Nath had agreed to a weaker tariff. In fact, when Atal Bihari Vajpayee was the Prime Minister, Nath was among those leading the protests against falling soya bean prices.

In the WTO talks, the proposal backed by the US to let developing countries impose additional duties up to 15% only in the event of an import surge of over 40% more than the average of previous three years, would have directly hit soyabean, official sources said.

The WTO proposal on SSM would have affected all Indian farm products with bound tariffs between 40% and 70%, they said.

Noting that the India does not have any comfort level in several farm products, including in soyabean, Nath told the other G-7 countries that since the SSM proposal affects his own district, he would never agree to it, the sources said.

However, Nath had agreed on a new formulation of SSM without import surge limits or triggers as to when the additional duty can be imposed and also no limit on the remedy of safeguard duties that can be imposed on sich imports. But the US rejected that proposal saying it was a protectionist one that would hurt normal trade.

Nath had been pitching for an SSM that developing countries find easy to implement. India had demanded that additional safeguard duties that it was allowed to impose on such imports should be above the Uruguay Round bound levels (tariffs that were committed to at the Uruguay Round) as the present proposal of 15% additional duty would not be enough to curb such import surges and price declines.

Despite many efforts between Monday and Tuesday to resolve the SSM issue using different formulations, including a proposal by WTO director general Pascal Lamy and another one by the European Union, the US rejected all new proposals saying the SSM would disrupt normal trade, rather than protect poor farmers, they said.

Some agricultural exporting countries like Uruguay and Paraguay too said SSM would hurt their interests. Brazil also had broken ranks with other developing country allies in this aspect due to their interests in farm export business.