Two WTO Deadlines Hold Key To Doubling India-EU Trade

Written by Malcolm Subhan | Brussels, December 2: | Updated: Dec 3 2002, 05:30am hrs
The successful implementation of plans by CII and FICCI to double the trade between India and the European Union (EU) by 2008 will depend on whether two key deadlines are met on time. The first of them provides for the complete liberalisation of world trade in textiles and clothing after 1 January 2005, the second for the completion, by 1 January 2005, of the WTO trade negotiations launched in Doha last year.

The 1994 Agreement on Textiles and Clothing (ATC) will automatically expire at the end of 2004. Whether tariffs on these products are also reduced will depend on the successful outcome of the WTO negotiations on industrial tariffs in the framework of the Doha Development Agenda (DDA), the official name of the current round of multilateral trade negotiations.

But will the 140 WTO member-countries bring the Doha Round to a successful conclusion by 1 January 2005 In other words, do the leading trading nations, and more particularly the EU and the United States, have the political will to meet the deadline they set themselves a year ago

The fact that for the first time, development issues lie at the heart of the Round, in the words of the WTO director-general, does not make it any easier for them to bring the Round to a successful conclusion. The developed countries agreed to the DDA in Doha, he noted. But it can be difficult for them to get their political act together back home, once words must be translated into action.

The director-general, Dr Supachai Panitchpakdi, was delivering the keynote address at the fourth EU-Asean Think Tank Dialogue, organised here this week by the European Institute for Asian Studies. As a former prime minister of Thailand, and therefore a seasoned politician, he had no hesitation in openly putting to one side the speech prepared by his staff, and taking the capacity audience into his confidence by speaking extempore.

Dr Panitchpakdi pointed to some of the problems facing the WTO as it tackled the issues arising from the DDA. Thus a good part of the first year of the three-year Round had been spent on procedural issues - which groups to set up, who would chair them, their modalities, etc. However, work on substantive issues had now begun, and requests and offers were being tabled.

This was particularly true of the services sector, which was making the strongest headway in the negotiations.

Even so, the negotiators faced a March, 2003, deadline as regards negotiations on services, agriculture, and market access for industrial products and services. The director-general described agriculture as one of the biggest challenges in the negotiations. He saw it as a core issue, on which the Round can stand or fall. There were worrying signs, however, as regards the negotiations over the modalities for agriculture, despite the fact that some 50 developing countries depend on agriculture for half their export earnings. Meanwhile, the OECD countries were spending roughly one billion dollars a day on farm support, as a result of which EU sugar prices, for example, were some two to three times higher than elsewhere.

Another intermediate deadline was this December, when agreement must be reached on three important areas: the question of special and differential (S&D) treatment for developing countries, the difficulties faced by them in implementing WTO agreements and, vitally, on how to address the issue of providing life-saving drugs in developing countries which lack the capacity to produce them domestically. Dr Panitchpakdi felt that chances for reaching agreement by December deadline are good, especially since the recent Australian-sponsored 25-nation mini-ministerial in Sydney.

In his extempore remarks, however, he drew attention to the difficulties facing the negotiators. The S&D treatment principle allows developing countries more time to adjust to their WTO commitments, for example. They had tabled some 85 proposals, so that it was a major challenge for even some of them to be taken up seriously by the end of the month. I dont foresee complete agreed on the S&D principle, the director-general noted, given that what was being treated earlier on a voluntary basis, had been made mandatory under the DDA.

He was more hopeful as regards access to life-saving drugs on a concessional basis, under the Doha declaration on the TRIPS agreement and public health, a declaration which put a humanitarian face on the WTO. While there was a need to ensure that the intellectual property rights of companies that spend money on R&D were safeguarded, there had been a great effort to reach a political consensus at the Sydney meeting. Even so, technicalities, such as an agreement between importing and supplying countries on how to prevent drugs supplied to Senegal, for example, being re-exported to an industrialised country, could hold up implementation.

But one of the major reasons for concern as to the outcome of the Doha Round was what the WTO director-general described as one of the big systemic issues in the world of trade today - the relationship between the multilateral trading system and regional integration.

He thought that the traditional controversy of whether the conclusion of regional trading agreements (RTAs) complements or undermines the objectives of the multilateral trading system had been overtaken by recent developments. Today, virtually every WTO member is also a member of one or more RTAs, Dr Panitchpakdi pointed out.

Not that he was personally opposed to RTAs and free trade agreements (FTAs), having negotiated some of Thailands earliest bilateral agreements myself. Even so, some countries had concluded as many as 30 bilateral agreements. As a result, the most favoured nation (MFN) tariffs were being pushed into a corner, and agriculture was being put on the back burner. The non-discriminatory open regionalism typically associated with the Asia-Pacific Economic Cooperation (APEC) forum appears to be waning, and there was now an emerging pattern of discriminatory bilateral and plurilateral trading arrangements.

The WTO director-general noted that all Asian WTO members are now engaged in, or actively negotiating RTAs with other countries in the region and further afield. Although he did not mention India, New Delhi in fact has offered to conclude a free trade area with ASEAN within 10 years, even while the latter has undertaken to form an economic union with China by the end of the decade.

The director-general did refer to the FTA deal between the US and Singapore, and the ambitious trade accord between the EU and Chile. These agreements are barely regional in nature, he noted.

We are beginning to see some negative effects of bilateral negotiations, Dr Panitchpakdi declared, with some smaller countries being dragged into them. As some countries were involved in as many as 15 bilateral negotiations, they could not spare staff for the Doha Round, with the result that the multilateral negotiations were being hampered in Geneva.

The director-general stressed why a successful conclusion to the Doha Round by 1 January 2005 was essential. The nascent recovery in Asia was fragile, and, therefore, depended on it, as did the crisis in Latin America. The expansion of world trade, which in fact contracted last year, also required a successful end to the Doha Round. Meanwhile, the negotiations had to progress rapidly, given that the political landscape might have changed by 2005 in many countries. The US presidential elections, for example, could witness such a change.

In a world composed of countries with a large diversity as regards population size, political clout, income levels and cultural traditions, the stability in international economic relations fostered by multilaterally agreed rules and disciplines is beneficial for all, the WTO director-general concluded.