Friction between India and Brazil, following disagreement at WTO

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Published: July 30, 2019 7:05:04 PM

The current rift between the two major emerging countries is based on Brazil's decision to give up developing country special and differential treatment (S&DT) at the WTO.

india, brazilThe change of Brazilian position means a break in relation in its diplomatic tradition, and may affect its ability to coordinate positions among developing countries in the WTO, a role traditionally shared with India, Rojas observes.

With India’s stand against Brazil’s stand on the fisheries subsidies at the World Trade Organization (WTO) at the ongoing negotiations, the two are heading towards diplomatic friction. This is expected to hit the India-MERCOSUR talks as well as BRICS grouping.

The current rift between the two major emerging countries is based on Brazil’s decision to give up developing country special and differential treatment (S&DT) at the WTO. This is something that the Trump administration had again demanded of emerging nations last Friday.

Sharing his views with Financial Express Online, Gustavo Rojas, Researcher of the Center of Analysis and Dissemination of the Paraguayan Economy (CADEP) said “India’s recent veto against Brazil over the ongoing negotiation in the WTO on subsidies in the fisheries sector is a first sign of the discomfort growing among emerging countries. Particularly among BRICS member nations, after Brazil officially expressing its intention to open up special and differential treatment in future negotiations in the WTO.”

The change of Brazilian position means a break in relation in its diplomatic tradition, and may affect its ability to coordinate positions among developing countries in the WTO, a role traditionally shared with India, Rojas observes.

In his view, Brazil’s new position would be a condition set by the US to support its entry into the OECD. Previously too Brazil had protested against the subsidies offered by India for sugar production.

“The accentuation of the divergences between the two countries can promote internal divisions within the BRICS, given greater political weight and frequency of meetings among China, Russia, and India,” he opined.

According to Rojas, it reduces expectations of progress in the ongoing negotiations for the extension of the bilateral tariff preference agreement between MERCOSUR and India, registered in the WTO just under the enabling clause, which supports the special and differential treatment for developing countries.

During his visit to Washington DC in March this year, the Brazilian President Jair Bolsonaro had approached the Trump administration with a bargain that included Brazil giving up special WTO treatment in exchange for US support to join the Organization for Economic Cooperation and Development (OECD).

What does S&DT mean?

S&DT means more time for a country to implement trade commitments, lower import tariff cuts, and more subsidies for its producers.

According to experts, for the Bolsonaro government, none of this has helped the country to increase trade with the rest of the world and that there will be no losses without the mechanism.

However, at the WTO there is still a “super polarization” on the subject.

India, China, and South Africa, in particular, insist that S&DT is an inalienable right of developing countries, without differentiating between them. And Brazil maintains that the mechanism is dynamic and has abdicated it for future trade agreements.

At the WTO General Council meeting last week, the US praised Brazil’s stance, signaling that the country was taking an advanced position in WTO reform. And in line with the organization, last Thursday’s Indian veto against Brazil for the negotiating presidency aimed at banning certain subsidies to the fishing industry, which according to experienced negotiators is linked to Brazil’s position on S&DT.

In the WTO, decisions must be by consensus. In May, New Delhi had arranged a meeting with ministers from around 20 countries in an effort to forge a front against various aspects of a WTO reform and keep the S&DT unchanged for developing nations in general.

Top officials confirmed that Brazil at the time did not sign the final statement from the Indian side, which illustrated the opposite views of the two emerging nations.

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