Nothing ‘historic’ about Nairobi Ministerial

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Updated: December 23, 2015 12:16:59 AM

The outcome of the Tenth WTO Ministerial Conference clearly tilts in favour of developed countries

The Tenth WTO Ministerial Conference (MC10) held during December 15-18 ended in a setback for developing countries. It was a setback because the developmental issue—which was central to developing countries’ participation in Nairobi—didn’t witness any forward movement or sought any serious attention, rather it experienced an overwhelming emphasis on export competition.

It’s true that export competition is an important part of the agricultural issue, which remains unsettled even after realising the distortions agricultural trade creates in world economy after WTO’s two decades of existence since 1995. Export competition, in fact, raised hue and cry in the earlier ministerial conferences in Hong Kong and Geneva in 2005 and 2009, respectively, too.

One may recall that the pledge made by the EU and the US to phase out the total export subsidy on farm products by 2013 is still in practice and was hardly reiterated at the meet. What is sensible from developing countries’ point of view to argue is that agricultural trade is highly discriminatory in nature essentially because of three primary issues that distort the trade even now. Domestic subsidy, market access and export competition are like a tripod that support this imbalance in agricultural trade. Export competition has the least intensity among the three and distortion taking place due to export competition would be minimal compared to the other two bigger culprits—domestic subsidy and market access.

Developing and least developed countries (LDCs), which constitute three-fourth of current WTO members, understand that export subsidy doesn’t play that big a role in agricultural distortions as is played by domestic support. The entire export subsidy given to the magnitude of $5 billion on farm products is minuscule compared to domestic support that is given to the tune of $1 billion per day. Though export subsidy remains a major irritant to free trade, according to the World Bank its abolition will only yield 2% of theoretical gains to world agriculture. In this heat of the moment, it looks the promise of a total phase out of export subsidy is only a small gesture towards pacifying the discontentment of a large number of WTO members. Instead, what would have been noteworthy is getting the commitment of phasing out of domestic support—the real dampener in agricultural distortions—from the US and EU by a realistic deadline.

India, in its negotiations, must emphasise future issues of agriculture through the earlier proposal of developing Special Safeguard Mechanisms (SSM) and identification of ‘Special Products’ (SPs). SSM would help developing countries defend their triple concerns of food security, farmers’ livelihoods and rural development in the event of agricultural trade liberalisation. It would enable them to raise their tariffs above the bound rates in the event of a fall in price of the imported product or an increase in volume of the imported product beyond certain levels. SSM would be an effective instrument to provide contingent protection to poor farmers in developing countries from negative shocks to import prices or from surges in imports. The other measure initiated by developing countries to prohibit agricultural import surge is the concept of SPs, which are a set of products that directly concern their food security and livelihoods, and therefore should be subject to no or low tariff reductions in the Doha programme.

Inclusion of such provisions, developing countries feel, will allow them to address the concerns of food security, livelihood and rural development as most of their agricultural products will be outside the ambit of trade liberalisation. It will also help them increase food production. It will be relevant with the crisis in food prices as subsistence in food production will provide food security and they won’t rely on imports when there is a global shortage or increase in prices.

The Nairobi Ministerial could break new grounds in the context of trade facilitation. Additional six countries—Myanmar, Norway, Vietnam, Brunei, Zambia and Ukraine—supported ratifications for the Trade Facilitation Agreement (TFA), bringing the number to 63 members that have formally accepted TFA, which will enter into force once two-thirds of the WTO membership has formally accepted it. For the first time in WTO history, the requirement to implement TFA was directly linked to the capacity of the country to do so. In addition, TFA states that assistance and support should be provided to help them achieve that capacity. The implementation of TFA has the potential to increase global merchandise exports by up to $1 trillion per annum, according to the WTO’s flagship World Trade Report released on October 26, 2015. It is argued that developing countries will benefit significantly from TFA, capturing more than half of the available gains.

And for the first time in a real manner it was noticed that Roberto Azevedo, the current WTO chief, is tilting in favour of developed countries’ pressure of ignoring Doha agenda, which is the real concern of developing countries in multilateral negotiations. The Nairobi Ministerial being conducted for the first time in Africa—which is also the birth place of WTO (Marrakesh, Morocco)—failed to consolidate the real aspirations of developing countries and LDCs.

The author is professor, Lal Bahadur Shastri Institute of Management, Delhi, and former senior faculty, IIFT, Delhi

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