The situation is grim on the eve of the World Trade Organisation (WTO) conference in Nairobi. Wide disagreement on most issues has marred the preparations, and neither side is prepared to yield ground at all. The climate conference succeeded in Paris because the participating countries were willing to make compromises. With the spirit of compromise absent, the WTO conference would be doomed to failure. Such an outcome will constitute a decisive defeat for multilateralism.
Agriculture is a core concern, and representatives of WTO member countries have been grappling with several proposals. A draft proposal on export competition envisages parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect.
From India’s perspective, two other proposals also have importance. The first is on public stockholding for food security purposes, which is related to the requirement in the WTO agreement to calculate subsidies based on reference prices that are nearly three decades old. The second is a G33 proposal on special safeguards mechanism for developing countries to protect agriculture against surges in import during times when low prices prevail in international markets.
A proposal for reduction of domestic support on cotton by developed countries and enhancement of market access for cotton and cotton products for least developed countries (LDCs) is of vital concern to LDC cotton producers in Africa. All the drafts under circulation bristle with square brackets, which denote lack of agreement. The benefits package for LDCs is doing better and an agreement on preferential rules of origin appears to be within reach.
Unfortunately, here too divergences have developed on the extension of duty-free-quota-free treatment to all LDCs as African LDCs fear that their benefits under the US African Growth Opportunity Act would be diluted.
The fundamental question before the conference is whether the Doha Round should be continued to a conclusion in terms of its mandate, or closed without further ado. While developing countries are almost unanimous that the Doha Round must continue, the three big players—the US, EU and Japan—are advocating its unconditional closure.
Another big issue dividing the membership is on the expansion of the WTO agenda to cover new trade-related issues such as investment and competition policy.
The comparative ease with which mega-regional trade agreements have made progress is reinforcing public sentiment in these countries in favour of such agreements. They seem to be rejoicing at the enhanced access to both goods and services that mega-regional agreements such as the Trans-Pacific Partnership (TPP) seem to have delivered, and there is great hope that the Transatlantic Trade and Investment Partnership (TTIP) would soon be a reality. Although such access is nowhere near the original expectation and concessions to domestic producer interests have spoilt the party for exporters of rice, dairy and sugar, the drum beating by leaders has led to undiminished exultation. There is satisfaction in the corporate circles too, because intellectual property rights have been strengthened and a foothold created for raising issues related to labour and environmental standards in developing countries.
It would be a grave mistake for the major developed countries to bring about a peremptory closure of the Doha Round. Once the Round has been closed, it would be well nigh impossible to commence multilateral negotiations again any time soon. The most favoured nation (MFN) tariffs and other barriers will remain in position at the post-Uruguay Round level for a long time. The average MFN tariffs were no doubt brought down to very low levels on industrial products in those negotiations, but tariff peaks are still in position for many products. Multilateral liberalisation ensures that citizens are able to buy from the cheapest market and sell to the dearest. Discriminatory liberalisation cannot guarantee such benefit.
During the past few decades, the proliferation of regional trade agreements has been a major worry.
Non-participants in such agreements have taken comfort from the fact that multilateral liberalisation would progressively reduce and ultimately eliminate the preferential advantage of regional trade agreements. If the current negotiations are abruptly closed and future negotiations are not commenced, such a process will not be initiated.
What’s more, in agriculture there is no guarantee that the largely voluntary reforms and the move towards decoupled income support brought about in the US and EU will remain in position. It is crucial for all countries—and particularly for those which are not parties to existing mega-regional agreements—that a political mandate is given for making fresh efforts to conclude the negotiations in the Doha Round. Securing this must be the main objective of India and other developing countries during the Nairobi conference.
Although the concerns regarding public stockholding for food security and special safeguards mechanism are important, there is no urgency for clinching solutions on these matters. Developing countries have been given open-ended immunity against disputes being raised against them on this matter. For India, special safeguards would be needed only after the bound tariffs have been reduced in future negotiations. At present, the general level of bound agricultural tariffs committed by India in the WTO are 100% for primary products, 150% for processed products and 300% for oils. These levels are far in excess of the applied levels, leaving considerable room to manoeuvre for protecting farmers again volatility in international prices, without recourse to safeguards. All these proposals will need to be carried forward to the future negotiations in the Doha Round.
India and other developing countries must concentrate on obtaining a commitment on multilateral liberalisation in the future by continuing the Doha Round. To achieve this end, they should be willing to make a compromise on the other big issue and be ready to discuss expanding the remit of the WTO. This has been a sensitive matter in the past, but the march of globalisation has increased the relevance of topics such as investment and competition policy for a multilateral forum like the WTO. One of the factors driving the major economies towards regional trade agreements has been that in regional forums it is possible to agree on disciplines in these areas. The language reflected in the December 9, 2015, version of the draft text of the Ministerial Declaration, which calls for exploratory discussions on new subjects, appears to be a good basis for agreement.
The author is professor, Indian Council for Research in International Economic Relations (ICRIER)