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High Stakes in the WTO's Mini-ministerial

High Stakes in the WTO's Mini-ministerial

The World Trade Organisation will meet next week to hammer out an agreement on the modalities in agricultural and industrial goods issues of the Doha round. Strangely, in what was supposed to be a balanced development round, the focus will be solely on these two areas even as the rest of the agenda has been kept out. The draft agreements are also skewed (once more) in favour of the advanced economies. India, in particular, will gain very little and lose considerably if it agrees to the proposals on the table. Why then has India gone along so far with the US and WTO demands? Is this too a result of Manmohan Singh's government wanting to accommodate the interests of the country's new "good friend", George Bush?

COMMENTARYjuly 19, 2008 EPW Economic & Political Weekly14High Stakes in the WTO’s Mini-ministerialA CorrespondentSo this is what it has come to. A meet-ing of select – not all – trade minis-ters will decide next week at the World Trade Organsation (WTO) the fate of the Doha round modalities in agriculture and market access for industrial goods. (The modalities refer to the formulae and numbers by which countries reduce their tariffs and seek exemptions.) The mara-thon race towards reaching an agreement on the modalities will begin on July 21, and is expected to last for five days. Itisbeing described as the last ditch effort toensure that the so-called Doha Development Agenda orDDA (the pretentious title con-ferred in 2001 on the WTO’s trade liberali-sation agenda in order to give it legitimacy in the eyes of the developing countries) is not dead or frozen for another two years. If all goes well, the successful conclu-sion of an agreement on modalities would have accomplished 80 per cent of the DDA goals, says Pascal Lamy, the venerable head of the WTO. Foes Turn into FriendsSurely, credit goes to Lamy for building a powerful alliance with some of his former friends and foes in pushing the modalities agenda divorced from all the other issues of the DDA. For example, Lamy has managed to exert pressure on recalcitrant members like Malaysia through the European Union’s commissioner for trade, Peter Mandelson, on the issue of “anti-concentration” in the negotiations on non-agricultural market access (NAMA). This is the same Mandelson who exploded during the green room meeting at the 2005 Hong Kong ministerial conference against Lamy when the latter sought clarity on the European Union’s road map to eliminate farm export subsi-dies. Similarly, the director general found a friend (and perhaps a successor) in the Brazilian foreign minister Celso Amorim to convince Argentina, which remains fiercely opposed to the modalities agreement on NAMA. And then he has friends like the World Bank president Robert B Zoellick, theUS treasury secretary H Paulson, and the lame duck president George W Bush to prevail on the likes of Manmohan Singh. Therefore, it is not a small achievement that Lamy managed to postpone a decision on a number of other items on the DDA such as services, rules to improve anti-dumping provisions, rules to devise new thresholds for fisheries subsidies, the special and differential treatment concerns as well as the implementation issues including intellectual property, the Con-vention on Bio-Diversity and Geographical Indication protection for items other than wines and spirits. Despite concerted opposition from some members like India to the WTO dealing only with the modalities issues of agricul-ture andNAMA in a series of green room meetings which are attended by about 30 select trade envoys, the WTO head saw to it that none of the issues that would re-motely raise the hackles of the US Congress are included for any in-depth negotiations next week. Ignoring Single UndertakingBut the DDA is a single undertaking, which underlines that nothing is decided until everything is agreed to in the negotiating mandate. However, the member-countries are being told by the WTO not to worry at this juncture about the issues other than agriculture andNAMA. Since the modali-ties agreement is not worth the paper on which it is written unless the entireDDA package is approved, a common refrain is that there is no harm paying a price upfront on agriculture andNAMA as it would not amount to accepting any commitments until all other issues are resolved.This is the atmosphere under which the modalities agreement is now being negotiated. All other political and economic concerns with wide-ranging ramifications are being set aside for the time being either on the plea that it is not appropriate to raise those issues or everything would fall into place once the modalities are agreed upon. Though it is common knowledge that formulating the trade policy and pro-viding the authority to the administration to negotiate international trade agree-ments is a prerogative of the US Congress, WTO members are being asked not to make The World Trade Organisation will meet next week to hammer out an agreement on the modalities in agricultural and industrial goods issues of the Doha round. Strangely, in what was supposed to be a balanced development round, the focus will be solely on these two areas even as the rest of the agenda has been kept out. The draft agreements are also skewed (once more) in favour of the advanced economies. India, in particular, will gain very little and lose considerably if it agrees to the proposals on the table. Why then has India gone along so far with theUS andWTO demands? Is this too a result of Manmohan Singh’s government wanting to accommodate the interests of the country’s new “good friend”, George Bush?
COMMENTARYEconomic & Political Weekly EPW july 19, 200815a hue and cry about the expiry of the Bush administration’s trade promotion authority. For more than a year, the US administra-tion has had no trade promotion authority with which it can negotiate global or bilateral trade agreements. Besides, the US Congress – which is dominated by Democrats – chose to turn its back when the Bush administration pressed it for approval of some of its recent bilateral trade initiatives. Worse still, the Congress defied veto warnings from Bush by approv-ing a farm bill worth over $ 300 billion that is replete with grandiose trade- distorting farm subsidy payments. Even as some members like Argentina and India raised the issue of the absence of trade promotion authority with Bush orthe size of the recent farm bill, theUS negotiators had the gumption to say that they can convince the Congress to amend the farm bill if there is at the same time an ambitious Doha package on the table. Messrs Lamy, Mandelson, and Amorim also chanted the same mantra time and again when faced with any uncomfortable questions on the unfolding political reali-ties in theUS. The Brazilian foreign minister once said if the modalities are not agreed to now, then the future administ-rations will further complicate issues in the Doha mandate, implying that the Democrats would bring in issuessuchas labour and environment. Clearly, it is absurd to argue that a modalities agreement concluded at the WTO now will be respected by the US Congress, especially by a new administra-tion. Only the future will vindicate whether the modalities agreement or a final Doha deal will stand the test of time or it will be dumped like what the Bush administra-tion did with the Kyoto Protocol. US Interests SupremeMeanwhile, all efforts are being geared to satisfy what the US wants in the modalities agreement in both agriculture and NAMA. This can be clearly seen in the manner inwhich the underlying developmental dynamic of the Doha round has been turned and twisted in such a way that the US will end up paying virtually nothing. How did all this come about? Is it an acci-dent or a deliberate design to ensure that a large majority of developing countries aremadeto pay in both agriculture and NAMA? And, more importantly, does this have credibility when judged against the Doha mandate that was agreed in 2001 and further fine-tuned in 2004 and at the Hong Kong ministerial meeting?To start with, the DDA was launched in 2001 after the 1999 Seattle fiasco on the promise that developing country concerns will be comprehensively addressed not just in the market access areas of agricul-ture,NAMA and services but also in impor-tant rules and implementation-related areas of the existing WTO agreements. Tectonic ChangesDuring this period between July 10, 2003 when the EU and the US tabled the most obnoxious side agreement on agriculture to cover their mutual areas of concern in agriculture and July 2004, there were some tectonic changes in the alignment of forces among developing countries. For example, Brazil which all along sided withthe farm exporting countries of the Cairns Group headed by Australia became a leader for the developing country coali-tion G-20 in August 2003 in what was seen as a chain reaction to the EU-US deal onagriculture. Since then, it has managed to occupy the high moral ground as the champion of global farm trade reform while simultaneously pursuing its own trade agenda. Without the G-20, Brazil would have been an inconsequential player in global trade negotiations but withthe leadership role in the coalition it became an interlocutor for developing country concerns. TheEU and later the US saw immense gain in dealing with Brazil directly as if it represented all the developing country concerns. Along with Brazil, the two Atlantic-trade partners managed to rope in India into the so-called Group of Four (G-4) club that dramatically changed the negotiating contours. While India was fighting hard for its defensive concerns in agriculture and minimising the damage inNAMA, Brazil attempted to enhance its gains in agriculture in which it has already emerged as a leading exporter. Finally, the G-4 collapsed like a pack of cards at Potsdam last year when Brazil realised that it was impossible to deliver the developing countries on the kind of extreme demands made by theEU and the US in theNAMA.Subsequently, Brazil tried hard to keep the G-20 coalition together but started showing its real intentions by moving away from another developing country coalition – the NAMA-11 headed by South Africa – by seeking special flexibilities in NAMA. Many countries were puzzled as to why Brazil, which is determined to keep theG-20 intact, was not prepared to do the same in the arena of NAMA. By then it had become public knowledge that Brazil was prepared to accept the new dynamic in the Doha negotiations. That dynamic attempted to preserve the subsidy programmes of the US and the EU almost intact or rather within manage-able limits that are acceptable to the two big players. In return, there will be modest gains in the market access for agricultural products that was more or less acceptable to Brazil. As regards market access for in-dustrial goods, Brazil was ready to accept the “Swiss formula” and the accompany-ing coefficients, if it was provided with some additional flexibilities over and abovewhat are accorded to developing countries. In a nutshell, this dynamic pro-pelled the negotiating texts both in agri-culture andNAMA, with industrialised countriesmanaging to secure a bigger pay-ment inmarket access for industrial goods while conceding relatively modest changes in the arena of agriculture. The chair for the Doha agriculture negotiations moved somewhat cautiously in capturing this dynamic in which the big subsidisers – the US, the EU and other industrialised countries – managed to preserve their overall subsidy payment programmes within some manageable limits. At the same time, the chair ensured that there would be gains for farm export-ing countries while conceding some flexi-bilities for developing countries like India to protect their defensive interests through special products (SP). Special ProductsThe Indian negotiators have waged a grim battle since 2007 on SP for agriculture in the face of fierce opposition from the US, Australia, Uruguay, Thailand and Malay-sia. Last year, the US was not prepared to concede more than five tariff lines for SP
COMMENTARYjuly 19, 2008 EPW Economic & Political Weekly16treatment and insisted that there would be zero cut only for one product. The chair’s latest proposals allow India to pro-tect at least 100 tariff lines if one takes the mid-point between 10 and 18 per cent with 6 per cent of tariff lines outofthishaving no tariff cut and the remainingitemsto be subjected to around 12per cent cut. On the special safeguard mechanism (SSM), however, the chair’s latest proposals may lead to a situation where noses will be bloodied because of the proposed reme-dies. While the trigger for imposing special safeguard duties came close to what India and other members of the G-33 had pro-posed, the actual remedies fall well short of expectations because the chair veered close to what the exporters dictated on the safeguard duties. The chair for the NAMA negotiations showed his colours from the day one in blatantly pursuing the interests of four in-dustrialised countries in total disregard to the proposals tabled by the developing countries. Therefore, the degree of oppo-sition to the proposal from the NAMA chair was pretty violent with several developing countries openly raising concerns of a crisis of confidence.Four Drafts in AgricultureAgainst this backdrop, there have been altogether four draft texts during the last 12 months. The first draft text which was issued in July last year set the ball rolling in the Doha agriculture negotiations by establishing some broad ranges in the domestic support, market access and export competition pillars. Besides, it attempted to gradually reduce the number of unre-solved issues that were included in the square brackets through further revisions. The July 2007 text, forexample,contained some 700 brackets which came down to about a dozen in the latest draft text issued on July 10. In the area of domestic support, the ceil-ing for overall trade-distorting domestic support for the US was fixed in the range between $ 13 billion and $ 16.4 billion with a range of unresolved issues or flexi-bilities concerning the US’ base period and specific supports for different commodities, the cotton subsidy payments and even some new blue box programmes. Significantly, an issue pertaining to green box income payments – the income criterion – which is rapidly becoming a major mechanism for subsidisers to contain their trade-distorting payment programmes, remains a major source of controversy. If farmers earning more than $ 200,000 from their farm pro-duce can continue to retain green box pay-ments then there must be something wrong with the way the system operates.As regards market access in agriculture, the industrialised countries are supposed to provide a minimum average tariff cut of 54 per cent while the developing countries are expected to provide a maximum over-all average reduction of 36 per cent. But the average cut for industrialised coun-tries though corresponding to what the G-20 demanded, in reality it is a meaning-less figure if one were to compare it with numerable flexibilities they managed to get through the number and treatment of sensitive products or other loopholes involving tariff simplification, partial desi-gnation of tariff rate quotas, tropical prod-ucts and so on. Several south American farm exporting countries privately com-plained that Brazil managed to secure high gains through some confidential side deals with the EU and other farm importing countries. Brazil, which was a member of the Group of Six countries (the US, the EU, Canada, Japan, Australia and Brazil) on sensitive farm products, managed to secure much higher access for its exports of frozen beef, poultry products, other meats, ac-cording to south American trade officials. Besides, it managed to secure “a carve out” (i e, an exception) for its sensitive indus-trial goods by having additional flexibility separately in NAMA. The Doha round is being described as the “US-Brazil round” because the US is walking away without paying any price while Brazil has managed to secure the maximum share of the cake!In sharp contrast to the flexibilities accorded to the industrialised countries, there are mixed responses to the chair’s proposals on special products and the SSM for developing countries. While the chair conceded that around 10 to 18 per cent of farm tariff lines can be designated as special products with 6 per cent of lines to subject to zero cutandtheremaining lines having an averagecutbetween10 and 14 per cent, it did not include any exchange mechanism with sensitive pro-ducts as was done in the previous text. Besides, India and other developing coun-tries are not happy with the SSM which they argue is overly burdened and replete with a variety of restrictions. Surely, the three-tiered structure for SSM with varying triggers and remedies will prove to be a contentious one during next week’s minis-terial meeting. Further, there are several issues relating to tropical products, prefer-ences, tariff capping, and tariff simplifica-tion among others that can prove to be deal breakers at this juncture.NAMA the Achilles HeelMore than agriculture, which was earlier reckoned as the most difficult area of the Doha negotiations, it is now NAMA that has become the Achilles heel. The WTO’s director general and the chair for Doha NAMA negotiations are held largely res-ponsible for the mess that was created in the fourNAMA texts. The very first text issued in July last year more or less set the ground by raising the level of ambition disproportionately higher than what was set out in the agriculture commitments. The latest text issued on July 10 has pro-posed a coefficient for tariff reductions between 7 and 9 for industrialised coun-tries while the developing countries were offered three ranges – between 19 and 21, 21 and 23 and 23 and 26 – along with flex-ibilities on a sliding scale. Besides, there are additional flexibilities for the mem-bers of the Southern Africa Customs Union – Botswana, Lesotho, Namibia, South Africa and Swaziland – as well as for the members of the MERCOSUR customs union comprising Argentina, Brazil, Paraguay and Uruguay. While the figures for the coefficients are the ones that were negotiated at the failed Potsdam meeting, the chair also included a controversial proposal called “anti- concentration” which aims to place a trig-ger on excluding certain number of tariff lines from the flexibilities by developing countries. The EU and the US have insisted that the anti-concentration clause is a must to satisfy their domestic industrial lobbies despite widespread opposition from many developing countries. The industrialised countries also managed to protect some of their most
COMMENTARYEconomic & Political Weekly EPW july 19, 200817sensitive industrial tariff lines in textiles, fish items, leather products through non- reciprocal preferences. Finally, the princi-ple of “less than full reciprocity” (LTFR) which is a cardinal requirement agreed to in the July 2004 framework agreement is being made to stand on its head. Under the LTFR principle, the industrialised countries are required to take on bigger commitments than the developing countries. But thanks to the efforts of Lamy and his partners, the LTFR is more or less buried for all practical purposes. One-sided DealIn short, the balance between the commit-ments in Doha agriculture and NAMA is definitely tilted in favour of industrialised countries as members move towards a deal over the next week. Whether they would get there by the end of next week is still an open issue. It would largely depend on how desperate the US is committed to an agreement which it is anyway getting for free without making any difficult com-mitments either in agriculture orNAMA. Much would also depend on what the final provision on anti-concentration will be. This is a must for the German industry and Germany’s chancellor Angela Merkel. If the developing countries manage to block a robust anti-concentration provision, the German chancellor would not think twice of joining the French president Nicholas Sarcozy in blocking a modalities agreement in agriculture. How can the Manmohan Singh govern-ment possibly sell the agreement at a time when its image has been badly tainted because of its proximity with the Bush administration? The government has very little to show in terms of actual gains in either agriculture orNAMA barring some flexibilities for addressing its defensive concerns in agriculture. Manmohan Singh and the UPA govern-ment are strangely very keen on pleasing the Bush administration at a time when the elections are round the corner. But then given their enthusiasm to embrace theUS on the nuclear issue, it should not be a surprise that a similar process has been going on at the WTO.If theUPA government goes all the way at Geneva this week, India will pay dearly in a supposedly “development round” and it will find that it has secured few credible gains in areas of its offensive interest such as the short-term movement of services providers in Mode 4 or even cross-border services in Mode 1 of the services negotia-tions. All this is largely due to the pro-mises prime minister Manmohan Singh seems to have made to “India’s good friend” president George Bush over the last several months – that India will make a positive contribution to an agreement on theDDA at Geneva.[Readers can post their comments on this article in the blog section of the EPW web site. The blog will be open until July 29.]The G-8 and India’s National Action Plan on Climate Change Mukul SanwalThe Hokkaido communique on climate change of the Group of Eight countries does not lay down targets for emissions reductions in the developed countries. Yet theG-8 asks developing countries to take more meaningful mitigation actions. How does India’s new national action plan propose to deal with climate change and how is it different from the approach being suggested by the G-8? The summit last week of theG-8 at Hokkaido, Japan, deliberated on, among other items, climate change. The focus of the deliberations was not on how to make the transition to a low carbon economy, but on what deve-lopingcountries should do to share the burden even at the cost of their own economic growth.The summit is important because for the first time we have two communiqué, negotiated at the heads of state level, laying out the positions of the developed and developing countries. There is no longer one vision on how to deal with climate change. The developing countries now have the capacity to reject any frame-work that seeks to shift the burden onto them and have laid out their own vision for sustainable development.The communiqué issued by the G-8 on July 8 stated: ...seeks to share with all Parties to the United Nations Framework Convention on Climate Change (UNFCCC) the vision of, and together with them to consider and adopt in the UNFCCC negotiations, the goal of achieving at least 50 per cent reduction of global emis-sions by 2050, recognising that this global challenge can only be met by a global response…in ways that will enable us to meet our sustainable economic development and energy security objectives…all major economies will need to commit to meaning-ful mitigation actions to be bound in the international agreement to be negotiated by the end of 2009.It is important to note that the reference is to a “goal”, which is defined as an aim or desired result. A target would be an objec-tive or result towards which efforts are directed. In the framework convention on climate change, negotiated in 1992, all de-veloped countries had agreed to the “aim” of reducing their emissions by the end of the century to 1990 levels. In the Kyoto Protocol emissions reductions were agreed, but only up to 2012. The commu-niqué just agreed upon does not specify the year from which the further reduction would be measured. Despite the lack of any demonstrable progress in reducing emissions so far, or commitment to reduce developed country emissions in the Mukul Sanwal (sanwals@gmail.com) has worked with the government of India, the UnitedNations Environment Programme and in the United Nations Climate Change Secretariat.

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