Under pressure, India makes U-turn

The writing is clearly on the wall. With India succumbing to pressure and the G-33 group of developing countries unlikely to stand in the way, the controversial Doha Development Round of the World Trade Organisation (WTO) may just be all set to sail through.

At a two-day international seminar on “Saving Doha and delivering on development” that concluded at New Delhi on Mar 13, India’s Commerce Minister Kamal Nath provided ample evidence of India’s willingness to go along with the rich and industrialised countries. In what appears to be a u-turn in India’s position so far, Mr Kamal Nath said: “This round is not about removal, but about reduction of distortions that lead to artificiality in prices.”

To be seen in conjunction with what Prime Minister Manmohan Singh said the same day at another roundtable organised by The Economist in New Delhi: “India was committed to an early positive conclusion of the Doha Development Round,” the underlying message is crystal clear.

For a few months now, after the suspension of the Doha round negotiations in mid-2006, New Delhi has been under pressure to drop its opposition. WTO chief Pascal Lamy had time and again visited India, and had used every opportunity to negotiate on behalf of the developed countries so much so that he was allowed to walk after he had literally threatened India. Knowing well that Kamal Nath’s ‘tough’ posturing is aimed only at the media, Lamy now made it abundantly clear that an agreement on Doha round has to be reached before the expiry of the US Trade Promotion Agreement in June.

If the agreement is not signed by June, the US President will lose his Fast Track authority to approve international trade agreements, which means the US Senate/Congress will then oversee the agreements.

This is why the US wants to hurry.

On the other hand, if no agreement is signed by June it will still be beneficial for Indian agriculture.

• The ‘free trade’ explosion

• Much ado about nothing

If the agreement is not signed by June, the US President will lose his Fast Track authority to approve international trade agreements, which means the US Senate/Congress will then oversee the agreements. That is why the US wants to hurry. If no agreement is signed by June it will still be beneficial for Indian agriculture. As long as the subsidies stay in the rich countries, we will not be able to protect our agriculture.

The two-day conference in New Delhi was therefore an effort by the Ministry of Commerce to provide justification for a complete somersault in its official stand. The list of invitees, and the selective picking up of speakers and rapporteurs made the real objective copiously clear. Keeping the real stakeholders away, and ensuring that the critical voices were not present, “Saving Doha” became the rallying point.

Henry Benfield Jeffrey, Guyana’s Minister of Foreign Trade and International Cooperation and Moudjaidou Soumanou, Benin’s Minister for industry and Commerce, were two speakers who made it clear that they were not in favour of a bad agreement. Most of the other speakers, and that included ambassadors from Brazil and Indonesia and trade ministers from South Africa, Mexico and Argentina, only expressed concern but were more than willing to see the round through. The selectively picked Indian speakers, many of them retired bureaucrats, were of course for a speedy conclusion. They included Radha Singh, former Agriculture Secretary, B K Zutshi, former Ambassador to GATT, S N Menon, former Commerce Secretary, S Narayanan, former Ambassador to WTO. Anwar Hoda, former Deputy Director General of WTO (and now member Planning Commission) was also present.

Interestingly, the empirical evidence that Sandra Polaski of the US-based Carnegie Endowment for International Peace presented showing that the Doha round to be heavily biased against the developing countries, found few takers. The UNCTAD-India study on Green Box subsidies and the benefits it would throw for the developing countries if the support were to be abolished, also did not find many takers. As expected, the rapporteurs made only a passing reference to what was in reality the most substantial contribution to the deliberations. The rest was merely rhetoric.

For those who have been following the WTO negotiations, a turn around by India at the crucial juncture is nothing new. Remember the failed Cancun WTO Ministerial in 2003? India’s former Commerce Minister, Arun Jaitely had shouted from the rooftop that he was unwilling to accept any agreement with the massive farm subsidies of the rich countries intact. And yet at the concluding stages of the negotiations (which finally failed because of a walk-out by African countries), India had actually accepted the unjust agreement.

Negotiators should be asked to openly spell out the benefits to their respective countries after they have inked an agreement.

Kamal Nath picked up from where his predecessor left. After the hastily concluded July Framework 2004, which had allowed the rich countries to increase their agricultural support, he was against the re-opening of the agreement as it addresses the developmental issues of the developing countries. What ‘development’ benefits did Kamal Nath see when even a former US Trade Representative Charlene Barshefsky made an honest admission (to the Third World Network on 21 February) that the Doha round was launched on false pretences, including calling it a ‘development’ round.

Just before Hong Kong Ministerial in December 2005, Kamal Nath had loudly said before a cheering media: “What the US proposed is not real cuts in agriculture subsidies. The real cuts would be when there is decline in the support provided by the US treasury.” Nath was referring to the US offer to reduce domestic support by 53 per cent and the EU following it up with another offer of 70 per cent. Interestingly, post-Hong Kong, for some strange reasons the minister agreed to the same commitment he rejected.

Whatever the US and EU may offer to keep Doha round is not going to translate into any actual reduction in the massive domestic support, this much is known. The US $360 billion support to agriculture in US, EU and Japan will remain intact. In fact, the US has announced more support to agriculture under its new Farm Bill 2007, and this is not surprising.

In 2006, at a day long meeting of trade negotiators in London, ahead of the G-6 ‘Striptease’ Summit on Mar 10-11, Kamal Nath stopped talking about agricultural subsidies. Senior trade officials from the US, the EU, Brazil, India, Australia and Japan debated only on how to overcome the differences in the market access pillar of the Doha farm trade negotiations. There was no mention of agricultural subsidy commitments.

India had by then shifted to identifying the number of ‘special products’ for which there were to be no further tariff reduction commitments. Subsequently, at the World Economic Forum 2007 at Davos, Kamal Nath was even willing to provide ‘flexibility’ in the number of ‘special products’ to be negotiated, which in other words meant that he was willing to reduce the tariff lines that need to be protected.

In any case, ‘special product’ is not a long-term protection. Pascal Lamy had earlier cleared the mist: “the use of special products will be limited, and in the future it will shrink.” As subsequent studies by the Carnegie Endowment for International Peace has shown that even with all the SPs and Special Safeguard Measures intact, the gains will still be more for the developed countries. If Doha round succeeds, the entire gain in agriculture to the developing world would be to the tune of US $6.7 billion dollars. This so-called gain has to be shared between 110 developing countries. G-20 countries must tell us what ‘development’ gains they have for each member country.

Not only India, but the G-20, G-33 and the G-90 group of developing countries have failed to get the developed countries reduce even one dollar in the massive domestic support they give to their agriculture. The tall claims of ‘victory’ at the conclusion of every WTO Ministerial and general council agreements speaks volumes about the incompetence and failure of the negotiators from the developing world. I don’t know if any one of them has ever worked out cost and benefits accruing from the Doha round. Negotiators should be asked to openly spell out the benefits to their respective countries after they have inked an agreement. It is high time trade negotiators are made accountable to the society.

Meanwhile, Indian farmers and for that farmers in the other developing countries must continue to pay the price with their blood for yet another unseen ‘development’, which in reality means keeping agribusiness companies in western countries afloat.