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Protecting Indian interests at the World Trade Organization


Economic commentator Ruchir Sharma once said of India that it disappoints both optimists and pessimists. The jury is still out on the applicability of his beautiful pun on India. However, Sharma’s formulation fits perfectly with an international body – the World Trade Organization (WTO).

The Geneva-based international trade body, created in 1995 as a successor to the General Agreement on Tariffs and Trade (GATT), is best compared to the metaphor trishanku — it wants a lot but remains in perpetual limbo constrained by its design rigidity. The WTO has definitely disappointed optimists — it has not led the world to the golden dawn of borderless free trade. It also disappointed pessimists as two-thirds of world trade is still conducted on a most-favoured-nation (MFN) basis, the founding principle of the WTO.

The professional organization which was unable to hold its twelfth umbrella ministerial conference (MC-12) after the eleventh edition in Buenos Aires in 2017 due to the pandemic is meeting again in Geneva between June 12 and 15. Several issues are on the table and India is playing a key role in shaping the global trade narrative in almost every area.

It is important for India to focus on protecting national interests rather than making deals under international pressure, especially from developed countries. While India is regaining lost ground in international trade at a steady pace, the global trade architecture is still heavily loaded against India. Therefore, MC-12 is not an occasion for bravado, but for a cold and calculating attitude on all matters under consideration.

The most important issue for India is to limit the damage in agriculture. It is well known that the agreement on agriculture is extremely unbalanced and has considerably reduced India’s freedom of investment in the sector. Developed countries want greater rationalization of agricultural subsidies by the developing world with their weapons firmly trained on India and China.

Major food exporters are realizing that India and China are clinging to global agricultural export markets. While India and China face a particular challenge in agriculture, mainly due to the need to support a huge population, it is clear that both countries will pose a challenge to export hegemony. of the “Cairns Group” – an interest group of 19 WTO Members, the United States and the European Union.

India would ideally like to secure a permanent solution for its public stockholding – WTO-legislated flexibility to build food buffers for any crop at any domestic price without having to respond to the WTO on subsidy levels. India has also joined a group of allies in demanding a recalibration of the way the WTO calculates allowable subsidies. The Indian proposal aims to use inflation-adjusted prices for the calculation of food subsidies, unlike the current WTO practice of using external reference prices since the 1980s.

Getting these decisions in their favor would be the ideal outcome for India in MC-12. However, even if the developed countries do not concede this position, India must ensure that there is no downward revision of the existing agricultural subsidies. Some members, particularly Brazil, have been particularly hostile to the Indian position, seeking to reduce the Indian government’s already meager support for agriculture. Of course, Brazil and other members of the Cairns Group are also motivated by self-preservation, not wanting new competition in what is an oligopolistic market.

Fisheries negotiations have been ongoing since the Doha Ministerial Conference in 2001, seeking to curb illegal fishing and save overexploited stocks in the world’s oceans. In these negotiations, the developed world has again taken the same approach it took to agriculture in the Uruguay Round negotiations – seeking to maintain its own subsidies to the extent permitted while closing the door to competition. potential.

In this area, India is not a key player as most Indian fishing interests are currently subsistence-based. However, deep and distant water fishing is a potential growth area for India. Thus, any agreement that would tie India’s hands while allowing major fishing nations to continue to subsidize their pollutants would be counterproductive. There will be a lot of pressure on India to sign this agreement, but India should only agree if it secures a place for itself for a long enough transition period.

Another key demand from the bloc of mercantilist countries is to reform the WTO. Currently, the WTO is a member-driven multilateral organization, where all decisions are taken by consensus. Western countries want to legalize the idea of ​​plurilateral agreements, where only a few members negotiate future changes and then try to impose the outcome on everyone else.

India should also strive to restore the WTO’s two-stage dispute settlement mechanism, which has been crippled by the bipartisan action of successive US governments. Former Presidents Barack Obama and Donald Trump and President Joe Biden have not let the WTO’s appellate body work, perhaps seeking to make arbitration the second leg of the dispute settlement function of the WTO. This should not be accepted by India. Although it is far from ideal and takes into account Indian concerns, the WTO mechanism offers even more chances for developing countries to hold their ground. vis à vis international arbitration.

India and South Africa have fought hard to get the WTO to agree on intellectual property flexibilities to bring fairness in the Covid-19 vaccine. Members like the European Union, Switzerland and Norway – which neither had their own vaccines to offer nor needed intellectual property flexibility to purchase vaccines for their own populations – spoiled an ideal outcome. . However, any outcome is a symbolic victory for India and South Africa for forcing developed countries to take notice and acknowledge their pharmaceutical greed. Their profiteering behavior left poor countries on the sidelines when the pandemic ravaged the world – any agreement on this will set the tone for the WTO’s action in the face of future natural disasters.

India, South Africa and Indonesia have also requested that electronic transmissions be subject to customs duties. This is a very interesting area, where a moratorium on these customs duties has been in place since 1998. If electronic transmissions are indeed made dutiable, this will give large developing countries political leverage to influence monopoly players in the ‘Digital Economy.

The WTO works at a snail’s pace, so there is no guarantee that there will be results at MC-12. India’s strategy for the ministerial meeting should be to maximize its influence in building thematic coalitions and signaling to the world that it is a serious player in global trade.

As in all other international forums, India has traditionally been a passive and reactionary player, even in the WTO. This has started to change in recent years, both within the WTO and more broadly. However, India still has a long way to go to take the lead in areas where it needs to defend its interests. A growing “commercial culture” at the national level must also translate into greater international influence. Taking concrete steps towards this goal will be a good end to MC-12 for Commerce Minister Piyush Goyal.