People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 35

August 30, 2009

Thwart Initiative to Revive WTO Negotiations: IPCAWTO


THE Doha Round of negotiations which was dormant for about a year is now being revived at the initiative of the Indian commerce minister whose objective is to �break the deadlock� in the process. A ministerial meeting to which some thirty five countries have been invited is scheduled for 3-4th September 2009 in New Delhi.


The Indian initiative in this regard is, to say the least, intriguing. The so-called �deadlock� was cited in official circles, only a year ago, as the proof of a strong pro-farmer stance of the then commerce minister. It was argued that the negotiations got deadlocked mainly because the minimum safeguards insisted upon by the commerce minister for protecting the livelihood of millions of Indian farmers against the unfair competition from subsidised cheap imports from developed countries were not acceptable to the developed countries, particularly USA.


Not an iota of evidence is available to indicate that developed agriculture exporting countries, particularly USA, have since relaxed their stance to accommodate the Indian concerns. On the contrary, reports are circulating that some formulations are being proposed by a minister of one of those countries which seek to dilute the safeguards in agriculture and impose severe burden on the developing countries by opening up of their markets for industrial imports.


The initiative to �break the deadlock� is thus likely to boomerang. The forthcoming ministerial meeting may well turn out to be the preparation of the ground for substantial dilution of the official Indian stand in vital areas of negotiations.


The Indian Peoples Campaign Against WTO (IPCAWTO) has consistently pressed for a strong negotiating stance, particularly in the areas of agriculture, non-agricultural market access (NAMA), intellectual property rights, services. IPCAWTO had hailed the re-emergence of the solidarity of the South at the Cancun ministerial meeting in 2003 and has been stressing that India should forge links with the developing countries and evolve a coordinated stand to defend the interests of the South in these negotiations.


Unfortunately the Indian position not only got diluted in the crucial areas as the negotiations progressed but India also veered away from the solidarity of the South on more than one crucial occasions.


IPCAWTO appeals to the peasantry, the workers, the craftsmen, all patriotic elements and particularly the youth, committed to self-reliant, just, prosperous and egalitarian India, to join the campaign to not only thwart the present initiative to revive the WTO negotiations at the present juncture but also to compel the Indian Government to thoroughly reorient its stand in international negotiations so that it fully accords with the interest of working people.





In Agriculture, the fundamental imbalance persists. The market access sought by developed countries into the developing countries is ensured by the maintenance of the three- tiered tariff reduction formula which has been there for some time. Which, broadly speaking, requires developing countries to reduce their tariffs on agricultural products by 36 per cent as against the developed countries obligation to reduce them by 54 per cent. The promise of average reduction by developed countries will make sense if the very high tariffs in the top tier (some ranging as high as 700 per cent or even more) are drastically reduced and few exceptions are permitted through the escape route of �sensitive products�. Both these conditions seem very unlikely to be fulfilled. For developing countries like ours, an average cut of 36 per cent on bound tariffs in agriculture is a stiff proposition. In sharp contrast, the issue of elimination/ substantial reduction in subsidies by developed countries, particularly USA, still remains hanging, awaiting "political solution".


        The possible level to which USA may agree to "bring down" the narrowly defined trade distorting domestic support has been indicated at $14.5 billion, from the present allowable level of $ 48.7billion under the Agreement on Agriculture (AoA). But the actual current level of such subsidies was only around $8 billion in 2007. Which means that even after much publicised 70 per cent reduction in the allowable level, the newly allowable level will still be nearly double the actual level, leaving a lot of scope for USA to increase the actual level of subsidies in future. What is worse is that all this �reduction� will not at all affect the burgeoning subsidies under the so-called �green box� (estimated currently at $50 billion) which constitute the bulk of around 80 per cent of the total subsidy bill of USA and which are outside the range of reduction aimed at and are not subject to any worthwhile multilateral discipline, despite some provisions sought to be incorporated in the text for better "surveillance".


        India (like a large number of developing countries forming G-33 led by Indonesia) has basically protective or defensive interest in these negotiations. We missed the bus by not insisting on ensuring the right to impose quantitative restrictions on imports to safeguard the livelihood of millions of small and marginal peasants. We placed our trust in the proposed instrumentalities of special products and special safeguard mechanism. G-33 proposed that developing countries should have a right to �self-designate� 30 per cent of tariff lines as special products which would not be subject to any tariff cut. Later G-33 diluted their stand and settled only for 20 per cent tariff lines. As against that the current text speaks of only12 per cent of tariff lines being eligible to be treated as special products and of these, only 40 per cent, i.e. only 5 percent of the tariff lines, to be subject to no tariff cut and remaining 60 percent i.e. 7 per cent of tariff lines to be subject to an average of 19 percent cut. We have 715 tariff lines in agriculture. We wanted 215 tariff lines to be treated as special products; now the text implies that we would get only 86 tariff lines, of which only 36 lines would be subject to no tariff cut and 50 lines subject to a tariff cut of 19 per cent. Considering vast multiplicity of our agricultural product range and the crucial importance of these products for livelihood, the range of protection available is too narrow and too weak.


        As regards special safeguard mechanism, the criteria in the text for the price- based measures are too restrictive and ineffectual. Thus, the provision to impose additional duty to protect indigenous peasantry from sharp decline in international prices and consequent surge or threat of surge of imports can be invoked only if the import price declines to or below the designated "trigger price" which the text suggests to be 70 percent of the average import price of the preceding three years. The additional duty to be so levied cannot exceed 50 percent of the difference between the actual import price and the trigger price. By definition, the import price will continue to remain much below the "trigger price" even after the levy of additional duty. Moreover, this measure will be applicable only on a shipment-by-shipment basis. The protection so offered is also therefore ineffectual.


        The other safeguard measure is volume-based. It has a two-tier volume trigger, with one tier being a volume increase of 120-140 per cent of the base level imports and the second tier being a volume increase over 140 per cent. In tier one, the maximum additional duty permissible shall not exceed one third the current bound tariff or 8 percentage points (whichever is higher). In the second tier, the maximum additional duty shall not exceed half the current bound tariff or 12 percentage points, whichever is higher. These are too restrictive formulations. For one thing, the trigger range of volume is too high, making the remedy coming into force when the damage is already done. Secondly, the remedial protection through levy of additional tariff is too low to effectively address the problem of import surge.


        There is also proposed cross-linkage of the two triggers making the application of remedial measures even more problematic. At the same time, the volume- based and price- based measures cannot be invoked simultaneously for the same product. Moreover the measures are not expected to be applied beyond a limited period (four to eight months) and are not expected to be repeated before a lapse of similar period.


        It is well known that adverse impact of decline in international prices in a domestic market integrated with the world market is felt even before or without large scale actual imports. What is needed to insulate the peasantry from such adverse impact is a strong signal like immediate imposition of quantitative restrictions. Finely calibrated, halting and inadequate measures taken after the damage is done are of little use.


        All in all, the protection regime visualised in the text is too limited and ineffectual to protect the livelihood of millions of small and marginal farmers against the surge or threat of surge of cheap imports of products the bulk of which would continue to be heavily subsidized.


        The logic of integration of Indian peasant agriculture with the global agri-buisiness dominated agriculture is deeply flawed and fraught with incalculably dangerous consequences. And the present conjuncture only underlines the untenability of that logic. The free trade agreement with the ASEAN has evoked spontaneous resistance in Kerala and other states where the livelihood of small peasantry dependent on plantation crops is threatened. We are witnessing a severe countrywide drought which is already threatening the livelihood of millions of small and marginal peasants. It would be nothing short of suicidal to aggravate such disastrous situations today or in future by accepting or preparing the ground for eventual acceptance of a trade policy that poses a systemic threat to the livelihood of our peasantry.






 As regards the NAMA text, the tilt against the developing countries is even more blatant. The universal binding of tariffs, the line-by-line tariff cutting instead of the average reduction target (which was the rule in all the previous rounds), application of the "Swiss Formula" and more than proportionate reduction in the tariffs of developing countries through low coefficients and few exceptions, which constituted the hallmark of the earlier texts continue to govern the approach in the latest text. What is worse, the "Para 8 flexibilities " which were insisted upon by developing countries to mitigate the harshness of the approach have been effectively diluted, if not nullified, by the latest text.


        The choice of low coefficients leaves developing countries with little margin or manoeuvrability. The simulation exercise done by the Third World network had shown that the developing countries which have had historically high tariffs would need very high coefficients to avoid or smoothen the adverse impact on their industries. But the figures indicated now are close to, if not the same as, what was proposed in the earlier texts. A coefficient of 8 is proposed for developed countries. For developing countries three optional values of coefficient viz.20, 22, 25 are proposed, each associated with different regimes of flexibilities; the underlying principle being that the higher the coefficient chosen, the lesser will be the flexibility in terms of deviation of tariff lines from the application of the formula cut. If the highest coefficient of 25 is accepted, no tariff lines will be exempted and in case of the coefficients of 20 and 22 are accepted, then 14 per cent and 10 per cent of tariff lines respectively will be exempted for less than formula cuts.


        A new conditionality has been introduced to reduce the flexibility even further. The policy space for exempting a particular industrial sector from the drastic formula cut has been severely circumscribed by proposing that no sector or sub-sector can be totally excluded from the formula cut and at least 20  per cent of tariff lines or 9 per cent of value of imports in a given sector or sub-sector must be subject to the formula cut.


        Our current level of applied tariff is, on average, 10 per cent, and the bound level average is 34 per cent. The cut which the formula would likely entail will require drastic reduction of bound level of tariff. Assuming that India accepts the coefficient of 22, we would be obliged to reduce tariff by about 60 per cent with only 10 per cent of tariff lines open for less than formula cut. With very limited exceptions available under the dispensation of the text and the policy space severely circumscribed, the door to de-industrialisation will be wide open.


        We are experiencing a severe contraction of exports, particularly in the labour- intensive sectors of textiles and garments, leather and leather goods, gems and jewellery, handicrafts. Large scale lay-offs are taking place. Of late, industrial sector had witnessed stagnation or very low growth. Employment is not keeping pace with the additions to labour force, not to speak of the vast backlog of under and unemployment. In such a situation, it would be nothing short of courting a disaster to open doors to de-industrialisation through trade policies imposed by lopsided and unequal negotiations.





        There is therefore little to "take" and quite a lot to "give" in the dispensation visualised in the two major areas of negotiations. But the story does not end there. Developed countries are keen to give a push to the negotiations in the area of services to obtain new commitments, which means building up of pressures on emerging economies in particular to integrate their services markets, particularly the financial services markets with the global market. This has a sinister implication at the present times. The "toxic waste " of the financial services market, the magnitude and manifestation of which is still not fully understood, and which virtually brought the recession in the US economy needs to be dumped somewhere. And the burgeoning financial services sector in emerging economies like ours would be as good a destination as any other for the purpose. We have already a powerful "in-house" lobby advocating, as in the Economic Survey 2009, liberalisation and further opening of banking, insurance and other financial services sectors. The US would, therefore, knowingly enhance their pressure in this regard. And there goes another substantial "give" with unknown consequences for our financial sector and the economy as a whole.


        When the Doha Round was launched, it was agreed by all that negotiations on outstanding �implementation issues� constituted an integral part of its mandate. Developing countries including India had emphasized the importance of introducing into the TRIPs agreement a mandatory requirement for the disclosure of origin of biological resources and/or associated traditional knowledge used in inventions for which property rights are applied for. In pursuance of this and with a view to harmonising the TRIPs agreement and the convention on biological diversity, developing countries have proposed a text of a new Article 29 b in TRIPs. The new Article will require that patent application concerning subject matter derived from or developed with biological resources and/or associated traditional knowledge must disclose the origin of such resource and/or associated knowledge. Moreover, the applicants must provide evidence of compliance with relevant legal requirements for prior informed consent for access and fair and equitable benefit-sharing arising from the commercial utilization of such resources and/or associated traditional knowledge.


Although more than two years have elapsed after the text was proposed for negotiations, there has been no progress whatsoever. And it seems unlikely that any progress will now take place when the negotiation are being focussed only on Agriculture and NAMA texts. The latest twist, however, is that India is reportedly diluting its position in this regard and is ready to accept that the observance of the proposed amendment be only a voluntary and not mandatory. Thus a priority area of high importance for developing countries will very likely go by default or lose its steam altogether.



Last, but certainly not the least, consideration why the initiative taken by the commerce minister should be thwarted is the stark fact that the present US administration has no �fast-track� authority to conclude the negotiations in a credible manner. The �fast-track� authority which gives the credibility to the offers made by USTR in the course of negotiations lapsed on July 1, 2007. It is not known if and when such authority would be granted by the US Congress to the US administration. And no trade negotiations are meaningful if USA is not at the negotiating table, fully equipped to make credible deals.


The current initiative of the commerce minister took shape after his visit to Washington and his confabulations with the director general of WTO. WTO director general is keen to breathe fresh life into the negotiation for his own professional career must have an achievement to show. Washington would not be averse to inducing the emerging economies to make stiff advance payments even before the negotiations start, so that it can decide in due course whether the trade negotiations deserve any priority in its scheme of things which at the moment has more pressing agenda to attend to on financial, economic and strategic fronts. And EU, Japan and others may be very pleased to see that USA is eventually induced to come to the negotiating table at the cost of third parties such as India and other emerging countries. All this is easily understood. What passes understanding is the keenness of our commerce minister to kick-start the negotiations, when all analyses show that we have much more to lose than gain in these negotiations. Whatever "co-operation" we may extend by agreeing to the unequal bargain at this stage in the mistaken belief that it is good for the global economy, will only bind us to it, leaving USA administration and the legislature to ask for "more" when time comes to approve the deal.



We must be vigilant in the coming months as the process sought to be initiated in the ministerial meeting in New Delhi on September 3-4, is only a first step towards the formal ministerial meeting of all country members of WTO scheduled to be held in Geneva in November-December 2009 intended to formalise the planned outcome of the Delhi meeting.