India should look at the big picture, says Lamy

IN CONVERSATION

.

Is the Doha Round over for now?

That would be a bit premature to say. It has been suspended "" time for people to cool down, go back home and reflect whether what needs to be done now is a few extra steps, which I recognise are not that easy.

There's been a lot of accusations and belligerence from all the parties. So, who is to blame for this breakdown of talks?

That is a question journalists love to ask. They like culprits. But that is not the way I work. I have to remain neutral. You should not be surprised that when a negotiation like this doesn't work, it's never my fault, it's always your fault. You haven't put anything on the table. What I put was really good and you were not nice to me to consider that it was not enough. This game is a classical one.

The reality is that the EU, US, India, Brazil, China, South Africa and a few others have not yet put enough on the table. There is already a big package available but we need a few more concessions in agriculture, industrial tariff and services. The final proportion is always difficult because you have domestic factors pushing and resisting.

Some people have said that what was on offer was a recipe for disaster for developing countries. Would you agree?

Who speaks for developing countries? Their governments. So, I don't agree with that. What is already on the table is a clear possibility to rebalance what remains in the system of unfairness for developing countries. For instance, there does remain many things in agriculture that are unfair to developing countries.

Slashing down of domestic subsidies for agriculture and zeroing export subsidies is something which is already on the table. This is good for developing countries. Is that free? Will that happen with some concession from developing countries? No. But there has to be a good balance which means developed countries paying more than developing countries.

The trade talks are in the fifth year, but failures have become common and deadlines are not taken seriously...

Trade negotiations have always been very complex. I would not bother so much about the fact that it has good and bad moments. What is important is that people step back and look at the big picture "" multilateral trading system, connection between what we do in WTO and what happens in Middle East, Iraq, Afghanistan, North Korea. The few billion subsidies and a few percentages of tariff reduction are not much a price to pay to stabilise this system.

What are the consequences of the trade round collapsing, especially for countries like India?

The first consequence will be damaging of developing countries' position. Developing countries have a strong position in WTO because we take decisions by consensus. The bilateral option is not good for developing countries. It may be good for China and India, but not for Cambodia or Senegal. Second consequence is that probably there would be more disputes. When the rules do not adjust, they go to litigation.

What about the EU and the US? Are they afraid of any consequences or is it something that they feel would not affect them at all?

The EU and the US or India and China, because of their size, can be tempted by the bilateral route for a short term. But, for medium and long terms, they also have a big stake in the multilateral system.

There have also been accusations that there is no roadmap for the future. People have hinted at structural flaws.

There are structural flaws in this system... There are things which are unfavourable to developing countries. How do you change that? The only way to do that is negotiation which leads to agreement.

Mr Kamal Nath (Minister for Commerce and Industry) has said that India's economic growth will not be affected by the failure of this round of talks and India has already been looking at deals with EU and Japan.

I think India's economy will be better off with a deal rather than without a deal. It's doing relatively well for the moment, but if it is 1 or 2% plus, even if the rate of growth is 8 or 9%, it is quite important, especially for the poor. Can India move the bilateral road with US and EU? Of course. But I am not sure that it is going to be much easier.

How flexible has US been and what did it bring to the table on farm subsidies?

US has said that they are ready to reduce subsidies.

So it's not the case that for every single dollar that has been stripped off, you get one dollar of inching in? There's no quid pro quo like that?

US is saying that I'm putting subsidies on the table for the price of you putting market excess... We know it will resolve in the reduction of US subsidies, we know it will resolve Europeans opening their markets more, we know it will resolve in Brazil and India once they open their markets more.

The only problem is how much is the proportion. It's now a question of few billion dollars of subsidies and a few percentages of tariff reduction.

You are saying that it is the only problem. But, isn't that really a big problem?

True, it remains the main problem. But you have to look at the numbers. Let us look at not only what is there under the spotlight, but also at the rest. I think a country like India, given it's size and potential, and given it's record in terms of modernisation, also has to look at the big picture.

Mr Kamal Nath said it was a no-offer actually.

Perfectly legitimate in the assessment he is making, that the price that is asked for him to do a number of things is not enough. But that is what the others say on the other side of the table.

At the end of the day, it can only result in a compromise because that is what we mandated in the negotiations "" developed countries will have to put more effort than developing countries and among developing countries, the ones that are in a position to do so will have to do a bit more than the developing countries that are poorer or weaker in the system.

Do you feel the European agri subsidies as they stand today and the proposed cuts are sufficient?

In case of Europe the biggest problem is no longer the agri subsidies because they can accept a very large reduction, somewhere between 70-80%. The problem there is more of what sort of reduction they do in terms of tariff in order to provide more market access.

What do you have to say about the fact that the US would like to see India bring down tariffs by 40-44%. Is that reasonable?

On this, we have to go into a bit of more detail. We are not talking about tariffs that India is applying today, we are talking about maximum tariffs which India committed it would not go beyond 10 years ago. So in many areas India will have a WTO maximum tariff of 40% and real tariff of 8-9%.

So, as the situation stands today, would it be fair to say there is no trust between the rich and the poor countries and that there will be no easy solutions to the difference that exists between the US and EU.

Trust is always difficult in trade negotiation, but there is a mandate that we have to open trade more and adjust the rules. This is a common understanding between the developed and developing countries....developed countries is not a homogeneous camp neither is the developed countries...there are difference between China and Argentina and Chile and South Africa.

The US trade deficit is touching about $700 billion annually, while China's economic boom is continuing. Do you think it has led to hardening of protectionist attitude?

Yes, there is a risk. I am not saying it is leading to protectionist attitude at this stage. There is a risk that these imbalances are used by domestic vested interest to try and raise protection. The only solution to that is the WTO.

Do you think another round of talk would be able to gain momentum more easily after the mid-term US elections

I do not know about that. It may be that it can resume after the mid-term elections, but it may also resume before.

Will the negotiators meet again and how will it begin? Who will take the first step? Do you have the date fixed?

No, I do not have a date. It's a time out, a pause. They are talking to their managers and reviewing their positions and tactics. When they feel that bilateral contacts and quiet diplomacy may have to produce results, then naturally they might come back to the table.

Recent World Bank studies show that the gains of the trade deal are less than previously estimated...

I have seen many studies and many numbers, what remains true is that opening of trade is good because it creates efficiencies. Of course, if you measure the impact of this by reduction of prices for consumers, it is not surprising that the main benefits go to developed countries because this is where you have the biggest number of consumers who are wealthy.

So, I don't need a study to intuitively understand that if it is about price reduction, the biggest benefit goes to developed countries. But, I also do not need a study to understand that given the difference between developing countries and developed countries, it is very important for developing countries to open trade. It creates opportunities for developing countries, whether it reduces poverty is a question of how the welfare gains are distributed. Opening of trade is one of the many conditions for development to happen.