 "<b>Rahul Khullar & Abhijit Das:</b> Separating myth from reality")
Many so-called experts are critical of the “stalling tactics” of India and others that have weakened the World Trade Organization (WTO) and forced Western powers (read the US) to go outside the WTO and negotiate mega trade pacts. Second, the mega trade pacts being negotiated outside the WTO, it is argued, will isolate India. Third, the relevant new issues today are IPR (intellectual property rights) protection, labour standards, environment etc., where India lags behind. Finally, India needs to change its stance at the WTO, if she has ambitions of sitting on the international high table. The “experts” could not be more wrong on each of these issues.
Did India’s “stalling tactics” compel the Western powers to lose interest in the WTO? Completely wrong. Since 2008 it is the US that has systematically used every dirty trick possible to stall and block any progress on the Doha agenda. This is a fact that the “experts” conveniently omit to mention. The US did not want any progress on disciplining agriculture (or export) subsidies, nor did it want to cede ground on services for fear of jobs being Bangalored. On industrial tariffs (NAMA), it already had access because of unilateral tariff reduction by India and other developing countries. Given this reality, the US found it expedient to unshackle itself from the Doha Round. Instead, it has gone outside the WTO to pursue a political agenda vis-à-vis China and to “create” an agenda of its own, minus agriculture subsidies.
India pressing for “sky-high tariffs” in agriculture is given as an illustration of her “stalling tactics”. It is true that India sought to protect its interests in agriculture. This was a political mandate that had the support of both the government and the Opposition. Experts tend to forget that applied tariffs have been well below bound levels, i.e. applied levels on average are one-third of bound levels. Over the past decade, tariffs on major cereals (wheat, rice and pulses) were even reduced to zero. Hence, market access was available to trading partners.
The only protection against a surge of imports is a safeguard measure. Under the extant Agreement on Safeguards, it takes a long time to put a measure in place. This is why India sought a quicker way to react to an import surge of agricultural produce. For instance, if tariffs on apples were reduced and this resulted in a huge import surge, the lack of a quick (special) safeguard measure could send domestic prices crashing and wipe out apple growers and indirect employment. The experts do not think of this as a cause for worry. Fortunately, our politicians do, and we can ignore this reality only at our peril.
Experts posit that the Western powers have liberalised a lot and brought down tariffs on industrial products. True, but they overlook how developed countries flouted GATT (General Agreement on Tariffs and Trade) rules for almost half a century by restricting imports of textile products from developing countries. They have also done nothing to dismantle the egregious agriculture subsidies on cotton, soya, milk, sugar etc. Further, they have not lowered tariffs on leather and textiles. They have not even moved on their commitment to provide duty-free quota-free market access to LDCs (least developed countries) in a transparent manner. And lest we forget, they have abused health and technical standards (SPS and TBT measures) to block competitive exports from developing countries.
On “new” issues, experts totally ignore what is of vital interest to India: trade in services. Here, the main objective of the US and other developed countries is to somehow block entry of professionals and semi-skilled persons under Mode 4. Their sole objective is to protect domestic jobs and, more generally, to stop liberalisation for fear of an import surge. Witness the nationalist movements in these countries, say France, if there are any lingering doubts.
And, on IPRs, India is completely WTO-compliant. On changes to existing IPR disciplines there is simply no consensus. Similarly, on standards for labour or environment — two other important “new” issues — most of the world is still not on the same page as the US. So to expect that this will be a near-term problem is unfounded.
Will the new mega trade pacts isolate India? Surely not. Most developing countries including India, China, Brazil and South Africa are excluded from such deals. But it is these countries that account for the bulk of trade. In any case, the two mega free trade agreements — Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership — are not imminent. Many countries in the two mega trading blocks are worried about the domestic political and economic aftermath of these deals. They are not as enthused as the US. Even across the Atlantic there are serious differences on many issues, including IPRs. Thus, the concerns on such mega deals are misplaced. In any case, India has negotiated her own comprehensive economic partnership agreements and is moving forward on protecting her trade interests.
Finally, does India need to change its negotiating stance (and trade policy), if it has political ambitions of sitting on the international political high table? This seems wrong. International political respect derives from economic strength. Surely, India’s negotiating position has to be based on our national interests. There is little point in being on the high table if it entails a compromise with national economic interest.
In conclusion, Kissinger’s dictum that America has no permanent friends or enemies, only interests, rings true. India is a strategic partner of the US. But this has not prevented the US from pressing its economic interests in the WTO against India. To just keel over on trade issues to keep political peace is fraught with peril.
Khullar retired as chairman, TRAI, and was commerce secretary during 2009-2012.
Das heads the Centre for WTO Studies
Das heads the Centre for WTO Studies