Stoop to conquer

Now that the Doha Round of trade talks seems to have dislodged itself from the doldrums, the usual growls and snarls of negotiators are once again becoming audible. The European Union, no slouch when it comes to protectionism, has unctuously asked India to open up its industrial imports. Its director general of trade says that the industrial countries will not cut their agricultural subsidies if India does not reduce its tariffs on industrial goods. The same applies, of course, to other developing countries as well, which, he says, share the responsibility for the successful completion of the round. "In the end, everything is a trade-off in [the] WTO," he adds but does not mention what would be a fair trade-off.

Such a trade-off might eventually include market opening by the developing countries to agricultural products from the developed countries, which hugely subsidise their farms. India and other developing countries have been strongly opposing this. They want the developed countries to cut their farm subsidies first. The difference this time is that the US has finally agreed to effect fairly substantial cuts. This will help. The EU, too, seems to be getting there. The result is that there is a perceptible increase in the probability of a successful completion of the Doha Round. But many twists and turns lie ahead, and breaking through the impasse will still take some doing.

What role can India play? Until recently, when India's share in global trade was minuscule, no one much cared what it said or did and India merely accepted the deal that the big boys agreed on. Even now, its share of trade is hardly impressive. But the rate at which India is opening up its economy has begun to count and when this is combined with the rapid economic growth of the last few years, India cannot be ignored any longer. In the end, it will come down to whether or not India agrees to revise downwards its average tariff bindings on industrial products from the current levels to around 30 per cent, and on what it does with the items that are not included in the calculation of this average.

The key determinant will be what is called domestic sensitivity to imports. Rajesh Mehta, at a Delhi-based think-tank, recently analysed 9,467 tariff lines defined by the 8-digit level of harmonisation. It used three categories: insensitive, moderately sensitive, and highly sensitive. The study then went on to suggest the possible levels of bindings in the light of the finding that "India's current bindings, for most lines/commodities, do not reveal a domestic sensitivity from imports". If true, this is certainly good news. Not just that. "The applied rates for a large number of lines are lower than their corresponding binding rates but the differences between the applied and corresponding binding rates are not significant." This too is good news because it frees the hands of the negotiators very considerably. In sum, says the study, "there are very few lines/commodities which are highly import sensitive." This means that India can pretend to give a lot while actually gaining from a trade-off.