Who needs Doha?

The Hong Kong ministerial meeting of the World Trade Organisation is a little over a month away. Recent indications are that Hong Kong may go the Cancun way. There are pre-negotiation meetings going on in London and, subsequently, there will be meetings in Geneva, all designed to thrash out a draft ministerial text, which should be ready by mid-November. The question is""how much of the text will be in brackets, signifying areas where there is no agreement? If too much is bracketed, it is unreasonable to expect ministers to arrive at a consensus in the limited time available in Hong Kong. If there is no breakthrough, the Doha Round cannot be concluded before the US President's fast track authority disappears in mid-2007. At the moment, failure of the Doha Round is a clear possibility.

Optimists will argue that the Uruguay Round went through a similar process of hiccups and all eventually ended well. However, there has been a perceptible shift in power structures since then and the G-20, with a core of Brazil, India, China, and South Africa, has become a negotiating force. What the US, the EU, and Japan thrust down other countries' throats through the Blair House accord during the Uruguay Round, is no longer possible. Even though Cancun ostensibly failed because of the so-called Singapore issues, the central issue always was and continues to be agriculture. Here, the European Union's proposal, thanks to French resistance, is not good enough and the French president has declared that he will make no more concessions. So it is time countries began considering what would happen if Doha failed.

Without question, failure would be a negative development because it would mean a halt to the beneficial process of trade reform and globalisation. And on the argument that things never stand still, and if you're not moving forward then you're likely to fall backward, there is the fear of trade wars breaking out. Some of the scarier scenarios are fanciful, and a sober assessment is in order. Without giving up the overall goal of multilateral liberalisation, which would clearly be in India's interest, the question must therefore be posed: how vital is India's stake in a successful Hong Kong Ministerial?

WTO agreements have two conceptual components""market access and rules, with trade facilitation and intellectual property also part of the latter. Multilateral rules are already in place and the Doha Development Agenda (DDA) doesn't contemplate a significant change in the rules, with the possible exception of anti-dumping. On market access, there is a give and a take. The debate on the formulae used for non-agricultural market access (NAMA ) may be important for the commerce ministry. But on the take, enhanced market access through duty reductions isn't terribly important for India's exports. Not only are industrial tariffs low, but duty reductions will apply to bound rates, which are considerably above the applied ones. And India's give will be overtaken by unilateral reductions and RTAs (regional trade agreements). Even in agriculture, in the absence of domestic reforms that will make Indian exports both competitive and feasible, India's take is little, although it is important to tango with Brazil in pushing for liberalisation by the developed countries. India's negotiating interests are primarily in reducing the give in sensitive products.

It is also well to remember that special and differential treatment (for which India has fought long and hard) does not mean all that much, except for the least developed countries. That leaves services, where India has rightly altered its stance in resisting corporate presence in India, although there are attempts to obtain a quid pro quo through cross-border movements of labour. However, this has been pushed through RTAs, such as the ones with Singapore and Sri Lanka, not to speak of a possible one with the US when the US trade representative comes calling in the next few days.

The short point is that multilateral agreements have been propagated because they involve lower costs in negotiation, compared to bilateral and regional deals, and easier implementation/enforcement. With 148 WTO members, each of whom has right of veto, it is by no means obvious that this continues to be a compelling argument. India's slightly increased economic clout has also made bilateral deals easier, and fairer, to negotiate. Thus, India's interest in a successful Hong Kong Ministerial is less than was the case during the Uruguay Round. Indeed, India's external trade stands to gain more from achieving domestic economic reform, including in the unreformed agricultural sector, than from any deal that will be negotiated at Hong Kong.