WTO: India's path diverging from S Africa's, its parting of ways with China

After the 13th Ministerial Conference (MC13) of the World Trade Organization (WTO) in Abu Dhabi failed to deliver a substantial outcome in spite of an extended deadline, European Trade Commissioner Valdis Dombrovskis took to microblogging platform X to vent his frustration.

“European Union (EU) engaged intensively on: Fisheries subsidies, agriculture & WTO reform. Agreements were within reach, supported by a big majority, but ultimately blocked by a handful of countries — sometimes just 1,” Dombrovskis posted, adding a picture of India’s trade minister Piyush Goyal, WTO Director General Ngozi Okonjo-Iweala, and himself engaged in an animated conversation.

Though a picture is often said to be worth a thousand words, the short note attached to the picture in this instance left no room for speculation regarding whom Dombrovskis held responsible for the failure at MC13.

India has often been the fall guy for assiduously safeguarding development issues at the WTO Ministerials, but it has seen a rapid decline in its coalition partners of developing countries. This is at a time when India has been seeking to position itself as the true voice of the “Global South”, a euphemism that represents less the geographical Southern Hemisphere and more the developing world that faces the common challenges of poverty, inequality, and under-development.

“Since the WTO involves hard commercial interests, Global South always doesn’t stand together and some fall for inducements,” an Indian official involved in the MC13 negotiations said, requesting anonymity.

Ujal Singh Bhatia, India’s former Permanent Representative to the WTO said it was important, of course, for India to build partnerships with like minded countries, but the dynamics on the negotiating table did not always reflect the numbers.

“In the past, the G-20 on Agriculture was a strong negotiating group, but it is no longer in the picture. The G-33 has larger numbers, but has not been able to force decisions on its key issues. Among developing countries, only India has the strength to stand alone, but, obviously, strong coalitions are better,” he added.

Widening gulf

Indian negotiators believe a key takeaway from MC13 has been that South Africa may no longer be as close a partner to India. 

The two countries have almost always jointly championed the cause of developing countries, raising their voices on issues ranging from agricultural subsidies, e-commerce, access to medicines, special and differential treatment, and fisheries subsidies. But their paths are now diverging.  

On the investment facilitation for development agreement pushed by China, initially both India and South Africa jointly sent a draft statement to the WTO secretariat opposing the joint statement initiative (JSI). But, finally, the statement was released with only India’s name, as South Africa withdrew its opposition.

India is opposed to JSIs negotiated by a group of countries without explicit WTO mandate, though it made an exception for the regulation that aims to make domestic regulations governing service providers clear, accessible, and publicly available.

“So, basically, it was only India that blocked China’s main agenda in the Ministerial to push the investment facilitation deal,” the official said.  

India was also taken by surprise when South Africa ratified the first part of the fisheries agreement at the closing ceremony of MC13 without prior communication.

WTO DG Okonjo-Iweala praised South Africa for the “pleasant surprise”, calling it a great way to end MC13. India has not yet ratified the partial fisheries agreement reached at MC12 to cut down illegal un­reported and unregulated (IUU) fishing, though it has to abide by it once two-thirds of the member-countries ratify it.

The difference between India and South Africa also emerged for the first time on extension of the electronic transmission moratorium by maintaining the duty-free trade in online services, including apps, games and software, as well as digitally transmitted content such as music, video, and other digital files. 

Usually, India and South Africa put out joint statements, piling on pressure on developed countries to end the moratorium claiming revenue loss. But this time, only South Africa put out a statement seeking to terminate the moratorium. India and Indonesia, on the other hand, put out a separate statement implicitly supporting an extension.

“South Africa was in favour of taking a carve-out for women and MSMEs in electronic commerce and ending the moratorium. India was of the view that it would be inconsistent if you are opposing inclusion of MSME and women in the WTO agenda and bringing it for one topic,” the official said. “Though ultimately everything fell into place, but, at the negotiating level, conversations with South Africa became difficult for the first time.”

A former trade negotiator requesting anonymity says South Africa today is much more vulnerable to pressure than India, as it has become economically weak. “Even though South Africa is taking very strong positions, when it comes to actual negotiations, discussions happen between capitals. So there is always pressure on Durban from developed countries. As days go by, India has to understand it is pretty much on its own at the WTO,” he added.  

Parting of ways

Despite their historically fraught relationship, China and India have often found common ground on some issues to coordinate their positions at the WTO, such as in special and differential treatment for developing countries.

At the MC13, though, India had no truck with China.

“We had zero coordination with China this time, though China benefitted as India fought on key issues such as fisheries subsidies. Between exposing China and protecting our self-interest, we had to choose the latter. But investment facilitation for development agreement was a big loss of face for them as that was their main agenda,” the official said.

Jayant Dasgupta, India’s former ambassador to the WTO, says China has supported India in the past only on a case-to-case manner. “They have been very transactional in nature. They don’t support us where they don’t have a stake. That has been the case for the past 10 years at least. Given the aggression China has shown at the borders and at other international fora, it is not surprising that India doesn’t support China’s cause at the WTO,” he adds.

Biswajit Dhar, former economics professor at the Jawaharlal Nehru University, says the last common position by both the countries at the WTO was on agriculture subsidy issues before the pandemic. “China has announced itself as the biggest defender of globalisation and wishes to replace the US. We have been constantly equated with China. We can isolate China by clearly communicating that our interests are divergent,” he adds.

US cedes leadership

The Trump administration started blocking new appointments to the appellate body in 2017, as the terms of the seven judges started expiring, leading to the collapse of the dispute settlement function. Though the Biden administration promised to be more liberal towards global trade, it has not heeded requests to restore the two-tier dispute settlement mechanism at the WTO. The US claims that the present system has often overreached its mandate and has hinted at its preference for a single-tier system and more scope for bilaterally resolving disputes.

The US initially urged members to make MC13 the first “reform ministerial”, and engaged in informal delegate-level discussions since April 2022, but no headway was made on the issue at MC13.

The US Trade Representative, Katherine Tai, in her inaugural statement at the MC13 insisted that “the goal is not just to go back to the way things used to be, but rather to provide confidence that the system is fair and to better allow Members to settle their disputes”.

Bhatia says the inward turn in US politics had great significance for the WTO because it implied the US was no longer as keen to provide leadership at the multilateral forum as it had done in the past. “The WTO is fairly rudderless now as alternative leadership has not emerged. The US focus on industrial policy probably informs their position on WTO DSS reforms,” he says.

According to Dasgupta, while the US has completely given up on the WTO, the EU is not in a position to provide leadership. “There is so much economic problem at the EU itself and it has to go by the consensus principle within. The executive power of the US president is not there with the EU,” he adds.

The WTO has been called a “dead horse” and a “talking shop”, with little tangible negotiating outcome over the years. Now Washington’s disinterest to abide by the multilateral trade rules has dealt it another body blow.

“The WTO will continue to drift, which is a very sad thing, because it used to be one strong organisation creating a very robust set of rules which could be enforced. But now, with the dispute settlement system in disarray, the WTO really doesn’t have too much authority,” Bhatia says.