TNC Rajagopalan: Role for least developed nations must

EXIM MATTERS

The framework agreement of 147 member-countries of the World Trade Organisation (WTO) at Geneva last week is a significant achievement considering that each country is in a different stage of development and has a different wish-list.

Several factors played a key role in getting the members to agree. The emergence of G-20 coalition of developing countries made it difficult for the rich countries to gain further market access without commitment to reforms in their own farm subsidies.

The possibility that Pascal Lamy, European Union negotiator, and Robert Zoellick, US Trade Representative, may or may not be around after December goaded the members to strike a deal now.

The "peace clause" in agriculture agreement had expired and the EU and the US expected more disputes over their farm subsidies. Brazil had won an important WTO ruling against US cotton subsidies and was on the verge of winning another ruling against EU sugar subsidies.

The NG-5 (Non-Group of five countries Brazil, India, Australia, the US and the EU representing divergent views) hammered out the second draft agreement that carried greater credibility as it represented the views of a wider cross section of member countries.

Finally, everyone has realised that multilateralism is better than regionalis and that any further inaction will harm poor countries more.

The framework agreement gets the Doha Development Round moving again but further progress will not be easy. The agreement is limited to general principles and directions. Modalities dealing with specific formulae and trajectories of tariff cuts are yet to be worked out.

The rich countries have agreed to eliminate export subsidies and cut trade-distorting or production-linked domestic support starting with a 20 per cent cut in the first year and cap the "Blue Box" subsidies. But when they will do so is yet to be negotiated.

The agreement allows protection of "sensitive products" and "special products". The rich countries may use the provisions to continue subsidies and high tariffs on products of interest to poor countries. In turn, the poor countries may categorise a range of products as essential for development.

The US has cleverly kept its "counter-cyclical" payments to farmers, given as protection against depressed prices, from the definition of subsidies.

Commerce Minister Kamal Nath, approached the negotiations with a keen appreciation that India's interests are better served through multilateral negotiations at the WTO and that nothing much is gained from isolation or theatrics.

The agreement takes note of India's concerns on food security, livelihood security and rural development, recognises the principle of "less than full reciprocity", exempts developing countries from commitments on "de minimus" reduction of farm subsidies and allows for negotiation of reduction of bound rates and not effective rates.

Nath could appreciate that any agreements on agriculture and services could be achieved only by allowing enormous flexibility and that it is unwise to expect dramatic reforms only from rich countries. The developed countries, interested in large and growing markets of developing countries, engaged only the developing countries in NG-5 negotiations.

The least developed countries, exempted from major commitments, were left out of the negotiating process, although tariff cuts by richer countries will hurt them by erosion of the preferences that they get.

Their active involvement and support will be necessary to strengthen the WTO and take the Doha Development Round forward.

tncr@sify.com