Seeing no progress on the stalled multilateral trade talks, potential partners are keen on bilateral pacts with India.
Nine years after New Delhi started implementing its Plan B — bilateral trade agreements — to beat the impasse at the World Trade Organisation’s Doha Round of liberalisation talks, India seems to be finally rolling.
By the end of the year, agreements with Japan and Malaysia are expected to be signed, while substantial progress has been made in talks with the European Union for what will include agreements for trade in goods and services, intellectual property rights and government procurement.
Last fortnight, Commerce Secretary Rahul Khullar finalised a deal with Japan, and by next month the contours of an agreement with the EU are expected to be ready.
While India had a slow start, with only an early harvest scheme with Thailand covering 80-odd products operationalised, things seem to be falling into place. The agreement with Asean, which is at present confined to trade in goods, has been operationalised by only five countries. And, progress on negotiations for an agreement in services has been slow.
There is an agreement with South Korea that has been inked, but given that it’s been only a few months since it was operationalised, there is nothing much to talk about. “You should give time to assess the impact of the agreement,” Khullar said recently.
But, the Comprehensive Economic Cooperation Agreement with Singapore is being dubbed a success, and there is already a request from the island nation for a review with a possibility to enhance its coverage. Besides, there is the South Asian Free Trade Agreement and other deals that predate the talks in Cancun, Mexico, which really provided a thrust to India’s strategy for bilateral trade deals.
The Doha Round has lasted longer than the previous Uruguay Round, which lasted eight years. “In the Uruguay Round, there were more than 100 countries participating, but the shots were called by a handful of them. Today, this is certainly not the case. There are 153 members in the WTO and dozens are active in this round, many of them active across numerous sectors and obtaining consensus among so many players is difficult,” said WTO Director-General Pascal Lamy in an e-mailed response to a questionnaire from Business Standard.
“Then came the economic crisis. For highly understandable reasons, many governments turned all their energies to combating the most threatening economic circumstances in eighty years. This was right and necessary, but in so doing, countries took their feet off the Doha accelerator,” Lamy added.
He also admitted that what is currently on the table is not enough to close the round. “However, now when the countries are emerging from the crisis, they are looking for sources of economic growth, which are fiscally sound and trade provides just that engine for growth. We have seen in recent weeks a new dynamism in the Doha negotiations,” he said, referring to the recently concluded WTO general council meeting.
Former commerce secretary Dipak Chatterjee said that until the global economy recovers fully, it would be difficult to get all countries to agree on the Doha Round.
“The question that needs to be addressed is what date can now be a realistic target for bringing the trade talks to a successful end. As economic recovery in developed economies is expected to be slow, some believe the earliest opportunity might come at the end of 2011. However, others reckon that full recovery may take the better part of next year and the year 2011 also may be lost. Since 2012 is ruled out because of the Presidential elections at the end of that year, the worst case scenario is that conclusion of the round could drag on to 2013,” said Anwarul Hoda of ICRIER.
By the time those talks conclude, India would have added several more trade pacts to its list, since there are a host of agreements in the pipeline, including those with Mauritius, Israel, Australia, New Zealand and Japan.
“The inability of WTO to deliver has obviously shifted the focus to bilateralism. However, bilateral deals cannot substitute for WTO simply because these agreements will not be able to provide the institutional framework necessary to implement them in an efficient and effective manner,” said Biswajit Dhar, director-general at think-tank Research & Information System for Developing Countries.
A senior commerce department official said trading partners are even keener than India for trade deals. “It is a question of what I will get if I enter into an agreement with India before my neighbour or competitors get into one,” said an official who did not wish to be identified. Besides, some countries are trying to strike a deal that is better than what others in the trading block have got. A case in point is Asean, where members like Malaysia are trying to go beyond what has been offered.
| PLAN B | ||
| INDIA’S BILATERAL TRADE TALKS | ||
| Partner | Start of talks | Status |
| Thailand | 2001 | Under negotiation; likely to be signed in 2010 |
| Singapore | 2002 | Signed in December 2007; to be reviewed |
| Sri Lanka | 2003 | Under negotiation |
| Mauritius | 2003 | Under negotiation |
| China | 2003 | Joint feasibility study underway |
| Asean | 2003 | Trade in goods pact signed in August 2009; agreement on services to be signed soon |
| Malaysia | 2004 | Likely to be signed by December 2010 |
| BIMSTEC | 2004 | Under negotiation |
| GCC | 2004 | Under negotiation |
| Japan | 2005 | To be signed in October 2010 |
| SACU | 2005 | Under negotiation |
| Chile | 2005 | Signed in March 2006; to be reviewed |
| Israel | 2006 | Under negotiation |
| SAFTA | 2006 | In force |
| EU | 2006 | Under negotiation |
| EFTA | 2008 | Under negotiation |
| Australia | 2008 | Joint feasibility study underway |
| Nepal | 2009 | Treaty in force until 2016 |
| South Korea | 2009 | Under negotiation |
| New Zealand | 2009 | Under negotiation |
| Indonesia | 2009 | Joint feasibility study underway |
| Turkey | 2010 | Joint feasibility study underway |
| Pakistan | _ | No formal agreement; Most Favoured Nation status accorded |
| Asean = Laos, Vietnam, Singapore, Thailand, Malaysia, Indonesia, Brunei, Cambodia, Myanmar, Philippines BIMSTEC = Bangladesh, India, Sri Lanka, Thailand, Myanmar GCC = Kuwait, Bahrain, Saudi Arabia, Qatar, UAE, Oman SACU = South Africa, Lesotho, Swaziland, Botswana, Namibia SAFTA = India, Pakistan, Sri Lanka, Bangladesh, Bhutan, Maldives, Nepal, Afghanistan EFTA = Switzerland, Iceland, Norway, Liechtenstein | ||
Whatever the reason, India’s approach to trade talks has also evolved in the last seven years. For instance, the cloud of secrecy has given way to a consultative process, where industry associations and trade bodies are consulted and their concerns taken on board. FTAs are generally negotiated based on the feedback of the industry chambers and associations, which form the main basis of the negotiating text for the government. Even though the ministry of commerce and industry negotiates the deals, inputs and suggestions are also sought from other ministries and departments.
“Whatever is signed is placed in the public domain, so that everyone knows what we have done,” the official said. As a result, the industry uproar following the signing of the Early Harvest Scheme with Thailand is now absent.
One reason for this is the improved political management of trade negotiations. Prime Minister Manmohan Singh created a new institutional framework for trade policy formulation within the government by creating the trade and economic relations committee (TERC), which includes the Cabinet ministers for external affairs, finance, commerce & industry, agriculture, deputy chairman of the Planning Commission and senior officials. TERC has played an important role in securing governmental green signals for FTAs. It has enabled the external affairs ministry to bring to bear considerations relating to foreign and strategic policy on FTAs. When the India-Asean FTA faced domestic political hurdles, for example, it was the external affairs ministry that gave the needed push by underlining the importance of closer strategic relations with Asean.
That apart, Indian industry’s attitude to FTAs has changed. “You cannot compare India of seven years ago with the India of today,” said a commerce ministry official. Over the last few years, Indian industry has also realised it can compete favourably in the global marketplace. “Besides, it has realised that we may have a scarcity of some product today, but five years from now, we might be world-beaters. We are factoring all this in when we go out to negotiate,” the official added.
“Trade deals that we have signed have definitely produced results,” said S N Menon, former commerce secretary, who was involved with the initial work on many of the agreements.
“While some segments of domestic industry might have experienced some difficulties on account of preferential imports, mechanisms exist in the bilateral treaty to address the problems. On the other hand, it will also not be correct to link the rise in the number of bilateral trade agreements with the slow progress of the Doha Round,” added Abhijit Das, deputy project coordinator and officer in charge, Unctad India.
