WTO - India's Strategy or Failure - General Awareness

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Published : Tuesday, 29 December, 2015 09:15 AM

WTO – India’s Strategy or Failure

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Read General Awareness Topic: WTO – India’s Strategy or Failure

World Trade Organization (WTO) came into being on January 1, 1995 replacing the General Agreement on Tariffs and Trade (GATT) to regulate as well as facilitate the international trade in goods and services. Every two years, a Ministerial Conference of WTO is organized which is its highest decision-making body. Between December 15-19, 2015, the Tenth Ministerial Conference was held in Nairobi, Kenya where member countries adopted the ‘Nairobi Package’. Elements of the Nairobi Package are as under –

Export Competition

Members agreed to work for elimination of export subsidies, formulating new rules for export credits, international food aid and export by state trading enterprises. Collectively these issues are known as ‘Export Competition’. A decision to fully eliminate any form of export subsidies would be a significant step in the reform of agricultural trade because it would ensure that countries will not resort to trade-distorting export subsidies. The decision envisaged for the Nairobi Ministerial Conference would introduce legally binding commitments to fully eliminate export subsidies.

Agriculture has been the major bone of contention between the developed and developing countries like India where the US and the EU were on one hand demanding access to their goods in third world but were not ready to remove the export subsidies to bring a level playing field. Thus the export competition may serve as a major landmark of WTO negotiations.

Public Stockholding

Public stockholding programmes are used by some developing countries to purchase food at administered prices and distribute it to poor for food security. While food security is a legitimate policy objective, the public stockholding programmes are considered to distort trade when they involve purchases at prices fixed by the governments, known as “supported” or “administered” prices. The amount of support provided under the public stockholding programmes at administered prices is therefore counted as trade-distorting domestic support, subject to "Aggregate Measurement of Support" limits. Future negotiations would try to come on agreement on limit of public stockholding.

Special Safeguard Mechanism

The Special Safeguard Mechanism (SSM) allows developing countries to temporarily raise import tariffs on agriculture products in cases of import surges or price declines. Principally everyone agrees for SSM but there is disagreement on the modalities of SSM determination. At Nairobi, however, there was no time limit was placed on putting SSM negotiations which was demanded by India.

Cotton Negotiations

The proposal asked that cotton from least-developed countries (LDCs) be given duty-free and quota-free access to the markets of developed countries.

Preferential Rules for LDCs

Least-developed countries (LDCs) are the poorest countries in the world. There are 48 LDCs recognized by the United Nations of which 34 are members of WTO and two other Afghanistan and Liberia are under process. Rules of origin are the criteria used to determine where a product is made. But in current global scenario when various factors of production are sourced from different parts of the world, it becomes very difficult to decide on the country of origin. At Nairobi, the LDC Group proposal called for the adoption of a number of changes to make it easier to comply with preferential rules of origin.

India’s Failure

India was primarily concerned with the first three elements in Nairobi Package which included Export Competition,    Public Stockholding and SSMs. While the elimination of subsidies by the developed world would help in creating the level playing field for agricultural goods market, absence timeline for SSMs means that negotiations regarding SSMs would not be taken on urgent basis.

The worst thing that happened to India in Nairobi was that final draft omitted ‘Doha Development Agenda (DDA)’ and instead made a passer by reference to ‘Doha Issues’. In the past, India has maintained that negotiations on DDA first complete before adding any new issue on the negotiating table. In fact, Indian Commerce Minister also made her displeasure clear after the meeting.

India’s Strategy

WTO doesn’t work on the basis of majority but consensus which means that all members should agree to reach on a final draft. It is because of this reason that many WTO Ministerial Conferences ended in complete failure making no progress at all. Therefore India could have blocked the final draft if it was so detrimental to the Indian trade interests. The DDA was formulated at the Fourth Ministerial Conference held in Doha in 2001. In the past 15 years, since no progress was made on DDA, many members have started believing that DDA is a dead. By including issues other than DDA, from now onwards, India would be able to bring any new concern affecting it on the negotiating table like agreement on services. Since services are the fastest growing sector in India, a favourable pact on services would immensely benefit the Indian economy.

However, in reality, whether Nairobi was failure or just a change of long term strategy by India only time will tell. But for now, pushing DDA in the backdrop is indeed looks a failure.

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