Carrot and stick, carrot and stick, carrot…
International trade negotiations are not as opaque as they are made out to be. If you read newspapers, follow international winds and keep an ear to the ground, you can participate in the process of influencing the writing on the wall before it emerges as a treaty text you are forced to sign. The World Trade Organization’s (WTO) summit that concluded recently in Nairobi (Kenya) has little if no good news for India. At his post summit presser Director General of the Geneva-based WTO Roberto Azevado said the agreement was ”historic” and “will improve the lives of those who most need to benefit from trade, especially those in Africa.” This kind of poorest of the poor and extreme hunger versus hunger talk is a fig leaf – it has always been one. Imagine if all the efforts to save poor people succeeded? The WTO and the United Nations (UN) and all its agencies would be out of a job. So would be many national government agencies. That’s a lot of unemployed bureaucrats.
The WTO summit in Nairobi was not good for India. Ground has given from under India’s feet in areas such as investments, environment, labour standards and competition policy, for example. There is impasse on subsidy for agriculture and public stock holding which will directly affect India’s public distribution system (PDS). Observers say this is the consequence of India ceding its bargaining chip by signing on to the Trade Facilitation Agreement (TFA) under pressure from the United States (US) without securing something for itself. While it was widely announced that a record $3trillion would accrue to world trade once TFA was signed, it was unclear how and where that would come from and go to. On those negotiations, Union Commerce and Industry Minister Nirmala Sitharaman had to hit the ground running. In Nairobi, things were different. She put up a brave face saying India was disappointed but the world – and India - knew it was coming. The Narendra Modi government, like other governments before it, has systematically bowed to pressure from the US and the European Union (EU). The downward slide was set in place over two decades ago when India short-changed itself at the Uruguay Round. India let India down – blaming developed countries is no longer spinning. One negotiator told The News Minute “It looks like India has borrowed a page from Mother Teresa – give, give, give, till it hurts.” As the Doha Round collapses New Delhi is once again left holding the short-end of the stick.
History, history, there’s no mystery
The General Agreement on Tariffs and Trade (GATT) – which preceded the WTO - came into being in 1948 as a loose and temporary agreement. It remained a provisional treaty for 40 years, a contract among governments acceding to it and not a treaty requiring ratification by national governments. Its provisions dealt mainly with the exchange of tariffs and trade concessions and there were some clauses ensuring that concessions granted to imported products would not be undermined by governmental interference. Post the Uruguay Round, GATT became the WTO, the world’s free trade policeman and the third leg of the Bretton Woods institutions which till then included, the World Bank and the International Monetary Fund (IMF). The WTO was a single undertaking which meant countries could hit each other intrusively and across goods and services and question domestic law. If you don’t buy our computers or cars, we will not buy your mangoes was the way forward. If necessary, trade embargos could be imposed. “The Uruguay Round will do to the next century (21st) what gunboat diplomacy and colonisers did to the last century (19th), wrote Chakravarti Raghavan, the Geneva-based global authority on trade and development issues. In his incisive book Recolonisation – GATT, the Uruguay Round and the Third World, Raghavan argued that the efforts of the developed countries directed against the developing world and aimed at circumscribing their process of industrialization and autonomous development were not without parallel – 18th century Britain and North America had waged similar battles on each other and later together against their colonies and spheres of influence.
Round, round, Uruguay Round
The Uruguay Round was not an attempt to put the clock back. It was an effort to remake the clock so that developing countries remained permanently behind on the curve of economic and technological progress. Countries that blinked had to leave the room – that’s how severe the pressure was on capitals in the developing world to sign up. Almost 30 years ago, this round of multilateral trade negotiations that was launched at the seaside town of Punta del Este in Uruguay lasted for eight years. Held under GATT’s auspices the trade talks were billed as the most complicated and ambitious of any post World War 11 multilateral negotiations. Unlike those that preceded it, this round aimed to go much beyond facilitating trans-border trade in goods.
The 15 items on the Uruguay Round’s agenda were a mix of traditional and new issues. There were normal market access issues for products, there was agriculture where GATT rules had not been applied and there were some systemic issues. Then were the new issues -– trade in services, intellectual property rights (TRIPS) and trade related investment measures (TRIMS). This single-undertaking treaty was like none before and it redefined the rules of trade. India was just opening up as a market and standing against it was the European Union (EU), USA and Japan. When asked what the WTO rules and later amendments would mean for countries like India, a top European negotiator joked “Well, when elephants make love, the grass beneath is bound to get crushed.” The writing on the wall could not have been more crass or crude. A handful of Indians protested. Among them was Sarang P. Shukla who has held key positions like India’s commerce and finance secretaries. He made it plain that unless India bargained stoutly, it would lose on all fronts. Developed countries wanted his wings clipped. Whoever got him away from the talks would win a lottery was the word in Geneva. They succeeded. Could India have blocked the negotiations? No. Could India have granted concessions in return for what it wanted? Yes. India didn’t trade well then. The slide was set – it moved only in one direction, steadily against India assisted unfortunately by vested interests in New Delhi. Something similar happened at the recently concluded COP21 climate talks in Paris.
Chakravarti Raghavan’s Office Is On the Fifth Floor
Chakravarti Raghavan is to trade and development issues what Amitabh Bachchan is to the world of Indian cinema – God. Former head of the Press Trust of India (PTI) he took on Indira Gandhi during the Emergency. A man of uncompromising integrity and intellectual honesty, it was believed that many governments were willing to pay him or secure a top UN job for him in return for his silence. Former Indian Prime Minister Manmohan Singh is Manmohan to him – Raghavan is on first name terms with anybody who is anybody in the world of international trade. From his 5th floor office at the United Nations’ European headquarters in Geneva – a stone’s throw from the WTO - Raghavan wrote daily in his SUNS newsletter about the politics and history of trade talks. Rookie in this world and not knowing what to expect when I landed in Geneva, I knocked on his door. Come in, I heard. I want to learn about GATT, I said. He gave me a set of books saying we can have a discussion after I have read the books. I remember this like yesterday. This was in 1984. I could not have found a better teacher. Legend had it that if Raghavan scolded you, it was a good sign. I was scolded. Often. The reason I write about this fine gentleman now is because you cannot write about WTO without saluting him. If you have an interest in trade issues, do read was he has to say – its is global economic history and politics.
Here we go around the Doha Round, the Doha Round, the Do…
The Doha development round or The Doha Development Agenda is the ninth round of trade negotiations since 1945 and the first after the coming into being of the WTO. Diplomatically stated the 157 countries who sit around the table seeks to lower trade barriers around the world but in gunboat diplomacy language, the effort is to blast open developing country markets. A former US Trade Representative (USTR) said as much when she announced that she would open developing country markets with a crowbar. India, potentially the democratic world’s largest single market, is hugely attractive.
The Doha Round was supposed to cut import taxes (tariffs) on almost everything from food to machines, textiles to technology. It was also slated to curb countries’ use of subsidies for farmers and fishermen, lowering taxes and regulatory barriers that affect cross border trade in services such as banking. Most importantly for a country like India that has a respectable pharmaceutical industry, the Doha round was also negotiating new intellectual property rights and patents on drugs.
This round broke down in 2008 because countries could not agree on agriculture subsidies, industrial tariffs, non-tariff barriers (NTBs) and services. The crack is now deep and wide with EU, USA and Japan on one side and large developing countries like Brazil, India, China and South Africa. For all practical purposes, the Doha Round is dead – it died months before the recent Nairobi summit. What this means is that bilateral pressure on India will mount. This also means India can push for access to life saving drugs. For that to happen, Indian negotiators need the unwavering political backing of the government. Will they, won’t they?
No bright spot that – India and multilateral negotiations
Indian negotiators can be a formidable force. Diplomats around the world will tell you that the stamina and brilliance of Indian negotiators is something the world must learn from. But here’s the sting. A Chinese scholar – diplomat told this reporter that one Indian intellectual was equal to two Chinese intellectuals. “But two Indian intellectuals are equal to half a Chinese intellectual,” she said. The penny dropped. Indians are not seen as team players. In fact, it is well known that Indian negotiators often have to go out deep into troubled waters without adequate political backing and sometimes not even a set of oars to row back. Typically, Indian politicians like to play victim so it gets them hero status at home. The Nairobi summit and the climate talks in Paris – COP 21 – are good examples of how an issue is framed and raised to a crescendo and then swift retreat begins with side meetings and non-transparent procedures.
New Delhi has now taken a strategic decision to agree to many demands by Washington including some that are not in India’s interest. It is high time we drop the pretense. Everybody knows. Many countries do not trust India precisely because of what happened in Nairobi where New Delhi broke ranks with the developing to negotiate the final text with the EU, US, Brazil and China.
In a galaxy not far from…
Meanwhile, a new force has emerged on the scene. It is called the Trans Pacific Partnership (TPP), a trade agreement under negotiations between nine countries – USA, Australia, Brunei Darussalam, Malaysia, China, Chile, New Zealand, Peru and Singapore. Technically, it does not include India. Politically everything in the Indian market will be influenced by it - more of that in another post.
Chitra Subramaniam covered the Uruguay Round from start to finish.