The WTO Has Teeth That Bite
Time is not of the essence considering the WTO missed its own deadline of coming into force!
news Thursday, January 29, 2015 - 05:30
Chitra Subramaniam | The News Minute | July 31, 2014 | 08:19 am IST Geneva: When George Bush (the father) sent his trade representative Carla Hills abroad to open markets for their trade products, he presented her with a crowbar with which to stamp his determination to pry open anything that stood in the way of his definition of free trade. The lady arrived in Geneva, metaphorically brandishing the farm instrument and hurling words at all including the India which in the 1990s was learning about trade liberalization. At one point New Delhi was so mesmerized by Californiaâ€™s almond growers, it promised to import them into India as soon as the countryâ€™s balance-of-payments (BOP) situation was back in the black.Â Canâ€™t accuse papa Bush or Ronald Reagan before him of being dishonest â€“ the more recent pirates in three-piece suits on both sides of the Atlantic say the rules will help the poor and the very poor. Over 800 million Indians are not part of any market, much less an international one and depend to a very large extent on the state to survive. And this excludes electricity, water and healthcare. That is the story of India meets WTO which readers of The News Minute (TNM) have asked us to explain. Is India a party spoiler now as it balks at the Trade Facilitation Agreement (TFA) in Geneva?Â As the deadline to sign the TFA approaches at midnight on Thursday, naysayers are beating the drums and taking to the social media pointing fingers at India for holding up a deal which reportedly will add a trillion dollars to world trade and create 20 million new jobs. Whatever happens tomorrow, heavens will not fall. India may need to review its conversations and negotiating angles, but the principle of seeking guarantees for its own food security cannot be in doubt. The crowbar has been used against India when punitive sections of US trade laws were slammed on New Delhi. This New Delhi, however, is a little different â€“ something that even New Delhi is discovering, much less other capitals. Time is not of the essence here considering that the WTO missed its own deadlines to come into effect! We bring you a simple explanation of the WTO which polices trade between countries and every now and then stops traffic for some VIPs to pass, much to the exasperation of the general public. The worldâ€™s only multilateral trading organization is exactly that â€“ it decides on rules of trade between countries which are called contracting parties because it is a contract between countries on everything they buy and sell from mangoes to AIDS vaccines, cars to toothpaste.Â The WTO currently has 160 contracting parties, up from the 123 when it was created in 1995 at the end of the last round called the Uruguay Round, thus christened as it was launched in Punta Del Este in Uruguay. The current round called the Doha Round takes its name after the country it was launched in. The laws written at the WTO have to be ratified by national parliaments which a stipulated time-frame that can be calibrated depending on several factors including which category a country falls into â€“ developed, developing, least developed, etc.Â The WTO is based in Geneva, Switzerland which is also the European capital of the United Nations (UN) with one critical difference. The UN can pass resolutions that can make a country or a region feel good or bad, but the WTO can impose trade sanctions that can hurt and distort trade in ways that can make a country cry.Â The WTO is not just about trade liberalization â€“ it also has rules to support or install trade barriers to protect consumers, prevent the spread of disease or save the environment. Some of these barriers are called non-technical barriers (NTB) to trade as they are not about tariffs. The current EU ban on mangoes from India until further review is an NTB as the EU says the mangoes do not meet their standards of hygiene and can cause disease in salads in Europe, among other produce. It also has a dispute settlement mechanism where itâ€™s policing rules kick in to ensure that countries are neither dumping into or starving pipelines and products.Â There was life before the WTO and it was called the General Agreement on Tariffs and Trade (GATT), which remained a provisional agreement between countries from 1948 and 1994, proving rules for a large portion of world trade. In that avatar, the developed countries produced the Multi-Fibre Agreement (MFA) which worked against Indiaâ€™s textile exports till such time that Europeâ€™s textile exporters â€“ Italy, Spain etc â€“ caught up with India. This â€ścatching upâ€ť clause was in place for over 40 years. In fact, the origins of the MFA can be traced back to the textile mills of Lancashire which after the wars in Europe had lost ground to India.Â The WTO in its current form is the third leg of the Bretton Woods agreements, the other two being the World Bank and the International Monetary Fund (IMF). The need for a single trading contract was hastened by the fall of the Berlin Wall in 1989 and the subsequent liberalization of many markets including India that afforded huge opportunities as they no longer belonged to any blocs. But, the WTO differs from GATT in a fundamentally huge way â€“ it is a single undertaking. What that means is that if India accepts one WTO rule, it accepts all unlike GATT which allowed countries to apply rules independent of one another.Â When the GATT became the WTO at the end of the Uruguay Round, it was the biggest and largest change the international trading system had seen since the wars. In addition to traditional issues like reduction of tariffs and non-tariff restrictions on imports, it called for a complex undertaking or many different and simultaneous negotiations on new issues like trade-related intellectual property rights (TRIPS), trade-related investments (TRIMS) and services. In more ways than one, it profiled the lack of development in many large countries like Brazil, China and India without offering any innovative solutions other than a laissez-faire model couched as progress.Â The WTOâ€™s ambition is to stimulate economic growth and cut costs of doing business internationally. A decade is too short a time to take a call about 160 countries all seeking to find a place in the sun for their goods and services. For the moment the very fact that representatives of 160 countries sit around a table and talk is a tribute to the necessity of a rule-based trading system.Â Read more:Â WTO-TFA-India â€“ Itâ€™s About Food, Not Cakes, Stupid!