Paradigm Shift at Nairobi WTO Ministerial Talks

Trade Ministers from 162 countries of the World have assembled at Kenyan capital Nairobi, between Dec 15-18 to arrive at a consensus on liberalizing trade and give final push to the Doha Development Agenda (DDA) which was stalled since 2001. The special focus for the 10th WTO Ministerial conference at the Kenyatta International Convention Centre was agriculture, services and industrial tariff. This year marks the 20th anniversary of WTO (World Trade Organization), created under the Marrakesh Treaty replacing the General Agreement on Tariffs and Trade (GATT). GATT came into existence after World War II along with Bretton Woods Institutions of World Bank, IMF and ITO (International Trade Organization). ITO, initially created to address trade related issues, employment, investment and commodity agreements as an allied agency of UN couldn’t be rolled out as US didn’t approve it. In absence of an international organization for trade, GATT took over the trade till an institutional mechanism came into force. WTO is an intergovernmental organization that control the international trade by providing a framework for negotiating trade agreements, resolving disputes and enforcing the adherence to WTO agreements by member countries.

Under WTO’s predecessor GATT, seven rounds of negotiations occurred. Ministerial conferences, which meet once in two years are the highest level decision making body of WTO. The fourth ministerial conference held in Doha in 2001 had an ambitious agenda of increasing global trade by lowering the trade barriers through slashing subsidies. Termed as the Doha Development Round or the Doha Development Agenda, it was congruent with growth aspirations of the developing countries. The Doha agenda included two declarations- first one included negotiations on agriculture and services- referred to as Doha Development Round. Second agenda included industrial tariffs, changes to WTO rules, aspects related to developing countries and an agreement on Trade- Related Aspects of Intellectual Property Rights (TRIPS). Doha declaration called for phasing out all forms of export subsidies, and “substantial reductions in trade-distorting domestic support”. It provided special and differential treatment for developing countries. Domestic support, export subsidies and market aspects became key pillars for agriculture negotiations. China has become member of WTO during Doha conference where the implementation of patent systems in Least Developed Countries (LDC) is deferred by 2016.

Following the stalemate of the Doha talks, subsequent rounds held in Cancun (2003), Hong Kong (2005) aggressively pursued the agenda but the developed countries led by EU, US and Japan and developing nations under India, Brazil, China and South Africa failed to arrive at conclusion of negotiations by the first deadline, January 2005. Negotiations were stalled after breakdown in 2008 over disagreements in agriculture, industrial tariffs, non-tariff barriers, services and trade remedies. In the meanwhile, India was repeatedly blamed for breakdown of negotiations but 100 countries supported India’s claims that livelihoods of farmers would be at stake if the threshold of Special Safeguard Mechanism (SSM), was high. SSM is a measure that allows countries to protect the interests of domestic farmers by imposing import tariff on agriculture goods in case of price fall or import surge. Besides, a study by University of Michigan indicated that if trade barriers in services, agriculture and manufactured goods are reduced by 33% as per DDA, global welfare would increase by $574 billion (1). But following disagreements over the Doha talks, countries are now entering into agreements in smaller groups. Thus recently the groups like Trans Pacific Partnership (TPP) (nearly finalized), Trans- Atlantic Trade and Investment Partnership (TTIP) and Regional Comprehensive Economic Partnership (RCEP) are actively working to recalibrate the existing trade practices to accrue financial benefits.

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For the past several years, WTO is witnessing huge rift between the developed and developing countries over the DDA, wherein developed countries led by the US are keen on foregoing the DDA and rallied for more market access for their domestic producers. India, China and South Africa has been vocal about special and differential treatment for developing countries.

While current talks at Nairobi failed to evolve at a consensus, India managed to obtain Special Safeguard Mechanism (SSM) to protect interests of poor farmers of developing countries and affirmation from member countries to work towards permanent solution for stockholding food grains. SSM facilitates India to scale-up tariff barriers to protect the small and marginal farmers. Developed countries raised the bar of imposing SSM, by contending that it can introduced when agricultural imports crosses 40% in a sustained manner. India, insisted on using SSM when imports raise by 10%. Earlier at Bali, India despite stiff opposition from the US managed to obtain a right to hold huge amounts of food stocks in exchange for its support to the World Trade Facilitation Agreement (TFA). Public stock holding for food security is vital for developing countries like India (2).

The reaffirmation of the DDA rallied by New Delhi failed to find a place in the Nairobi Ministerial Declaration (NMD) or the Nairobi Package finalized after hectic negotiations for five days. Significantly, while the DDA agenda was literally buried, new issues were identified for discussions. The final draft, largely an outcome of series of negotiations carried out by the US, EU, China, India and Brazil mirrored the demands of US and conveniently avoided reaffirmation of DDA. Ironically the twitter hashtag #IndiablocksWTO was trending throughout entire duration of the meetings, implicating India for blocking the negotiations, while the dubious propaganda was indeed launched by the west on the social media.

In a marked departure from the “consensus-based decisions” the voices of developing countries like India, China, G-33, Least developed Countries (LDC), African Group and the ACP groups (African, Caribbean and Pacific) were largely ignored for the first time at the Nairobi talks. Developed countries hailed the Nairobi package who argued that in the 20 years history of WTO Doha talks significantly consumed 14 years and still negotiations over DDA couldn’t be concluded successfully. At Nairobi, developed countries have agreed for ban on export subsidies immediately while developing countries must follow by 2018 and global trade on IT products was liberalized. Developing countries can support transport and marketing costs of agricultural exports till 2023. Poorest countries are bestowed with more concessions and products coming from sub-Saharan region are given preferential treatment in the global markets. WTO has struck Information Technology Agreement in July 2015 to cut tariffs on $1.3 trillion worth of technology products (on nearly 200 products) (3). This move will indeed boost the manufacturers of various IT products like video games. Computer chips, GPS devices, medical equipment, printer cartridges etc., creates more jobs boosting the economy. Developed countries opined that removing export subsidies will help the farmers of poor countries to compete fairly. But Indian civil society was deeply disappointed as eliminating export subsidies might aggravate the crisis of sugarcane farmers. They opined that Nairobi talks spelt death knell for Indian agriculture and that New Delhi has meekly surrendered at Bali without getting much in return. At Nairobi, Afghanistan and Liberia joined the WTO taking the tally to 164 countries.

Economic crisis of 2008 has impacted all global economies and most of them failed to recover yet. By and large developed countries having lost their patience, have decided not to let the niceties for developing countries plague the agenda of the WTO talks, have  collectively opposed negotiations on Doha agenda. Developed countries battling under recession now want emerging economies to open up their agriculture, services and manufacturing sector. But intriguingly, market access to developed countries is not fully resolved. Besides, EU has been forcing India to impose cuts on the farm subsidies while they (EU&US) remained deeply uncommitted about their own agriculture subsidies.

But in any case, India’s agricultural subsidies are proving to be largely inefficient and unsustainable over a period of time. It is time to reform the agriculture subsidy system in India by moving onto direct cash transfer which is more effective and WTO-compliant. Further this will reduce burden on country’s exchequer even. Moreover, with economies largely aligning themselves into regional trade agreements, India can no longer afford to evolve a system wherein Indian markets and domestic producers can remain uncompetitive in the global market. With emergence of mega-trade blocks at faster pace, India might be forced to bring about changes in its IPR laws even.

 

 

  1. http://fordschool.umich.edu/rsie/workingpapers/Papers476-500/r489.pdf
  2. http://indianexpress.com/article/opinion/editorials/doha-development-round-world-trade-organization/
  3. http://www.bbc.com/news/business-33647358
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