There is an interesting comment made by Nancy Birdsall and Arvind Subramanian in the OP-ED of 25th April, Wall Street Journal. Interesting because the articles tries to bring out how rising food prices can lead to win-win situation to “collectively agree to policies that promote trade and efficiency” in forum like WTO. The last few negotiations over at WTO didn’t pan out anything substantial and the authors hoped, this time the rising food price might be seen as a boon as the focus of negotiation will shift from agricultural subsidies and high tariff barriers – the two main issues the developed and the developing nations were at loggerheads.
Despite this interesting argument, I am still little less optimistic about the future outcome (read, success in terms of win-win situation) at WTO. This is mainly because of India negotiating stance - the much touted leader of developing group of nations at WTO. Typically, trade negotiations revolve around issues relating to market access — the ease with which countries can sell in one anothers' markets. Though the WTO has curbed tariffs barriers, the cause of concern is the non-tariff barrier (NTB) that are used to prevent market access to genuinely competitive producers. Since any negotiation involves give and take, gains would be most if a country gets access to the markets of other nations in the product(s) in which it has comparative advantage.
The problem with negotiating within a group is each country's interest may not always be best represented. Before the formation of the WTO, India was not very active in the GATT forum, but preferred to discuss trade issues at Unctad in association with G-77 (an association of developing countries).
A Passive Stance?
Even during early days of the WTO, India's negotiating stance at various ministerial meetings was often criticised as being passive or excessively defensive, that is, not pressing hard for market access for its exports.
Over the last few years, however, New Delhi has realised the advantages of a collaborative negotiating strategy and the number of submissions to the WTO in association with other developing countries has increased.
It has played a key role in the formation of a number of developing country groupings, the G-110 and NAMA (non-agricultural market access)-11, being the latest, at the Hong Kong Ministerial (December 2005).
Enhancing Market Access
Though India was not focussed on NAMA, ahead of the Cancun ministerial, it submitted many proposals to enhance market access in manufacturing products.
In 2005, India made a joint submission with Argentina and Brazil seeking increased market access.
Indirect negotiations towards increasing export of non-agricultural products were, however, always in place. Indian submissions under General Council mainly focused on hindrances to trade in textile and garments, increasing use of anti-dumping measures, etc. In addition, submissions made under the WTO Rules have focused on adverse impact of the preferential Rules of Origin (ROO) requirement, as also anti-dumping and countervailing measures on industrial products.
Relative to agriculture and manufactured items, India has been more aggressive in negotiating market access for services. But this is not surprising as India's comparative advantage lies in this sector. Trade in services accounts for 30 per cent of India's exports; India's business process outsourcing (BPO) sector is a $ 7.7-billion industry — seven times its Chinese counterpart.
In addition, the movement of natural persons (Mode 4), mostly from the Information Technology sector, contributes significantly to India's export earnings. Therefore, growth of service sector and getting market access for the same have always been priority areas for India.
Its stress has primarily been on Mode 1 (cross-border supply, such as BPO) and Mode 4 (movement of natural persons), both of which are subject to several barriers.
India is usually criticised for not giving enough market access to services falling under Mode 3 (commercial presence in the domestic market, such as foreign banks setting up operation in domestic market).
India is using this argument to negotiate a better market access for services falling under Mode 1 and Mode 4 — areas in which India has comparative advantage.
Coming back to agriculture, unlike many developing countries, India is rather passive when it comes to negotiating for greater market access.
Given its limited agricultural export interest, India has maintained a defensive stance. On the contrary, Brazil, Mexico, Chile, South Africa, etc., with greater exports interest in agriculture, are quite proactive on this issue. Also, India is unwilling to reduce tariffs barriers for agricultural commodities.
It is not because farmers in India are inefficient (the actual difference between world price and domestic price is less) and that India needs high tariffs to protect them. The government fears that reducing tariffs will harm marginal farmers. Hence, India's defensive stance when it comes to reducing tariffs on agricultural items.
Advantage India
On the other hand, Mode 1 and Mode 4, where India has comparative advantage, are not areas of strength for many G-20 or G-24 countries.
Naturally, India has to ally with developed countries, such as the US and Australia, on this issue.
For instance, in 2005 it submitted a joint proposal at the WTO in association with the US and Taiwan on trade in computer and related services.
Current Stance
Thus, India's negotiating stance has been on ensuring better market access in the case of agriculture and manufacturing, with limited commitment on the domestic front, and in the case of services, the approach has been proactive in the areas of core competence (Modes 1 and 4).
The future success of collaborative negotiation by developing countries is not too obvious.
Though groups such as G-20 and G-110 are formed to get greater market access for developing countries' exports, there exist considerable differences among members.
Forming a `negative' alliance against the EU-US agricultural policy has been an easy exercise, but sustaining it through `positive' steps — that is, through joint offers — would be difficult, unless the members have something to offer to trade among themselves.
Post by Nilanjan Banik
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