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The Southern India Mills’ Association

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Goalless draw at WTO

The “collapse” of talks at last week’s trade ministerial may have raised questions about WTO’s future, but they did not go off too badly for India. Unlike the ministerials at Bali (2013) and Nairobi (2015), India did not concede any ground. At Bali, India agreed to trade facilitation rules in exchange for virtually nothing — a ‘peace clause’ till 2017 on its food procurement subsidies. At Nairobi, India unconditionally agreed to phase out export subsidies by 2023. Perhaps, India fielded a better prepared negotiation team this time.
The focus of the Buenos Aires meet was public stockholding and e-commerce. India, backed by China, managed to get the developing countries, including LDCs, to push for a permanent solution to public stockholding. To the credit of the Modi government, it managed to prolong the ‘peace clause’ soon after the Bali meet, till a permanent solution was arrived at — a view reiterated in Argentina. India’s joint paper with China on how the US and EU are chiefly responsible for trade-distorting farm subsidies has helped in pushing for a solution where the existing method of evaluating subsidies is dismantled. The WTO allows price subsidies to the extent of 10 per cent of the gross value added of the product concerned; the controversy over the years has been over which subsidies should come under scrutiny and manner of arriving at the market price, or fixed reference price, against which the amount of subsidy was calculated. With these wranglings not getting anywhere, and the rich countries managing to mask their subsidies while blaming the rest, there has now been a change of tack. That said, India should reconsider allowing exports out of its PDS pool (it is the world’s largest rice exporter) if it is to push towards a new regulatory order. A food security arrangement does not sit well with one that confers export advantage. By presenting a joint front with the LDCs on e-commerce and stalling efforts by the developed world to fast-track rules, India managed to buy time for its MSME-dominated brick and mortar trading sector. Efforts by the rich countries to introduce Singapore Round issues, such as investment rules did not gain traction. The Doha Round (2001) principles of according differential treatment to developing countries and not piling on issues extraneous to trade were implicitly underscored here.
But the question is what happens to WTO if there is no broad consensus on trade rules. It does not seem to matter much if the US plays spoiler in multilateral forums, as the progress on TPP and even climate talks seem to indicate. India cannot set store by FTAs, given its experience over the last decade. It needs to play a leadership role in working out a new multilateral trade paradigm, because that’s its best bet in an increasingly chaotic world. Inconsistencies between its positions at WTO and other forums such as RCEP need to be avoided.