Candor at Cancun

A second non-starter is the recurrent plea of some misled lobbyists like the leaders of the Bharatiya Mazdoor Sangh and some self-educated 8216;8216;economists8217;8217; of the Swadeshi Jagran Manch that India must walk out of the WTO. China paid a heavy price negotiating its entry, Russia continues to petition and India, an early entrant, must quit? For a continental country with a mere 0.6 per cent share of world trade and aspiring to increase that lowly share without preferential access to any major market, membership of a multilateral regime like WTO is useful. Nothing more, nothing less. Quitting WTO is not a practical option for India. Which implies we stay in and negotiate. Negotiate a regime that enables us to pursue our development goals while becoming increasingly open to external trade and investment flows. Foreign trade and investment need not be viewed as hurdles to development but as one more means of pursuing it. Sure, there could be a conflict of interest between domestic business interests and foreign interests and that is where a regime like WTO helps provide a framework within which these conflicts could be resolved.

So what is Cancun all about? Most developed and many newly industrialising economies have come to believe that the process of trade and investment liberalisation set in motion in the 1960s and after should be further accelerated and widened. On this there is now a broad global consensus. However, this consensus breaks down when it comes to the question of speed and scope. Having eliminated quantitative restrictions on trade, exporting economies have been seeking reduced tariffs. Most Asian economies have reduced their tariffs below India8217;s current 8216;8216;peak8217;8217; rate of 25 per cent. Many economists in India believe we can afford to reduce our tariffs to 10 per cent by 2005. Here India finds itself in a minority in WTO and must be prepared for further tariff cuts. There is a proposal for zero tariffs by 2015 in seven areas, including leather and footwear, marine products, gems and jewelry, auto components and textiles, where India would gain being a major exporter. However, the European Union has been dragging its feet on altering its agricultural support programme that has distorted global trade in agriculture. Both developing and developed countries want EU to reduce its trade distorting export subsidies in step with efforts to liberalise trade in industrial products and services. An adamant and protectionist EU is refusing to budge. This is a major clash that may bring the WTO to the brink of ruin if wiser counsels do not prevail.

In the area of services, the US wants more liberalisation because it sees services as an area of its comparative advantage. India can afford to be pro-active in this area because we have emerged to be competitive. Services are divided by WTO into four categories, or 8216;8216;modes8217;8217;, and it is in mode 1 and 4 cross-border movement of professionals that India can hope to gain more. Mode 1 includes outsourcing of services ranging from business processing BPO, where India is already ahead, to legal and financial services, where India can benefit a great deal, contrary to the fears expressed by protectionist lobbies of vested interests.

Next, there is the issue of trade-related intellectual property and the specific demand of many developing countries that the regime on patent protection be liberalised to enable poor countries to secure access to cheap drugs when faced with medical emergency. Here India has taken a principled position and one can only hope, at this point, that a deal is struck at Cancun, since it seems possible at this stage.

Finally, there are the so-called Singapore Issues, brought into WTO discussions but not yet negotiations. These are rules pertaining to investment, competition, government procurement and trade facilitation. India has resisted negotiations on these issues mainly because it does not want a multilateral regime for investment flows that curtails the government8217;s right to act as a gatekeeper for foreign investors. However, if this bag of four issues is 8216;8216;unbundled8217;8217;, India may take a more relaxed view.

WTO negotiations are about many other issues as well. But the above four are the major focus points and it is possible for some 8216;8216;give and take8217;8217; at Cancun. India is in fact on a stronger wicket today than at any time in the post-War period of multilateral trade negotiations. This new sense of national self-confidence must come through our negotiating stance. Sure, we must expose the hypocrisy of the developed countries that want trade liberalised in sectors where they are strong and seek protection where they are weak, despite the huge developmental gap that separates us from them. On the other hand, there are weaker economies that seek favours from India and we must be ready to extend them. It is a game of give and take.

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