Waking up to WTO

It is obvious that swadeshi is not the way forward. ‘‘No nation was ever ruined by trade,’’ said Benjamin Franklin. There is ample empirical evidence that the more a country trades, the more prosperous it is likely to be. An open, competitive economy, where the trade intensity nearly equals (or exceeds) 100 per cent of the GDP is the best guarantor of development and prosperity.

The WTO is, currently, the only legal multilateral institution. That is an important fact. All other multilateral institutions, including the United Nations, function not on the basis of rules, but on the basis of consensus (wherever possible) or on the basis of balance of power. The United States, for example, can ignore a resolution of the UN Security Council, but it cannot disobey a ruling by the dispute settlement body of the WTO. That 146 countries of the world have voluntarily agreed to abide by a set of rules is an awesome milestone in the political progress of the human race. Let us not, by silly or uninformed diatribe, undermine the enormous significance of this achievement.

Trade policy is not static. Trade policy will evolve over the years. The evolution will not be easy or along a pre-determined path. Member-countries will defend their interests. They will seek to ‘‘give’’ less and ‘‘take’’ more, but even while they do so, they implicitly recognise that trade negotiations among member countries is a matter of ‘‘give and take’’. Naturally, alliances will be formed. Regional Trading Arrangements (RTAs) will be forged so that countries belonging to a RTA can negotiate as a bloc. The member-countries will also strike alliances across regions or continents on the basis of being ‘‘developed’’ or ‘‘developing’’ or ‘‘least developed’’. All this should be taken in stride as natural features of any multilateral process — and not regarded as a conspiracy by the rich nations against the poor.

I have often emphasised the fact that India’s clout in Ministerial meetings will be proportionate to its ability to forge alliances. Murasoli Maran unfortunately failed to grasp the point, and often behaved like a lone ranger. His intentions were entirely honourable, he was driven by the best interests of India, he won brownie points at home, but he was the despair of fellow negotiators at Ministerial meetings. Fortunately, Arun jaitley has understood the need to win friends and allies before the Cancun meeting. I am extremely pleased that there is more support for the India-China initiative on Agriculture. At last count, the coalition was 17-strong, and this included 10 of the 18 members of the ‘‘Cairns group’’ of agriculture exporting countries. This will be a formidable combination against the US-EU alliance while re-negotiating the Agreement on Agriculture (AOA).

In my view, Agriculture must remain India’s priority item in the forthcoming negotiations. It is also on the top of the wish list of the US-E, but for entirely different reasons. The US and the EU are, for political reasons, defending a dwindling number of farmers in their countries; at the same time, they are defending the powerful commercial interests (backed by the industrial and service sectors) that are involved in agricultural exports. According to Prof. Biswajit Dhar (The Economic Times, August 23, 2003), the share of the US in the total global trade of corn and soybeans exceeded 50 percent. In wheat, the US is the second-largest producer with a 25 percent share of global trade. The EU has vital commercial interests in the trade in beef, sugar, butter and wheat. The high and increasing levels of ‘‘domestic support’’ provided by the US and EU for these commodities is directly linked to their share of global trade in these commodities. It will not be easy for the India-China led alliance to force the US-EU to scale down their domestic support.

India’s concerns on Agriculture are more ‘livelihood’ than commercial concerns, although it is trite that growing commerce (i.e. exports) in agricultural products will bring tremendous improvement in the lives of the farmers. Sixty million out of a total of 90 million agricultural holdings in India have less than 1 hectare of land. Fully 65 percent of India’s population is dependent on farm or farm-related activities. Domestic market prices for agricultural products are generally lower than world prices. Dr Ashok Gulati has estimated that, on an average, domestic prices were lower by 20 percent during the 1980s, and early 1990s. Indian farmers, therefore, need market access and a more competitive world market where prices are not distorted by the ‘domestic support’ extended by the US, EU and other countries. The opposing positions are driven by self-interest.

At Cancun, the battle will be intense and, sometimes, bitter. Jaitley has rightly listed the three pillars of agricultural negotiations as domestic support; export subsidy; and market access. I wish him and his team and his alliance well, but he must guard against the temptation to see negotiations as an end in itself. Negotiations are only the means to an end, which is winning more favourable terms for trade in agricultural products than what is available now. As long as the member countries are seen to be moving forward on this path, Cancun will be only one (albeit important) stop.

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