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Saturday, December 04, 2021

Bracing for Bali

India should worry about the multilateral trading system,not food subsidies.

Written by Sanjaya Baru |
November 28, 2013 3:07:41 am

India should worry about the multilateral trading system,not food subsidies.

Those in India who worry about the implications of a deal at the World Trade Organisation’s (WTO) Bali ministerial meeting next week (December 3-6) for our food procurement and subsidy policies may be missing the wood for the trees. India has already fallen foul of its WTO commitments,as far as food subsidies are concerned,and can be hauled up even today for violating its commitments. What may well be at stake in Bali is the very future of the multilateral trading system. The United States and the European Union are looking at a world beyond the WTO. By pointing fingers at India’s stance,they may well be setting a trap,into which India should avoid falling.

While some in India have resorted to bravado,saying it should walk out of the WTO if its demands on continuing food subsidies are not met,the fact is that so far the world has been generous to India,looking the other way and ignoring its violations of WTO provisions over the past four to five years. Countries that wish to walk away from the existing WTO system may no longer want to do that and may want India to fall into the trap of being the spoiler at Bali. Their aim could be to find a scapegoat for the collapse of the postwar multilateral trading regime.

The West claims it is tired of managing a system that has enabled the rise of what the trade economist Arvind Subramaniam calls the new “mega-trader” — China. With a share of close to 12 per cent of world exports,compared to less than 10 per cent for the US and India’s lowly share of about 1.6 per cent,China has emerged as the world’s biggest trader. Should the West — the trans-Atlantic powers,to be precise — continue to maintain a system that it once erected and which is now imposing costs on it?

That is the question weighing on Western minds,with the US taking the initiative to create three new “plurilateral” regimes that exclude China — the Trans-Pacific Partnership (TPP),the Trans-Atlantic Trade and Investment Partnership (TTIP) and the Trade in Services Agreement (TiSA). India’s approach to the WTO was based on the premise that it is still a marginal player in the global trading system,with exports (of both goods and services) aimed at paying for imports (of fuel and technology). As a country with a persistent trade deficit,India’s stance in multilateral trade talks has been essentially defensive rather than offensive. The one area in which India has had an “offensive” strategy is trade in services,especially the export of skilled labour. However,India remains excluded from the TiSA.

Does India have the option of creating a new coalition of the like-minded,who wish to preserve the multilateral system and resist the regionalisation of trade? Are India’s many free trade agreements and the new initiative for an Asean-led Regional Comprehensive Economic Partnership agreement adequate to protect India’s interests in the changing landscape of world trade?

At next week’s Bali ministerial meet,three issues are on the table — trade facilitation,agriculture and development issues. As Braz Baracuhy,a Brazilian trade diplomat and consultant for the geo-economics and strategy programme of the International Institute for Strategic Studies has argued,two contending conceptions of the Doha Development Round objectives confront each other at Bali — one,a view that emphasises the “reform and updating of current rules by levelling the playing field and redressing past privileges in-built within the multilateral trade regime (a view supported by Brazil,China and India); and another that seeks to prepare for the future and to hedge the emergence of new trading powers through the harmonisation and parity of commitments between industrialised and emerging nations (a view supported by the US and the EU)”.

Given that Brazil’s Roberto Azevedo now heads the WTO,and he would like Bali to succeed and the WTO system to be preserved,India has the option of working with Brazil and other like-minded countries to work out a compromise.

The joker in the pack would be China. As the rising “mega-trader”,China has a huge stake in how world trade is organised. But,China has not been averse to striking its own deals with the West,given the importance of Western markets for China’s exports. Not surprisingly,therefore,China has already flagged its interest in joining the TPP and TiSA,though both the US and EU,as well as Japan,would be wary of China’s entry.

With Russia eagerly waiting to become a WTO member,it too may be forced to play its own game. Unfortunately for India,the Brics (Brazil,Russia,India,China and South Africa) coalition does not have a unified position at Bali,and certainly not on India’s demand for open-ended rules for the continuation of its food subsidy regime. If the US strikes deals with the less developed countries and an assortment of friendly countries — even Pakistan is in TiSA talks — what options exist for India?

Clearly,India must seek a positive outcome from Bali,in the hope that such an outcome will weaken the still nascent efforts to regionalise trade through the TPP-TTIP-TiSA route. After all,the TPP and TTIP initiatives have already encountered domestic hurdles in the US and in the EU. The US Congress has not yet granted “fast track” trade promotion authority to the executive,which would enable the US government to take forward these negotiations. US officials have claimed that this would not come in the way of speeding up TPP negotiations,but it could if President Barack Obama is unable to regain policy initiative from the Congress.

India’s leaders have consistently argued that it has a “strategic stake” in the preservation of the multilateral system,especially the WTO’s dispute settlement and anti-dumping regime. None of the plurilateral regimes offer the comfort that India needs,given its fears about being the target of Chinese dumping and market denial practices of the West. It is in India’s interest to accept WTO discipline in managing India’s food policies in exchange for the preservation of the WTO system as a whole.

These larger questions about the future of the world trading system ought to be the focus of the policy debate in India rather than the single issue of Bali’s impact on India’s food policies.

The writer is director for geo-economics and strategy,International Institute for Strategic Studies and Honorary Senior Fellow,Centre for Policy Research,New Delhi

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