Zero Sum
How wonderful that we have met with a paradox. Now we have some hope of making progress. — Neils Bohr
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Posted Aug 16th, 2008 by ravi    / Permalink /

With regard to the recent unsuccessful culmination of the WTO talks in Geneva, there are, as can be expected, alternate accounts on the causes and culprits. The International Herald Tribune quotes French opinion that blame lies with India and China:

France’s agriculture minister said Wednesday that “big emerging countries” were to blame for the collapse of World Trade Organization talks on opening up the global economy.

Meanwhile, the Hindu Business Line writes:

The United States is to be solely blamed for the flopped WTO mini-Ministerial talks as it was not ready to “sew up a deal” in view of the impending presidential elections and it is unlikely that the Doha Development Round will conclude before 201 1-12, a trade expert said today.

While the Malaysian outlet, The Star offers (in an article that breaks down the details and is therefore well worth reading in entirety):


When the end came, the United States and others pinpointed Special Safeguard Mechanism (SSM) as the sticking point of the entire negotiations. Most developing countries wanted this mechanism to protect their farmers from sudden surges of agricultural imports.

The SSM would allow them to raise tariffs above the bound rate if import prices of agricultural products fall below or the volume rises above certain levels.

The US Trade Representative Susan Schwab tried to take the high ground by proclaiming that it was preserving the past 30 years’ gains of the trading system from the protectionists led by India and China whom it accused of wanting to raise their tariffs.

It was part of a concerted attempt by the US to shift the blame of any collapse onto India and China, by portraying them as selfishly seeking new protectionist devices. In fact a strong SSM had the support of about a hundred developing countries.

Insiders at the G7 meeting were surprised at the tenacity of Schwab in insisting on an unreasonably high trigger of 150% (of the base import volume) before the SSM could be allowed to raise duties above the bound levels prevailing now.

Lamy tried to break the SSM deadlock by proposing a new draft, but this was rejected by the United States. On Tuesday morning, officials of the G7 laboured to produce an alternative SSM model, which they presented to their ministers. Schwab again rejected the new draft, and this sank the talks.


India too points to the issue of SSMs as the deal breaker:

Rubbishing the proposal on special safeguard measures (SSMs) — measures which would allow developing countries to increase their tariffs in case of a surge in imports—in the meeting of the Trade Negotiations Committee of the WTO, India said it was unacceptable. “We cannot go home with a provision which would ask us to wait for an import surge of 40% before we can take remedial action. By that time the import surge would have wreaked havoc on the livelihoods of the most vulnerable farmers. We need serious reconsideration of this proposal,” India’s statement said.

What seems to be accepted at least in the rhetoric, is that the old colonialist arguments in favour of free trade no longer suffice, and modern justifications need to be grounded in terms of fairness and development. And it is using such metrics that some have argued that India’s resistance to US pressure is self-defeating:

World Bank lead economist Aaditya Mattoo said one of the ironies of the collapse of talks is that the deal, if passed, would actually have cost Indian farmers very little.

“India would have been required to make virtually no cuts in average applied agricultural tariffs,” he said by phone from Washington.

“The heart of the round was about legally locking in liberalization that has already happened. The effects on actual policy were limited. The big benefit was reducing uncertainty by preventing big reversals of policy,” he said.

Multilateral talks aside, India has not flinched in opening itself to foreign competition, Mattoo said. For example, under the WTO, India is allowed a 34 percent tariff on industrial goods; in practice the average applied tariff is 13 percent, he said.

Dani Rodrik, provides a different view in The Guardian (again, a full read of the article is recommended):

Don’t cry for Doha


What about industrial tariffs? Rich countries have demanded sharp cuts in import tariffs by developing countries such as India and Brazil in return for phasing out their farm subsidies. (Why they need to be bribed by poor countries to do what is good for them is an enduring mystery.) But here, too, the potential benefits are slim. Applied tariff rates in developing countries, while higher than in advanced countries, are already at an all-time low.

According to World Bank estimates, complete elimination of all merchandise trade restrictions would ultimately boost developing-country incomes by no more than 1%. The impact on developed-country incomes would be even smaller. And, of course, the Doha Round would only reduce these barriers, not eliminate them altogether.

The Doha round was constructed on a myth, namely that a negotiating agenda focused on agriculture would constitute a “development round.” This gave key constituencies what they wanted. It provided rich-country governments and then-WTO Director General Mike Moore with an opportunity to gain the moral high ground over anti-globalization protesters.


I leave you with Ramakrishna Hegde’s words from 1998, at the WTO conference in Geneva:

WTO Issues and India’s concerns


The 50th Anniversary of GATT should be an occasion for introspection and reflection on what the system stands for, its objectives and its shortcomings. We have to be clear in our mind regarding the manner in which we are going to take the system forward and how we are going to strengthen it. We have to set at rest apprehensions regarding the lack of fairness of the system. For the system to be strong and effective, all Member countries must be assured that they have an equal and effective role to play in its evolution and that their concerns will be viewed with understanding and a spirit of mutual accommodation.

In order to make WTO an effective multilateral body, which serves the objectives for which it was set up, it is necessary to go back to the basic principles. The Uruguay Round negotiators had stated their intentions quite clearly in the Preamble to the Marrakesh Agreement establishing the WTO. They recognised “that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development. They recognised also “that there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development”.

It is very clear that the intention of the negotiators was to use trade as an instrument for development, to raise standards of living, expand production, keeping in view, particularly, the needs of developing countries and least-developed countries. The WTO must never lose sight of this basic principle. Every act of implementation and of negotiation, every legal decision, has to be viewed in this context. Trade, as an instrument for development, should be the cornerstone of all our deliberations, decisions and actions. Besides, the system should be seen to be equitable and fair. It must be used in such a manner that the letter and spirit of the Agreements is fully observed. The WTO Members must mutually support and encourage each other to achieve the final goal. It must be recognised that all Members should assume a negotiating rather than an adversarial posture. It should also be recognised that different economies have different features and structures, different problems, different cultures. The pace of change must be carefully calibrated to take into account such differences. All Members should guard against unilateral action that cuts at the root of multilateralism.


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