Delhi Mini-Ministerial on Doha: High Stakes to Break an 'Impasse'?

What does India plan to achieve at the mini-ministerial meeting of members of the World Trade Organisation that it is hosting in New Delhi in early September? The most important member of the WTO – the United States – has not shown any enthusiasm to break the impasse on the Doha round. More important, the 2008 proposals on the table work against the interests of the developing countries in the two important areas of agriculture and industry.

Shefali Sharma (shefali@thirdworldnetwork.net) is with the Third World Network and is based in New Delhi.

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What I said was that the impasse has to be broken, must be broken, number one. Number two, we talked of principles. When I went to the Cairns Group meeting we were not discussing specifics. These specifics will be discussed when the negotiations resume.2

The government of India (GoI) has stated that it is willing to accept WTO’s December 2008 draft texts as the basis of further negotiations to conclude the Doha round. These were drafts prepared by the chairs of the WTO agriculture and non-agriculture market access (NAMA) negotiating committees and focused on economic sectors that generate the largest number of livelihoods for developing countries: agriculture, manufacturing and fisheries. The GoI is hosting an informal mini-ministerial meeting in Delhi on 3-4 September with approximately 35 trade ministers and the director general of the WTO, Pascal Lamy, to “re-energise” the stalled talks in order to bring them to a successful conclusion.

Lack of US Interest

Meanwhile, according to United States (US) reports, the majority of the trade- related p olitical positions remain unfilled in the US administration (Trade Insider 2009).

trade policy formulation?

The US participation in Doha will only increase once the government has dealt with its economic crisis at home, and if Doha offers its firms and agribusinesses real market access. In the meantime, and in the words of the United States Trade Representative Ron Kirk, the US will

continue to use trade remedies, like antidumping and anti-subsidy laws that the US has on the books, and that are vitally important tools. We use them to correct distortions of trade-situations, where the playing field is artificially tilted against us – and to ensure that the field stays level everywhere else (ibid).

The initiative to re-energise the Doha round must be seen in this wider context and in the context of a detailed assessment of India’s and other developing countries’ gains and losses accrued thus far. Anand Sharma rightfully says that the principles need to be agreed in order to break the impasse. But in WTO negotiations, it is only the specifics of the negotiations that give meaning to principles. This article looks at the key concessions that have been made by developing countries in agriculture and NAMA that call into question some fundamental principles of the Doha round:

Inequities in Agriculture

It is now widely accepted that developing countries did not gain from the WTO’s 1995 Agreement on Agriculture (AoA) and that several inequalities within the agreement actually made their agriculture sectors more vulnerable. For instance, in spite of disciplines imposed on domestic support for agriculture in the AoA, the US and the European Union (EU) continued to heavily subsidise and dump their agricultural commodities onto the world market in huge quantities and at such low rates that they chronically depressed world market prices in quite a few commodities. A study

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of 102 countries conducted by the Food and Agriculture Organisation found that import surges increased for many agriculture commodities post-1995 (FAO 2006). A few large transnational grain traders and processors continue to maintain oligopolies and benefit from the distorted trade regime that allows them to be price-setters of several commodities in global agriculture trade. Yet, even after the Uruguay round and seven and half years of Doha negotiations, the December text on agriculture does not oblige the US and the EU to make actual cuts to their subsidy r egime. In fact, the current December proposal allows them to have unlimited subsidies in the so-called “non-trade distorting” Green Box, which studies (UNCTAD India Team 2007) show, has been and will continue to be trade distorting in reality. Eighty per cent of US domestic support is in the form of Green Box measures. And the latest draft will also allow the US to shield its substantial counter-cyclical a griculture payment programme (Murphy and Suppan 2008) in the expanded Blue Box, a category of measures considered as “minimally trade-distorting” d omestic sup port and thus subject to less WTO d isciplines.

The removal of quantitative restrictions, limits on the types of domestic subsidies developing countries can provide to agriculture, restrictions on managing food stocks, procurement and distribution and prohibition of export subsidies (on the say-so of the WTO and other international financial institutions) has left developing countries with limited options to strengthen their agriculture sectors and food s ecurity. It has significantly narrowed p olicy space at the border and forced the use of tariffs as the primary means with which to shield domestic a griculture against the price volatility of global agriculture markets and corporate concentration.

“Special products” (SP) and “a special safeguard mechanism” (SSM) have emerged as the only tools in the Doha talks with which developing countries would be able to protect their agriculture against this external volatility. SPs are agriculture products on which developing countries would make lesser or no reductions on their maximum allowed customs duties (bound tariffs) to 153 WTO members. G iven India’s large agriculture base with 15 agro-climatic zones, a diverse number of crops grown in each region, extreme vulnerability of the sector and the critical role it plays for food security and livelihoods of over two-thirds of the Indian workforce, India’s main negotiating principle would logically be to have as large a number of SPs as possible.

Special Products

The December text requires developing countries to designate only 12% of their agriculture tariff lines as SPs. Out of this, only 5% of the SPs can be exempted from any tariff reductions, which translates into only 35 tariff lines for India. This means that only about eight or nine crops may be protected since around four tariff lines usually cover one crop. These concessions on SP drastically deviate from the original purpose of SPs as envisioned by the G-33 (a group of countries with large agrarian populations that seek to ensure food security and livelihood concerns in the AoA). In fact, the G-33 position has weakened significantly since 2004, when the concept was formally put forward. Countries with large and vulnerable agrarian populations and food security concerns were supposed to have been able to self-designate a large number of p roducts as SPs that could be exempt from t ariff cuts altogether.3

With more and more demands for market access by developed countries, the G-33 initially agreed to designate “at least 20%” of total tariff lines as SPs. They then conceded to reducing tariffs within SPs. By 2007, they had agreed to cap SPs to 20% of the total tariff lines. This meant that only a 140 tariff lines could be protected. They then agreed to allow only 10% of the SPs to be completely exempt from tariff reductions – immediately undercutting their position by half! During the intense negotiations last July, the G-33 further conceded to a two-tier system of SPs (one-tier of zero cut and the secondtier with an average of 12% cut). The D ecember text drastically undercuts even this position by reducing the SPs to 12% of total tariff lines, 5% no cut and an overall average cut of 11% for all SPs. This means that if India e xempts 35 tariff lines from tariff reductions, it would be forced to r educe the remaining 7% of SPs by an a verage of 19% (because of the overall a verage cut requirement).

Special Safeguard Mechanism

The original purpose of SPs to shield v ulnerable agriculture sectors against u nfair competition appears to have been forgotten and the main area of attention

CALL FOR PAPERS

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acute for India given its sizeable developing or nascent industries, and small- and medium-enterprises (SMEs) that employ a large number of workers. The impact on livelihoods associated with Indian SMEs is particularly difficult to measure given that a majority of the workforce resides in the unorganised or informal sector and SMEs are dispersed and inadequately represented in the capital.

Rather than follow the LTFR principles, the downhill concessions in NAMA are p articularly glaring. India and its allies began with demands for a simple average cut in tariffs and continued to concede without much in return. The middle ground proposed in the December NAMA text requires developing countries to cut their tariffs on average by over 60%, while members like the US, EC and Japan would be expected to do roughly half of that. They are required to do nothing on their NTBs. Given that India’s actual customs duties on average are already around 11.5%, a formula which demands such sharp cuts would actually force India to set tariff ceilings for many industrial products below its current applied customs d uties or just above them. In fact, India’s average tariff ceiling for its highest tariffs will come down to 18.8% from 130%.4 A large number of its tariff ceilings would lie between 11% and 16%, leaving little or no room to increase tariffs in the future if the strategic need arose.5

Even the flexibilities proposed for developing countries have been linked to the amount of cuts they will make in NAMA overall. The flexibilities cannot exceed a certain percentage of volume of imports. The December text also proposes an anticoncentration clause that further imposes limits on vulnerable sectors by demanding either a minimum of 20% of tariff lines or 9% of the value of imports in each NAMA sector.6 The Indian fisheries sector would have to compete with cheap fish for 20% of tariff lines or 9% of the import value even though cheap fish is easily substitutable. Developing countries would be prevented from excluding vulnerable sectors in their entirety even if that was detrimental to upgrading particular sectors. Another highly controversial pro posal is for mandatory commitments by certain countries (such as India) to reduce tariffs to

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zero or near zero in sectors of interest to developed countries. Fourteen sectoral proposals are annexed and include sensitive sectors such as hand tools, fish and fish products; forest products, industrial machinery, chemicals, electronics and toys. This has been vociferously opposed by developing countries, but still finds its way into the December NAMA draft.

Towards a Cost Benefit Analysis

A cursory analysis of two of the three key sectors shows little gain for developing countries – either in principle or on the specifics. Developed countries’ actual subsidies will not be affected, nor will their NTBs be addressed in this round. In exchange, developing countries will sharply bring down their tariff ceilings in NAMA and leave their agriculture sectors critically exposed to the vagaries of a highly distorted global agriculture market. The SSM will be of limited practical utility in its current form, while the SP is whittled down to a handful of tariff lines. Sadly, the SP was intended to be the substantial saviour to help right the wrongs (along with disciplines on domestic support) of the Uruguay round.

The one area where India had sufficient offensive interests – the movement of professional workers through Mode 4 of the services negotiations – is at a standstill. And no developed country is going to c ommit to opening movement of labour in

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