WTO meet sees no forward movement

The requirement to implement the deal was directly linked to the capacity of the country to do so.

The 10th World Trade Organisation ministerial conference (MC10) held last week ended in a setback for the developing countries. Setback because the developmental issue which was central to the developing countries’ participation at Nairobi didn’t witness any forward movement or seek any serious attention.

Rather, it experienced an overwhelming emphasis on the issue of export competition. It’s true that export competition is an important part of the agricultural issue which currently remains unsettled even after realising the distortions agricultural trade creates in world economy after WTO’s two decades of existence since 1995.

Export competition raised hue and cry in the earlier ministerial like Hong Kong and Geneva in 2005 and 2008. One may recall the pledge made by EU and US to phase out the total export subsidy on farm products by 2013 is still in practice and was hardly reiterated in the meet. 

What is sensible from developing countries’ point of view is that agricultural trade which is highly discriminatory in nature, is essentially because of three primary issues that distort the trade even now.

Domestic subsidy, market access and export competition are like a tripod that support this imbalance in agricultural trade. Export competition has the least intensity among the three and distortion taking place due to export competition would be minimal compared to other two bigger culprits such as domestic subsidy and market access.

Developing and the least developed countries (LDCs) which constitute three-fourths of current WTO members understand that export subsidy doesn’t play that big a role in agricultural distortions as is done by the domestic support.

The entire export subsidies given to the magnitude of $5 billion on farm products is miniscule compared to the domestic support that is given to the tune of $1 billion per day. Though export subsidy remains a major irritant to free trade, according the World Bank its abolition will only yield 2 per cent of theoretical gains to world agriculture.

In this heat of the moment, it looks the promise of total phase out of export subsidy is only a small gesture shown towards pacifying the popular anger and discontentment of large number of WTO members.

What instead would have been noteworthy is to get the commitment of phasing out of domestic support, the real dampener in the agricultural distortions, from US and EU by a realistic deadline.

India in its negotiations must emphasise future issues of agriculture through the earlier proposal of developing Special Safeguard Mechanisms (SSM) and identification of ‘Special Products’ (SPs).

The SSM would help them to defend their triple concerns of food security, farmers’ livelihoods and rural development in the event of agricultural trade liberalisation. It would enable them to raise their tariffs above the bound rates in the event of a fall in price of the imported product or an increase in volume of the imported product, beyond certain levels.

Agri import surge

The SSM, therefore, would be an effective instrument to provide contingent protection to poor farmers in developing countries from negative shocks to import prices or from surges in imports.

The other measure initiated by developing countries to prohibit agricultural import surge is the concept of the SPs. The SPs are a set of products that directly concern their food security and livelihoods, and therefore should be subjected to no or low tariff reductions in the Doha programme.

Inclusion of such provisions, developing countries feel, will allow them to address concerns of food security, livelihood and rural development as most of their agricultural products will be outside the ambit of trade liberalisation and secondly, will help them to increase their food production.

It will remain relevant with the current crisis in food prices as subsistence in food production will provide food security and they won’t rely on imports when there is a world shortage or increased prices.

Nairobi ministerial could break new grounds in the context of trade facilitation. More countries supported the ratifications for the Trade Facilitation Agreement (TFA), bringing the number to 63 members that have formally accepted the TFA. The TFA will enter into force once 2/3 of the WTO membership has formally accepted the agreement.

For the first time in the WTO history, the requirement to implement the agreement was directly linked to the capacity of the country to do so. In addition, the agreement states that the assistance and support should be provided to help them achieve that capacity.

Implementation of the TFA has the potential to increase global merchandise exports by up to $1 trillion per annum, according to the WTO’s flagship World Trade Report released recently.

First time in a real manner it was noticed that WTO chief Azevedo is tilting in favour of developed countries’ pressure of ignoring Doha agenda which is the real concern of developing countries in multilateral negotiations.

Nairobi ministerial being conducted for the first time in entire Africa and also being the birth place of WTO at Marrakesh, Morocco way back in 1994, failed to consolidate the real aspiration of developing and LDCs.
(The writer is Professor, Lal Bahadur Shastri Institute of Management, new Delhi)