How to win the fight in an unfair international market
Wednesday, Oct 9, 2013, 8:45 IST | Agency: DNA
The once influential global institution World Trade Organization (WTO)
continues to be afflicted with the same problems that diminished its clout.
The recent wrangling on trade facilitation and food security bill is another
example of how WTO continues to focus on the interests of the developed and
not the developing world. It also shows how developing countries like India
have not been able to make the most of WTO global trading rules.
But let's begin by talking about WTO's skewed understanding of fairness.
Visiting WTO Director General Roberto Azevedo says that India's food
security law will violates its rules. Under WTO rules countries must limit
the supply of subsidized food to 10 per cent of total output. But with India
planning to provide 70 per cent of the population subsided grains, it will
be in breach of this condition.
Not just India, several other developing countries including a Group of 33
has been asking WTO to relax this condition. For many poor countries,
subsidized food supply is an important part of their welfare programmes. WTO
has been unwilling to consider this view since global producers will be
affected by the supply of subsidised food in emerging markets. The big
producers of food like US, Western Europe and Australia have been hoping to
provide agriculture and food products to developing markets where the demand
is rising. They fear that the increase in domestic production coupled with
subsidy on supply will push their products out of the market.
In retaliation to WTO, developing countries led by India have been refusing
to discuss improvements in trade facilitation. WTO has been negotiating an
easier and less cumbersome regime of trade facilitation that speeds up the
movement of goods across the world. WTO estimates that less bureaucratic
hurdles will reduce time of processing and increase speed of delivery. This
efficiency will add about a $1 trillion to global trade. In a time of
downturn, this is seen as a significant boost to global economy.
The standoff between the developed and developing world shows that not much
has changed in the world. A similar standoff that began a decade ago in the
Cancun Ministerial meeting led to a decline in the status of WTO. Developed
countries had been using WTO to make trade rules to suit themselves at the
expense of developing countries. Emerging markets dug in their heels on
matters like the huge subsidy given by Western European countries to their
farmers. It was estimated that the farm sector received subsidies of over a
$1 billion per day.
In some ways the wheel has come a full circle. The same countries are upset
with India's subsidized supply of food to its own citizens. Europeans on the
other hand were exporting their subsidized farm products.
Blocking talks on trade facilitation to counter pressure on food subsidy has
brought some concessions from WTO. Now WTO is willing to allow the subsidy
to continue to 2-3 years while India is demanding about 9 years.
It will take lot of tough negotiations before India and the Group of 33 can
reach an acceptable agreement with WTO before a ministerial meeting in Bali
in December this year.
While emerging markets have learnt how to stall unfair rules being pushed by
WTO, they have not yet learnt how to make the most of the fair rules.
Internal efficiency and competitiveness is essential for developing
countries to take on the developed world. India has fought many years for
higher market access for its agricultural products in Western markets. But
its internal food policy has prevented Indian products from achieving high
quality and quantity that is good enough to be competitive in domestic and
global markets. Similarly, India must reduce its internal red tape and
inefficiencies that hurt exporters.
Only then will it be able to take advantage of an improved global trade
facilitation regime. Efficient internal policies are the best weapon against
an unfair external market.
The author tracks India's political economy and its engagement with the