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India's WTO stand is justified

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  • karmayog - tanya
    http://www.livemint.com/Opinion/HS2DPStIKHRPNAUmUV4ZnN/Indias-WTO-stand-is-justified.html FIRST PUBLISHED: MON, JUL 28 2014. 06 06 PM IST HOME» OPINION»
    Message 1 of 3 , Jul 29, 2014
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      http://www.livemint.com/Opinion/HS2DPStIKHRPNAUmUV4ZnN/Indias-WTO-stand-is-justified.html


      FIRST PUBLISHED: MON, JUL 28 2014. 06 06 PM IST


      HOME» OPINION» BARE TALK


      India's WTO stand is justified


      Irrespective of India's food security law, an outdated price benchmark to
      calculate food subsidy should be amended


      V. Anantha Nageswaran


      Many commentators and editorials in Indian newspapers have lamented, rued
      and regretted the stance of the government of India in World Trade
      Organization (WTO) negotiations and chided it. Bare Talk strongly believes
      that India is right to take the stance it has taken. Bare Talk is as
      appalled as any at the policy continuity of the new government from the
      previous regime. Commitment to the National Food Security Act and the budget
      deficit target of the previous government are but two examples. But, those
      are internal matters of India.


      Any commitment made in an international negotiation is a binding commitment.
      It cannot be renegotiated. Anyone who has a basic understanding of option
      pricing will know that surrendering a policy option is like throwing away a
      deep out-of-the-money call option that is unexpired. It carries value. The
      policy optionality on what to do with India's food security needs and how to
      go about meeting those needs should rest with the government of India. It is
      not to be negotiated away in a multilateral forum.


      If India is holding up the trade facilitation deal as a quid pro quo for
      getting its way on the food security matter, that is fine as far as
      negotiations go. China issued an ultimatum to Britain on its prime minister
      meeting the Dalai Lama. Britain meekly obliged. Trade policy as much as
      foreign policy is not about being liked but about growing a spine. Trade
      matters a great deal for small, open economies but for large economies, it
      matters far less. Lesser international trade will hurt them but will not
      decapitate them. In any case, as Adair Turner has written in a recent column
      for Project Syndicate, global trade volumes have not only slowed down
      considerably in recent years but will continue to slow down for a variety of
      reasons, regardless of whether the Doha round is successfully concluded or
      not and the trade facilitation agreement is signed or not.


      Western economies are still weighed down by debt accumulated before the
      crisis and after. Their economies are dominated more by services that are
      not easily tradable. Non-tradable sectors account for a rising share of
      employment and economic activity. Automation of manufacturing (3D printing)
      might move manufacturing back to the West without creating jobs.
      Consequently, the ranks of unemployed or employed with inadequate purchasing
      power might swell, rendering them unattractive as markets for developing
      countries.


      He is unambiguous: "further trade liberalization is bound to be of declining
      importance to economic growth." He correctly notes that progress in
      international trade negotiations is slow not because of rising trade
      protectionism but because the low-hanging fruits of trade liberalization
      have been plucked and that further progress requires complex trade-offs that
      are no longer offset by large potential benefits. India's situation is a
      case in point. India is insisting upon change in the method of calculating
      the legally permissible subsidy. It cannot be based on prices that prevailed
      in 1986-88.


      That India has a badly designed and ultimately counterproductive grain
      procurement and distribution programme today is no reason to agree to the
      use of an outdated benchmark price to calculate the nation's food subsidy.
      At a future date, even a well-designed food security programme might still
      fail to comply with the treaty obligation if the reference prices are not
      updated. The reluctance to do the same raises many unanswered questions on
      the intent behind keeping the reference price from nearly two decades ago.
      Further, the numerical ceiling of the total food subsidy not exceeding 10%
      of the value of production (calculated at 1986-88 prices) needs to be
      reviewed.


      For example, as Professor Timothy Wise of Tufts University pointed out in
      his piece in December 2013 (Why the WTO needs a hypocrisy clause), the
      allowed levels of trade distorting support-the Aggregate Measure of Support
      (AMS)-for the US is about $19 billion. The figure is high because it was set
      in 1994 based on the then prevailing levels of high trade distorting support
      for agriculture in the US! In a speech delivered at the African Development
      Bank in February 2009, Professor Ha-Joon Chang noted that "until the 17th
      century, Britain was a backward country dependent on raw wool exports to Low
      Countries (or what are the Netherlands and Belgium today), so it implemented
      various schemes to promote 'import substitution' in woollen manufacturing".


      Based on the average tariff rates on manufactured products, the US was the
      world's most protective nation "from about the 1830s until the Second World
      War except for Russia in the early 20th century". It was only after the
      Second World War, with its industrial supremacy unchallenged, that the US
      liberalized its trade, just as Britain did in the nineteenth century. Let us
      continue to strive for an original and smarter food security programme from
      this government but let us not allow that to blind us to the hypocrisy of
      the arguments made against India for its stance at the WTO negotiations.


      V. Anantha Nageswaran is co-founder of Aavishkaar Venture Fund and
      Takshashila Institution. Comments are welcome at baretalk@....


      To read V. Anantha Nageswaran's previous columns, go to
      www.livemint.com/baretalk
    • SH Subrahmanian
      Not out of place to place my letter to Editor, Economic Times July 29. Here it is: Jul 29 2014 : The Economic Times (Mumbai) my Letters et
      Message 2 of 3 , Jul 30, 2014
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        Not out of place to place my letter to Editor, Economic Times July 29.

        Here it is: 
        Jul 29 2014 : The Economic Times (Mumbai)
        my Letters et

        ============================
        Playing the TFA by the Rules

        This refers to `Delink Farm Subsidy & TRADEFacilitation' (ET, Jul 28). The interests of developing countries can't be subordinated to the might of the developed world. The latter has attempted to sideline the Bali package on food security programmes of developing nations and the whole matter may now result in a Dohatype stalemate. US, EU and Mexico oppose our stand, while South Africa, Tanzania, Uganda, Cuba and Bolivia support us.

        China and Brazil have not disclosed their stand.

        To conclude the TFA, the developed countries convened about 20-22 meetings, but not many on discussing the food security issue. The developed world is seeking to bolster their sagging economies through an unhindered international TRADE by way of uniform and easy procedures at customs.
        Unless there is an assurance and some visible outcomes convincing us that we can engage in negotiations with a commitment to finding a permanent solution on public stockholding and other Bali deliverables, especially those for the LDCs, we must not join the consensus on the protocol of amendment for TFA. And if the WTO assures a rule-based multilateral framework for organising TRADE in a non-discriminatory fashion, complete with a dispute resolution mechanism, we must agree.

        SUBRAHMANIAN S H By email


        --
        Subrahmanian S.H.
      • mani1936
        my Letters to Editor Jul 29 2014 : The Economic Times (Mumbai) ? ============================ Playing the TFA by the Rules This refers to `Delink Farm Subsidy
        Message 3 of 3 , Jul 30, 2014
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          my Letters to Editor  Jul 29 2014 : The Economic Times (Mumbai)

          ?

          ============================
          Playing the TFA by the Rules

          This refers to `Delink Farm Subsidy & TRADEFacilitation' (ET, Jul 28). The interests of developing countries can't be subordinated to the might of the developed world. The latter has attempted to sideline the Bali package on food security programmes of developing nations and the whole matter may now result in a Dohatype stalemate. US, EU and Mexico oppose our stand, while South Africa, Tanzania, Uganda, Cuba and Bolivia support us.

          China and Brazil have not disclosed their stand.

          To conclude the TFA, the developed countries convened about 20-22 meetings, but not many on discussing the food security issue. The developed world is seeking to bolster their sagging economies through an unhindered international TRADE by way of uniform and easy procedures at customs.
          Unless there is an assurance and some visible outcomes convincing us that we can engage in negotiations with a commitment to finding a permanent solution on public stockholding and other Bali deliverables, especially those for the LDCs, we must not join the consensus on the protocol of amendment for TFA. And if the WTO assures a rule-based multilateral framework for organising TRADE in a non-discriminatory fashion, complete with a dispute resolution mechanism, we must agree.

          SUBRAHMANIAN S H By email
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