The World Trade Organization (WTO) as an institution has perhaps never come under as much of a siege as now. The Director General of the WTO, Roberto Azevêdo admits that the WTO as an institution would need to evolve. Apart from the ongoing trade war like situation between the US and China, there have been trade skirmishes across the globe. US President Donald Trump recently referred to India as ‘the tariff king’ that imposes ‘tremendously high’ tariffs on American products like Harley Davidson motorcycles. Trump also signalled his intention to end the Preferential Trade Status (wherein certain countries are levied zero tariff on certain export products of theirs) given to India and Turkey. Interestingly this announcement is for not reciprocating by providing the US with ‘reasonable and equitable market access’. India has denied this and has stated that duties imposed are as per the WTO Agreements.
The US has also been demanding that countries should no longer be allowed to self-declare their status of development. The US has been raising this demand in the context of countries such as China and India continuing to enjoy ‘Special and Differential Treatment’ (SDT). The recent offer by President Jair Bolsonaro of Brazil to give up on his country’s SDT status has been a shot in the arm for the US.
Let us examine a few sticking points with regard to India’s position on a few issues which keep coming up for discussions at the WTO, as I analysed in a piece published by the German Foundation, Bertelsmann Stiftung.
India has been pushing agricultural issues at the WTO. Public stock holding is very important for India’s food security. The sticking point here has been the way in which the Minimum Support Price (MSP) is fixed. According to the WTO’s Agreement on Agriculture, the MSP would have to be calculated on the basis of price of foodgrains in 1986-88 and the total subsidy would have to be below 10 per cent of the total value of production. India has strongly disputed this formula because the current prices are much higher and the MSP given as subsidy would also be much higher. Countries like India and China have opposed the huge production related price distorting subsidies given by the developed countries.
Regarding investment/trade facilitation, India has its own model investment code which does not allow multinational companies to take the government to international courts before it has sought recourse through the domestic dispute settlement bodies for a period of at least five years.
One of the areas identified for further discussion at the 11th Ministerial Conference of the WTO held in Buenos Aires in 2017 was e-commerce. India has objected to freeing of e-commerce as it feels that the country’s digital penetration is not yet adequate. India also feels that MSMEs will not be able to compete with countries with deeper internet penetration.
Also, the suggestion in a recent IMF/ World Bank Report of having plurilateral instead of multilateral trade talks has not found favour with countries such as India. India has further highlighted the increasing trade frictions and the dwindled size of the appellate tribunal. It may be mentioned that the WTO presently has only three judges, of which two again are scheduled to retire in December this year. India recently drew up a proposal aimed at reforming the dispute settlement mechanism, rule-making and transparency requirements.
India has been pitching for a reformed WTO. India has maintained that it is committed to work alongside other countries to reform the organisation in order to ensure that it continues to be an ‘engine for global trade’. However New Delhi is against changing the consensus-driven character of the multilateral trade body.
Changing the WTO will take time. As far as India is concerned, there is a requirement to take a well-considered position, based on India’s national interests (and not necessarily linking it to countries like China), on all trade related issues. India should revisit Agreements like plurilateral Trade in Services Agreement (TiSA) or the Information Technology Agreement (ITA-2) and see how it can leverage its huge strength in the services sector. India is much better positioned today to streamline and fine-tune its global trade priorities. India needs to look not at boycotting talks regarding framing of rules for example relating to e–commerce but joining and opposing if and where required. With an unremarkable percentage of global trade (only 2.1 per cent), India would be better off with the WTO’s ‘one nation one vote’ system than not participating in talks at all.
If the WTO as an institution and all the principles that it stands for is to survive, there is no scope for rigidity. Negotiations, even if cumbersome, painstaking and incremental are the only solution. A trading system with an institution like the WTO is surely better off than one without it! While the WTO may not have achieved much, its mere presence as a referee has been comforting. The focus should be to arrive at a broad consensus on as many issues as possible, even if they be modest in terms of ambitions, before the next WTO Ministerial Conference in June 2020.
The government that will take over at the Centre this month/early next month should focus on tweaking India’s trade policies and practices in order to leverage the benefits of decisions and agreements arrived at in institutions like the WTO.
Ashok Warrier, IFS (RETD)
Former Ambassador of India to DRC