India’s trade policy faces a fork in the road
For India, the challenge is this: How can it simultaneously play a role in shaping a WTO which allows it adequate policy space, while devoting its limited resources to bilateral free trade agreements and plurilateral economic arrangements
It will be an exaggeration to say that the outcome of the recently held 12th Ministerial Conference (MC12) of the World Trade Organization (WTO) was a success. It will, however, be fair to say that an institutional crisis was averted, and the organisation will live to see another day.
The most important function of WTO — negotiating multilateral agreements based on consensus — has been defunct for some time. So, all eyes were on whether WTO will succeed in concluding an agreement on fisheries subsidies at MC12. The negotiations comprised three pillars: Fisheries subsidies for vessels engaged in illegal, unreported, and unregulated fishing (IUU); subsidies for fishing on overfished stocks; and subsidies contributing to overcapacity and overfishing. The agreement adopted at MC12 came up with disciplines for the first two. The third one was pushed back to the next conference. By doing so, the large fishing powers were let off the hook. Moreover, the rules, as agreed, apply only to subsidies that are specific to marine fishing, and not aquaculture and inland fishing. So, it is hard to see this agreement come into force unless the third pillar on overcapacity and overfishing gets done quickly.
This will depend mainly on the political will of the big players. The problem for India is that the issue of special and differential treatment has been left vague and it remains to be seen whether our demand for a 25-year transition period for the third pillar will be forthcoming.
The biggest failure of MC12, however, has been in the crucial area of agriculture. If there was one agreement from the Uruguay Round, which was fundamentally unfair to the developing nations and the Least Developed Countries (LDCs), it was the agriculture agreement. The public stockholding for food security, raised by countries such as India, was a stark reminder of this. Yet, MC12 could not even agree on a road map for the future, let alone find a solution. Other key issues in agriculture, such as domestic support and market access also eluded a consensus. The saving grace perhaps was a ministerial decision to exempt the World Food Programme’s food purchases from export restrictions or prohibitions by WTO members. But even here, there was no reference to government-to-government exports pushed by countries like India.
The other hot-button issue for many developing and LDCs was the Trade-related Aspects of Intellectual Property Rights (TRIPS) Waiver. After raising the issue of a waiver for a long time and expending much political capital on it, the final MC12 decision barely qualifies as a waiver. More than anything else, it clarifies and in a few cases, expands existing flexibilities in Article 31 of the TRIPS Agreement. The compulsory licensing for diagnostics and therapeutics has been postponed by six months. There is an inherent danger in repeatedly “clarifying” the flexibilities of Article 31 of the TRIPS Agreement, since, in the name of clarification some developed countries may seek to limit the flexibilities available for developing countries.
It is well-known that the dispute settlement system was WTO’s jewel in the crown. It is also known that the system has collapsed, thanks primarily to the actions of the United States, and there is an urgent need to fix this. Unfortunately, MC12 has done precious little, except to say that discussions will be held on the issue with a view to concluding them by 2024.
Other systemic issues of profound importance have also been left hanging. For instance, what happens to the joint statement initiatives or plurilateral negotiations? Again, there is a distinct lack of clarity in the MC12 outcome document as to how this will be addressed, except to give the impression that future meetings will deal with this.
In conclusion, WTO has kicked several cans down the road. This is perilous since the accumulation of contentious issues could poison the future negotiating atmosphere if not handled with care. What then has been the main achievement of MC12? The most important outcome of MC12 has been that the members have averted a collapse of WTO and have decided to keep the institution alive despite their striking inability to reach consensus on various crucial negotiating issues. India may have pushed back the immediate challenge, but serious battles lie ahead. The major players have invested too much in WTO to let it wither away. This meeting shows how far they can go to save this institution.
So, what is in store for WTO? The first and foremost is the dispute settlement mechanism. The fact that this has been pushed back to 2024 does not augur well. Second, what happens to the so-called plurilateral negotiations? With scores of members ready to negotiate, a way may be found to accommodate them. Again, this will have profound implications for decision-making in WTO. Third, new areas such as environmental and labour standards and e-commerce will be brought in and countries like India must be prepared for this. Fourth, special and differential treatment could become selective and discriminatory. Last, but not least, major players have made it clear that they will not reopen issues such as agriculture, where we are stuck with the inequities of the Uruguay Round. The fact is that too many issues have been postponed, and things will come to a head in WTO at some point.
For India, the challenge is this: How can it simultaneously play a role in shaping a WTO which allows it adequate policy space, while devoting its limited resources to bilateral free trade agreements and plurilateral economic arrangements. India’s trade policy faces a fork in the road.
Mohan Kumar is a former trade negotiator and a former Indian ambassador to France.The views expressed are personal