Globalisation under attack: Cancun meet could go the way to the two mini-ministerial WTO meets in Sydney ant Tokyo

Come September, and commerce and Industry Minister Arun Jaitley will, along with around 10 of his bureaucrat colleagues, wing his way to Cancun, Mexico. But it's unlikely that the young minister will get the time to catch any wave on the famed beach resort. Surfing, though, he will be-the treacherous waters of international trade. That's because between the 10th and 14th of the month, an estimated 2,000 negotiators from all of the 145 member countries of the World Trade Organisation, will descend on Cancun (pronounced can'coon) to participate in the most wide-ranging-and, hence, also the most ambitious-trade negotiations jamboree.

What happens here will determine the course of the world's $6 trillion (Rs 288,00,000 crore) annual trade. And, of course, India's own minuscule trade of $46 billion (Rs 220,800 crore) a year. Ergo, there's lots riding on the back of Jaitley & Co. Two years ago, at the last big WTO summit in Doha (Qatar), India-and some developing countries like it-had won assurances that trade rules and terms would be modified to give them greater access to lucrative markets in developed countries, besides giving them leeway in some areas. For example, the assurances on Trade-Related Intellectual Property Rights (trips) and public health assured easy access to critical drugs at affordable prices. Then, a new agreement on "Special and Differential Treatment" offered developing countries the option to limit agriculture imports more than what is currently allowed under the Agreement on Agriculture.

At Cancun, India will push for implementation of these assurances, but more importantly seek a level playing field for its agriculture sector. Specifically, India will ask for three things: one, speedy elimination of market distortions, arising from huge domestic support and export subsidies (countries like the US and Canada are the biggest culprits); two, greater access to developed markets for Indian agri-products through lowering of tariff and non-tariff barriers; and three, protection of small farmers in the country by asking for greater flexibility as far as agricultural tariffs are concerned.

Worryingly for Jaitley, though, the two mini-ministerial WTO meetings in Sydney (November, 2002) and Tokyo (February, 2003) that were supposed to help consolidate the progress made in Doha, ended in failure. That means the Cancun meet could possibly end up as just "a nice holiday by the sea", as described by Rafidah Aziz, the Malaysian Trade Minister. Worse, some western analysts fear that the meet could turn into a repeat of WTO's Seattle conclave three years ago, when negotiations collapsed amidst bitter recriminations, as protesters battled police in the city's streets.

This time around, it could be the war in Iraq that proves the WTO's nemesis. Not only are the European Union (except the UK) and the United States bitterly divided over the war in Gulf, they are looking separate ways over agricultural reforms and industrial tariffs. And the fact that the global economy is caught in a slump, with growing unemployment in major economies, isn't helping the situation either. In fact, on his visit to India in March, 2003, Pascal Lamy, the EU Trade Commissioner, was categorical in rejecting America's proposal for zero tariff for all industrial goods. "I think (zero tariff) is counter-productive because (the very notion) is frightening to many countries," Lamy said at a CII meet in New Delhi.

Some Indian trade analysts too, aren't very optimistic about the summit. Says B. Bhattacharyya, Dean, Indian Institute of Foreign Trade (IIFT): "The entire effort at multilateral rule-making has been disrupted by the Iraq issue. There are no signs of even a possible workable meeting of minds between the US and EU-something that's vitally important to carry forward the free trade movement."

"Indefinite delays in the settlement of key issues have caused serious concern for developing countries" Arun Jaitley/Union Minister for Commerce & Industry

Getting What's Due

On his part, Jaitley is digging in his heels. At the Tokyo mini-summit, he made it clear that India would not accept any dilution of the Doha developmental agenda-the round was ostensibly sold as a "development round"-or its implementation within the time frame agreed at the meet. "Indefinite delays in the settlement of Special and Differential Treatment issues, the trips and public health issues, and the implementation issues have caused serious concern in the minds of developing countries," pointed out Jaitley, adding that the resolution of these issues would be a sine qua non for the success of the Cancun meet.

Just the same, the global community will meet at Cancun under radically new circumstances. The division between the US and key European countries has never been sharper in recent history. Already, the bickering has made the WTO countries miss some important deadlines. Take the case of the Doha Declaration on trips and public health. The declaration was touted as a victory for developing nations, since it allowed export of patented (typically expensive) medicines to poor countries in times of public health emergency like epidemic. All that would be required is an amendment to the trips agreement.

But even after a year of the declaration, it has not been implemented because the US and Canada are opposing the move on the grounds that it goes far beyond providing poor countries with cheap medicines for problems like aids, malaria, and tuberculosis. They fear it would allow generic manufacturers, like the ones in India, to produce and export more profitable, patented drugs.

What many experts consider the double standards of developed countries is apparent in other areas too, especially agriculture. To break the ongoing deadlock, Stuart Harbinson, Chairman of the Farms Committee on Agriculture at the WTO, had drafted an ambitious plan that would have phased out export subsidies within the next 10 years and cut import duties on agri-items steeply. Japan and the EU, however, would have none of it. As America's chief negotiator, Allen Johnson, cryptically remarked in The Guardian newspaper, the problems were caused by "the European Union's inability to engage and Japan's unwillingness to engage".

"I think zero tariff is counter-productive because the very notion is frightening to many countries" Pascal Lamy/EU Trade Commissioner

India also is seen as being obdurate on the agriculture issues. Some trade experts think that the country should be focusing more on services. Says Manoj Pant, Professor, School of International Studies, Jawaharlal Nehru University: "It makes little sense to ask for market access or talk about competitiveness of Indian agricultural production when there is hardly any marketable surplus or demand for Indian food stocks." Instead, Pant says, India should focus on areas where it really has the competitive edge-such as negotiating aggressively in gats (General Agreement on Trade and Services) for pushing India's case in it exports, it-enabled services, and movement of Indian professionals.

To be fair to India's previous negotiators (particularly ailing Murasoli Maran), the country has been quite proactive in seeking greater freedom of movement for skilled labour in architectural, audio-visual, it and other related services, and maritime and tourism-it has already written request letters to as many as 60 countries. But there's been little headway, although the negotiations are scheduled to end by 2005. The major reason for that is the "economics needs test", which measures the need for foreign professional skills with that of its impact on the local labour market. Currently, different countries use different methods to strike this tricky balance.

On what are called the Singapore issues-WTO's new thrust areas of trade and investment, trade and competition policy, government procurement and trade facilitation-India is likely to join hands with other developing countries to pre-empt the launch of any new trade liberalisation talks at Cancun. As a senior Commerce Ministry official points out: "We are not convinced of the need for binding rules on these issues and that too in a trade negotiation forum like the WTO." Indeed. With 170-odd unresolved implementation issues from the Uruguay Round, what Cancun needs the least is more items on the to-do list.

Some amount of flexibility on India's part may be necessary to earn the country its due. Otherwise it risks getting marginalised. Here's why: India is not part of any of the major regional trade blocs like the North American Free Trade Arrangement, European Union, or even the Association of South East Asian Nations. And a staggering 60 per cent of global trade is estimated to be channelled through the regional trade blocs. A study conducted by Siddartha Rajagopal, Executive Director, Cotton Textiles Export Promotion Council, shows how member countries used the Preferential Rules of Origin clause in the regional trade arrangements to increase their exports. Mexico, for example, had 2.43 per cent share of the US market for clothing and textiles in 1990, when NAFTA did not exist. By 2000, its share had soared to 13.52 per cent-courtesy NAFTA. In contrast, India's share in the segment has grown just a percentage point to 3.82 per cent. Says T.K. Bhaumick, Chief of WTO Cell in CII and an advisor to the government: "We will no longer determine the direction of the wind, but go with it."

Therefore, if India is to do well in international trade, WTO must do well. Else, regional and bilateral deals will increasingly skew the pitch for the country. Rajesh Chadha, Chief Economist, NCAER, points out that the number of regional trading arrangements is likely to go up from 255 in October 2002 to 300 by the end of 2005. "The proliferation of such arrangements," notes Chadha, "threatens the primacy of WTO, foreshadows a world of greater fragmentation, and marginalisation of the weakest and poorest countries." For the sake of the underdogs, then, let's hope that Cancun doesn't turn out to be a vacation by the sea.