United we stand: (L to R) Indonesian Trade Minister Mari Elka Pangestu, Union Commerce and Industry Kamal Nath, Mauritius Agriculture Minister Arvin Boolell, Brazilian Foreign Minister Celso Amorin, Zambian Commerce Minister dipak Patel and Egypti9an Foreign Trade and Industry Minister Rachid Mohamed Rachid

The first question Pascal Lamy, Director General of the World Trade Organization (WTO), asked Union Commerce Minister Kamal Nath at the Sixth Ministerial Conference of the trade body was: "Will this (meeting) yield any substance, or should everyone go shopping?" He was referring to the joint front put up by the developing world to stonewall western attempts to prise open their markets while offering nothing substantial in return.

The obvious sticking point was agriculture. The US and the European Union (EU) were reluctant to cut their farm subsidies; and the developing world was unwilling to move forward on industry and services unless they did. The earlier Doha (2001) and Cancun (2003) rounds had failed for precisely this reason and led to the creation of the Group of 20 (g-20) developing nations led by India and Brazil.

In Hong Kong, when the talks seemed to be going nowhere, 110 developing countries came together in a grand coalition under the leadership of India and Brazil, and demanded that the us and the EU commit to a 2010 deadline for eliminating agricultural subsidies. Says Nath, who deserves much of the credit for stringing together this alliance: "The rules of global trade are being redefined and the developed world realises that we have the numbers." By applying collective pressure, the coalition managed to push through a declaration that addresses issues of importance to the developing world in agriculture, non-agricultural market access (NAMA) and services. This broke the logjam of the previous ministerial rounds, but could not entirely remove the question mark over the future of multilateral trade negotiations. Adds Dipak Patel, Trade Minister of Zambia and leader of the Least Developed Countries Group within the g-110: "Now that the developing world has come together, the big powers will have to sit and negotiate with us."

Despite the breakthrough, the declaration was short on deliverables and long on intent. The actual negotiations on agriculture, NAMA and services will take place over the coming months and only then will a clearer picture emerge of the New World Trading Order. "The satisfaction is that the draft now specifies timelines for concluding negotiations based on different approaches," says Amit Mitra, Director General, FICCI.

Agriculture

Contrary to popular perception, rich countries subsidise large farmers much more than poor countries do. The US, the EU and Japan give financial support to farmers in order to keep their domestic prices low and also provide export subsidies to prise open foreign markets. Every cow in the EU receives a subsidy of $2.5 (Rs 112.50) a day and farmers in the developed world collectively get $1 billion (Rs 4,500 crore) a day in support from their respective governments. Compare this to 380 million Indians who survive on less than $1 (Rs 45) a day. Little wonder that farmers in poor countries cannot compete with agri imports from the rich North.

The EU had, in the past, refused to set a deadline for phasing out these subsidies. EU Trade Commissioner Peter Mandelson expressed his helplessness in the Green Room (where actual negotiations take place behind closed doors), saying he did not have a mandate to proceed on the issue, since France had threatened to veto any subsidy cuts. But in a turnaround, the EU agreed to phase out all export subsidies by 2013. The icing on the cake: about 80 per cent of these will be phased out by 2010.

India also won the right to designate some farm commodities, which provide sustenance to small and marginal farmers, as Special Products on which tariffs will not be cut. Further, the government has reserved the right to increase import duties on select products if imports surge. Says FICCI's Mitra: "The draft declaration has adequately addressed India's concerns by providing flexibility to protect small and marginal farmers."

But these are the only quantifiable achievements. The precise modalities of structuring domestic support, market access and special and differential treatment for developing countries have been left open and will have to be negotiated by April 2006. Clearly, the multilateral farm trade architecture is still work in progress.

Non-Agricultural Market Access

The developed nations want lower import duties on a range of industrial products. The obvious logic: they want to access the huge market in China, India, Brazil and the rest of the developing world. In Doha, both developed and developing nations had agreed in principle to cut their tariffs on industrial goods like cars, auto components, consumer electronics, FMCG, etc. The question was: by how much? The rich countries advocated a Swiss formula with a high coefficient-which entailed the highest duty cuts on items with the highest tariffs. India and its allies opposed this formula on the grounds that such drastic cuts in import duties would result in cheap imports swamping their markets and kill domestic industries. After months of haggling in the run-up to the Hong Kong conference, this blueprint was modified and the industrialised nations agreed to "less than full reciprocity on tariff reductions"-this means the developed nations will cut their tariffs much more than the developing nations. Additionally, India also retained the right to keep certain items out of the purview of duty cuts. So, industries like automobiles and auto components needn't worry about duties coming down further. "The Hong Kong declaration gives developing countries the flexibility of keeping tariffs on some sensitive products as high as necessary," says R. Seshasayee, Vice President, CII.

"Bilateral relationships will drive growth"

Commerce minister Kamal Nath spoke to India Today's Malini Bhupta during the Sixth Ministerial Conference in Hong Kong on a range of issues concerning the WTO. Excerpts: On the so-called Grand Coalition (of developing countries): The process of forming this coalition began when India hosted the g-20 summit in March this year, where I conveyed to the delegates that collective action was necessary to extract concessions from the developed world. I realised that only a rainbow coalition of developing countries would have the clout to negotiate on these issues from a position of strength. Till Cancun, countries with interests in cotton, banana, sugar and other agricultural commodities were negotiating separately. So we formed the g-20 after the Cancun Ministerial in 2003 to collectively voice the opinion of the developing world. On the changing face of WTO: Earlier, the US and the EU used to call the shots. Now, India's economical progress and China's emergence as an economic powerhouse means that these two countries account for a large mass of consumers. Also the demographics of the developed countries are working against them. The global economic architecture has changed and the balance of power has shifted from the developed to the developing world. Today, India has massive economic clout as it is the fastest growing free economy. In the Uruguay Round of the GATT, about 50 per cent of the members did not have a voice. Today, all countries want to engage and be involved in making rules of global trade. Earlier, the WTO had locked itself in the hands of the developed world, but this has changed. There is now greater faith in the international trading system as it is more democratic. On the problems plaguing the multilateral trading system: The WTO has too much on its plate. The trading body today needs institutional subsidiaries, which will act autonomously. Every country was fighting a tight deadline during the six-day ministerial in Hong Kong. Since the WTO is a political body, decision making is slower and has a bottom-up approach. In future, too, it will remain a large trading body, but bilateral relationships will have to drive growth.

But there are other issues as well. Says Suhail Nathani, Partner at law firm Economic Law Practice (ELP) that advises the government on WTO-related issues: "Tariffs in India have fallen from a peak of 105 per cent in 1991 to 15 per cent now; but some countries, like the us, have high tariff peaks on some products and tariff escalations in others. This effectively prevents India and other developing nations from exporting products like leather and finished garments to the us." Tariff escalation is the technical term for imposing higher customs duties on processed goods and progressively lower ones on raw materials, thereby penalising the imports of value-added products into a country. Adds Nath: "We are not interested in duties on aircraft coming down. We want tariff peaks on products of interest to us to come down." Will the developed world, therefore, reduce tariffs on textiles, garments, leather goods and marine products, among others, where India has a competitive advantage? And will it stop using non-tariff barriers to block imports from the poor South? The Hong Kong conference has set a deadline of April 30, 2006, for working out the modalities involved.

Services

Among all the issues on the agenda, India had the highest stake in services. It gained the least on this, primarily because of the reluctance of the developed world to make legally binding commitments on the issue. There are four modes in services that pertain to categories in which services are delivered by different countries. The cross-border services negotiations, a euphemism for outsourcing, come under Mode 1. Under this mode, India has been unable to get any binding commitment; rather the declaration merely talks of a "guidance" given to countries on the matter.

Show of strength: Activists protest against WTO's trade policies in Hong Kong

India was also keen on extracting concessions on the free movement of professionals, which comes under Mode 4, so that Indian pros could move freely across continents chasing assignments and opportunities. The government has been successful in getting the EU to ease its Economic Needs Test, which made it mandatory for companies there to justify why a contract has been awarded to a non-EU service provider. Despite this, problems related to visa and immigration procedures, work permit norms and non-recognition of Indian qualifications remain unresolved. And the US has made no concessions on Mode 4. But on the positive side, there is a timeline for working out the modalities involved and greater recognition among 30 to 40 countries about India's need for greater access on Mode 1 and Mode 4. Countries wanting to present plurilateral (read: of interest to a group of countries) requests to other countries on this have to do so by February 28, 2006, and negotiations will begin thereafter.

The fine print of the new global trading order, therefore, will unfold only in the months to come. But it is safe to say that despite only limited success, the Hong Kong conference has saved WTO's multilateral architecture from imminent collapse. As Nath puts it in perspective: "The real negotiations will begin now."