Protecting Indian Interests At The World Trade Organization

Economic commentator Ruchir Sharma had once said of India that it disappoints both the optimists as well as the pessimists. Jury is still out on the applicability of his fine wordplay on India. However Sharma’s formulation does fit one international body perfectly — the World Trade Organization (WTO).

The Geneva-based international trade body, formed in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT) is best compared to the metaphorical trishanku — it desires a lot but remains in perpetual limbo limited by its design rigidity. The WTO has definitely disappointed the optimists — it has not led the world into a golden dawn of free borderless trade. It has also disappointed the pessimists in that two-third of the global trade still happens on a most-favoured nation (MFN) basis, the founding principle of the WTO.

The trade body which could not hold its apex twelfth ministerial conference (MC-12) after the eleventh edition in Buenos Aires in 2017 due to the pandemic is regrouping again in Geneva between 12 June and 15 June. Several issues are on the table and India is playing a key role in shaping the global trade discourse in almost every area.

It is important that the Indian focus remains on protecting national interests rather than getting into any agreements under international pressure especially from the developed countries. While India is regaining lost ground in international trade at a steady pace, the global trade architecture is still heavily loaded against India. Hence, MC-12 is no occasion for any bravado, but to take cold, calculative stance on all the issues under consideration.

The most important issue for India is to limit any damage in agriculture. It is well-known that the agreement on agriculture is extremely imbalanced and has drastically curtailed India’s freedom to invest in the sector. Developed countries want further rationalisation of agriculture subsidies by the developing world with their guns firmly trained on India and China.

The big food exporters realise that both India and China are clawing into the global agriculture export markets. While India as well as China face peculiar challenge in agriculture mainly due to the need of supporting a huge population, it is clear that both the countries will pose a challenge to the agriculture exports hegemony of the ‘Cairns Group’ — an interest group of 19 WTO members, the United States and the European Union.

India would ideally like to get a permanent solution for its public stockholding — a WTO legislated flexibility to build food buffers for any crop at any domestic price without having to answer WTO on the levels of subsidisation. India has also joined forces with a bunch of allies to demand a recalibration of how WTO calculates permissible subsidies. The Indian proposal seeks to use inflation adjusted prices for food subsidy calculation as opposed to the current WTO practice of using external reference prices from 1980s.

Getting these decisions in its favour would be the ideal outcome for India in MC-12. However, even if the developed countries do not concede this position, India needs to ensure that there is no review of the existing agriculture subsidies on the downside. Some members especially Brazil, have been particularly hostile to the Indian position, seeking to cut the already meagre Indian government support for agriculture. Of course Brazil and others in the Cairns Group are driven by self-preservation too, not wanting new competition in what is an oligopolistic market.

In this area, India is not a key player as most of Indian fishing interest currently is subsistence related. However, deep sea, distant water fishing is a potential growth area for India. Hence any agreement that ties down India’s hands while allowing the large fishing countries to continue with their polluting subsidies would be counterproductive. There will be big pressure on India to sign this agreement, but India should agree only if it carves out space for itself through a long-enough transition period.

Another key ask of the mercantilist bloc of countries is to reform the WTO. Currently the WTO is a multilateral, member-led organisation, where all decisions are made by consensus. The Western countries want to legalise the idea of plurilateral agreements, where only a few members negotiate future changes and then attempt to heap the outcome on everyone else.

India should also work towards restoring the two-stage dispute resolution mechanism in the WTO, which has been paralysed by the bipartisan action of the successive United States governments. Former presidents Barack Obama and Donald Trump, and President Joe Biden have not let the WTO appellate body function, perhaps seeking to build arbitration as the second stage of the WTO dispute resolution function. This should not be accepted by India. Although far from ideal and appreciative of Indian concerns, the WTO mechanism still provides greater chance to the developing countries in holding their ground vis-a-vis international arbitration.

India and South Africa have led a great fight for the WTO to agree on intellectual property flexibilities for bringing Covid-19 vaccine equity. Members like European Union, Switzerland and Norway — which neither had their own vaccines to offer nor required any intellectual property flexibility to buy vaccines for their own populations — have spoiled an ideal outcome. However, any outcome is a symbolic win for India and South Africa for having forced the developed nations to take note and acknowledge their corporate pharmaceutical greed. Their profiteering behaviour left poor countries in the lurch when the pandemic ravaged the world — any agreement on this count will set the tone for WTO action on future natural disasters.

India, South Africa and Indonesia have also asked for electronic transmissions to be brought under the ambit of customs duties. This is a very interesting area, where a moratorium on such customs duties is in place since 1998. If electronic transmissions are indeed made dutiable, it will give the large developing countries a policy lever to influence the monopoly players of the digital economy.

The WTO works at a snail’s pace, so there is no guarantee that there may be any outcomes to MC-12 at all. India’s strategy for the ministerial should be to maximise its influence in building topical coalitions and signal to the world that it is a serious player in global trade.

Like in every other international forum, India has traditionally been a passive, reactionary player even in the WTO. This has begun to change in the recent years both in the WTO and more broadly. However, there is a long way to go for India to take lead in areas where it needs to defend its interest. A growing ‘trade culture’ domestically also has to reflect in greater international influence. Taking concrete steps towards this objective will be a good end to the MC-12 for Commerce Minister Piyush Goyal.