The Hindu Business Line : Get WTO back on talking terms

After the Cancun Ministerial, the WTO negotiations appear to have come to a halt, with most players pre-occupied with issues at home. But there is little doubt that, sooner rather than later, the world community will need to sit down and evolve a multilateral system of world trade that will be free, equal and viable. The basic principles of the GATT/WTO system are unimpeachably sound, says Sharad Joshi.

THE DOHA Ministerial prepared a schedule for negotiations on the Marrakesh treaties. Most of the work that remained to be done was in the field of agriculture, investments and services. The Ministerial Conference at Cancun proved abortive as it could not finalise even a minimum common declaration, not even one relating to future programme of action.

Some kind of preparatory work was initiated at the Geneva headquarters of the World Trade Organisation (WTO). Some hopeful noises were made by the United States, the European Union as also in Japan and Cairns countries. There is little possibility that the Doha round of talks would be completed successfully as scheduled, by end-2004. In the next a few months a huge leap is required to meet the Doha timetable. As of today, that does not look likely.

The United States is caught up in the presidential elections. It is unlikely that the contenders — the President, Mr George Bush or the democrat challenger, Mr John Kerry — would venture to burn their fingers by taking a position that would help the Doha round of negotiation move forward.

The G-21 group that came together in Mexico is today even more disparate than it was on the last day of the Cancun Ministerial. The European Union has its hands full dealing with problems of expansion and the value of the euro. Suddenly, the WTO has become an unwanted baby that nobody cares for. Does it mean that all the work that since the end of the Second World War to establish a multilateral system of international trade has been in vain? The General Agreement on Tariffs and Trade negotiations, beginning in the 1940s, plodded on wearily till the beginning of the 1980s.

No one involved in the negotiations was trying to score political or economic points. There were occasions when a whole round of talks would be devoted to marginal expansion of list of commodities or of categories of commodities covered by the GATT.

It was after the fall of the Soviet Union that many countries connected with the GATT Round appeared to have developed a penchant to bite more than they could chew. Thus, in the Uruguay Round the number of agreements, memoranda, etc., expanded nearly to thirty. Even more questionable was the decision to include the Agreement on Agriculture (AoA) in the ambit of the Uruguay Round.

By Marrakesh (1995), it looked as if the whole system of the various specialised institutions of the United Nations had been subsumed by the WTO. No specialised institution could do a thing without risking some poaching on some area of the WTO competence. And the WTO continues to tread on the toes of the UN and its specialised institutions. The very word `globalisation' creates an impression of something on astronomical proportions gobbling up nations and even the international community. This globalisation by WTO happened too close on the heels of the fall of the Communism.

A good number of persons and institutions that got out of breath keeping pace with the march of the WTO globalisation fell by the wayside but remained rabid opponents not only of the globalisation but also of market-based mechanisms both at home and abroad. These opponents organised themselves into radical groups with considerable clout and have been haunting all international negotiation ever-since they tasted blood at the Seattle Ministerial Conference.

In the long history of international trade, there have been swings and slides — some times of roller coaster proportions. Nevertheless, freedom of trade and economy has made progress through cycles of mercantilism — from fully open laissez faire to completely closed Communism — not because of the inclinations or otherwise of politicians and leaders.

Freedom has advanced because it goes to the fundamentals of all life and human societies.

The present impasse in the WTO and globalisation may be long and even a difficult one. But there is little doubt that some day, sooner rather than later, the world community will need to sit down and evolve a multilateral system of world trade that will be free, equal and viable. The basic principles of the GATT/WTO system are unimpeachably sound. One: Treat all nations outside one's national frontiers as being equal and, therefore, most favoured. Two: Treat all commodities that have entered one's territory on parity. The difficulty comes when the bureaucrats start translating these principles into working rules capable of application.

The main bottleneck in the WTO negotiations comes in the sector of agriculture. It is in this sector that the member countries find it difficult to make concessions to others and bring about reforms at home.

The Agreement on Agriculture envisages: 1. Abolishing all quantitative restrictions (QRs) and replacing them with tariffs that would be governed by commitments on bound rates and the progressive reduction; 2. Abolishing subsidies, in whatever form, to export of agricultural commodities; 3. Scaling down domestic subsidies to farmers in keeping with agreed schedules.

Any agreement on trade presumes clear definition of qualitative and sanitary standards and grades, a dispute settlement mechanism and of remedial action. In the case of agriculture, the AoA was drafted to introduce concepts that were foreign to the communities directly affected, that is, farmers, and the procedures involved were so legalistic that they could be handled only by specialised international jurists.

When the next epoch of negotiations on multilateral trade in agricultural commodities comes around, the new scheme will have to provide for rules that are applicable uniformly in different countries with diverse systems that read like a code of conduct for literate farmers and not like complicated rules that can barely be understood by even specialists and experts.

One could elaborate by giving specific illustrations. I would give only a few. World over farmers understood what farm subsidies are. Subsidies were understood as an advantage conferred by the government that would not be available in a strictly market-based economy. Since in a free market system average cost would tend to be equal to the average revenue, subsidy also could be defined as the surplus the farmers get over and above their costs of production on state interventions.

The Marrakesh agreements introduced such concepts as the Aggregate Measure of Support (AMS) and subsidy equivalent, not to talk of green, blue and amber boxes, that have barely made any progress in the negotiations.

Similarly, the system of CODEX adopted and the rules pertaining to sanitary and phyto-sanitary controls, dispute settlement and anti-dumping rules have created complicated disputes, whole bodies of jurisprudence that only the specialist international jurists can cope with. The drafting of AoA was influenced too much by econometricians and the legal pundits, and too little by the farmers for whom they were meant in the first place.

If the Doha round is resumed honestly and seriously, it will have to retrace its steps and streamline the Agreement on Agriculture to clear it of many of the fatal faults. If the Doha round is given a quiet burial these considerations will need to dominate the spirits of the next generation of the architects of multilateral international trade in agricultural commodities.

(The author is Founder, Shetkari Sanghatana, and can be contacted at sharad@mah.nic.in)

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