The Hindu Business Line : Trade talk gets tough

If the World Trade Organisation (WTO) Director-General, Mr Pascal Lamy, came to New Delhi to soften up policymakers and prise open the Indian market for non-agricultural goods, he must have been disappointed. The quid pro quo he was trying to push through is iniquitous, to say the least. Developing countries such as India are being persuaded to adopt a flexible approach on industrial tariffs (read, reduce import tariffs) in return for developed economies agreeing to cut their humungous agricultural subsidy, and allow greater market access for agri-produce from the former. Some of the influential WTO members are trying every trick to ensure that major developing economies fall in line to meet the April 30 deadline.

Not that there is anything sacrosanct about the deadline. Global trade negotiations have seen so many missed and reset. April 30, 2006 may just be one more. Importantly, emerging economies — India, Brazil, Russia, for example — with large populations and rising incomes are increasingly perceived as major markets for industrial goods. Market access has, therefore, become an overriding issue. Even if developed nations cut subsidies and open up their markets, India is unlikely to benefit because of its own burgeoning internal demand and modest output levels, with limited growth prospects. It does not need rocket science to visualise who set Mr Lamy's mandate. The Commerce Minister, Mr Kamal Nath, is absolutely right in asserting that emerging economies should not be asked to pay the price for the successful conclusion of the Doha Development Agenda, as the Round was launched to reduce global trade imbalances in favour of developing countries. If the past is any guide, developed countries are most unlikely to effect any meaningful cut in farm support, which on current reckoning is about $320 billion a year, equivalent to 1.3 per cent of OECD countries' GDP. They would at best switch funds from one coloured box to the other.

While this cat-and-mouse game plays out, there is apprehension that India is losing precious time in not seriously addressing the structural issues that affect the agricultural sector. Like every country, India too faces the tough task of having to reconcile domestic compulsions with international obligations. However, this dilemma has been there for several years now; and with passage of time, some problems get worse and entrenched. Even while keeping the international trade dialogue going, policymakers have to design growth-oriented policies and set themselves a timeframe within which agriculture should break out of its present mire, become more cost-efficient and post a healthy 4 per cent per annum growth.