The Hindu Business Line : The importance of market access

Multilateral trade negotiations signify the difficulties of arriving at a consensus on key issues, especially among nations that have different priorities and requirements. The regular deadlocks at such meetings, most notably of the World Trade Organisation, are a confirmation of the idea that the multilateral trading regime is slowly losing relevance. Among the many issues that act as brakes to movement at the WTO, are agriculture, NAMA, TRIPS and non-tariff barriers (NTBs). But by far agriculture is the most important and contentious issue.

Agricultural negotiations at the WTO focus on three issues — export subsidies, domestic support, and market access. Export subsidies and domestic support may be seen as the make or break of WTO negotiations, but equally important is the issue of market access.

Divisive issue

Market access was a deeply divisive issue at the Doha Round of negotiations. There are major differences because a formal and detailed approach to effecting tariff cuts has not been finalised. The Hong Kong Ministerial made some progress after a four-band approach to tariff cuts was broadly agreed upon — countries having higher levels of tariffs are subjected to steeper cuts. Different coefficients for developed and developing countries to provide special and differential treatment to the latter countries was agreed to, though they have to be proportional. This is close to the non-linear Swiss formula.

In the subsequent negotiations, another dimension to market access emerged — the average tariffs, the member countries are willing to take in agricultural products even as they follow the banded approach. Inclusion of this aspect could indicate the ambition the various groups in the WTO have set for themselves. But, then, the negotiating process could become more complicated as members seek to calibrate the thresholds for the tariff bands to match their averages in tariff reductions.

Developing country's paradigm

From a developing country's perspective, the key issues that need to be settled are the designation of Special Products (SP) and the agreement over the coverage of Special Safeguard Mechanism (SSM). Developing countries want to designate a set of SPs, which are critical from the viewpoint of their food security, livelihood and rural development. In addition, the SSM may be available to them as a defence against sudden surge in imports or fall in international commodity prices.

At Hong Kong, WTO members agreed to these demands. As the Declaration said: Developing countries "will have the flexibility to self designate an appropriate number of tariff lines as SPs guided by indicators based on the criteria of food security, livelihood and rural development." The Declaration added that developing countries "will also have the right to have recourse to a SSM based on import quantity and price triggers, with precise arrangement to be further defined."

Slow progress

Developing countries argue that the slow implementation of the Agreement on Agriculture (AoA) has resulted in a negative impact on food security, livelihood and rural development in poor countries as it has enhanced exports from developed countries rather than promoting imports by them.

Therefore, developing countries are now insisting that inclusion of SPs and SSM should form an integral part of the modalities and outcome of agricultural negotiations to protect their survival instead of giving false promises of adding to their trade gains.

Even on the issue of SPs and SSM, cracks began to appear among the developing countries. Groups such as G-22 and G-33 are at loggerheads. G-33, the key proponent of SPS and SSM, argues that developing countries will have the right to self-designate "at least 20 per cent of the tariff lines" as SPs. It further suggests that 20 per cent of the identified SPs will not be subjected to any tariff cuts, and 50 per cent being subjected to a tariff cut of not more than 10 per cent. But the US has argued that "SP designation" should be "limited to no more than 5 per cent of tariff lines at the detailed duty level."

Limiting the number of SPs

Interestingly, the US argument for limiting the number of SPs has been supported by one of the G-20 members — Thailand. Because, Bangkok sees that once it accepts the formula set by the G-33 and the rest of G-20 on SPs and SSM, its exports to developing and less developed countries will vanish or be largely restricted.

Such developments make it imperative for countries such as India to adopt measures to strengthen the G-33 alliance, the group that maintains the SPs and SSM should serve the purpose of providing developing countries with policy flexibilities, and be the real fulcrum of market access negotiations.

(The author is with Indian Institute of Foreign Trade, New Delhi.)