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India doubts Lamy figure on stimulus

D Ravi Kanth  |  Geneva 

India today asked the World Trade Organization (WTO) chief to explain how he arrived at the figure of $150 billion as “being the Doha Round’s contribution to the global stimulus”, a demand that was supported by the United States.

New Delhi also pressed for addressing “the gaping holes in disciplines on subsidies services”. Several industrialised countries, including the US and other major European countries have provided subsidies to their ailing banking and insurance companies without any regard to the distortions they created in the marketplace.

Intervening at a special meeting on WTO’s report “on the financial and economic crisis and trade-related developments”, India’s trade envoy cautioned about the dangers of dishing out figures prepared by economists without any evidence. Though the latest report was “comprehensive and balanced than its predecessor”, it still contained “figures” which are not supported with hard data, he said.

“Today, economists, especially the forecasters among them, enjoy a social status somewhat below a used car salesmen and perhaps at the level of investment bankers,” Bhatia told the trade body’s chief

Over the last several months, Lamy repeatedly quoted the figure of $150 billion as gains to consumers from the anticipated Doha cuts in agriculture and industrial tariffs. Lamy canvassed support for the Doha Round based on this estimate even though several economists have challenged the veracity of such a claim. The just-concluded G-20 leaders communiqué also mentioned the $150 billion figure without any estimate.

“In the last few years, I have seen numbers ranging from $400 billion to $40 billion in this regard,” said Bhatia, citing Kenneth Galbraith’s famous statement that “the only function of economic forecasting is to make astrology look respectable”. The US trade envoy, Peter Allgeier, said he supported India’s request for more “details” from Lamy.

In his response, the chief defended his claim of $150 billion, saying it was neither “rocket science”, nor based on “astrology”. He said it represented “the revenues foregone” from the tariff cuts proposed in last year’s July proposals, maintaining that the developed countries would incur most of the cuts. “The director general was exposed for making audacious claims without evidence,” said a trade envoy, suggesting there was no truth that the Doha Round would result in such large gains.

Referring to the distortions caused by subsidies doled out to banks and insurance companies in several industrialised countries, India said: “With disciplines in manufacturing already in place and those in agriculture being negotiated, there is no reason why there should not be such disciplines in services as well.”

Therefore, a discussion on “definitions as well as an exchange of information on subsidies in services” is a must, the Indian trade envoy said, calling for a deeper analytical study on a range of trade restrictions that are not properly reflected in the report.

Several members, including India, called for an earlier return to competitive conditions in auto and steel industries by withdrawal of these subsidies as quickly as possible, stating that continuation of such subsidies would adversely impact developing countries.

First Published: Wed, April 15 2009. 00:40 IST