| Brazil, South Africa, India and China are the new challenge to the WTO's decision-making process
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| The World Trade Organisation (WTO) is about multilateralism. This is a proposition that floats around and has a grain of truth. But one would have to be completely naïve to believe this entirely.
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| Certainly, the basis of WTO agreements is multilateralism, as opposed to regional or bilateral agreements. And because relatively weaker developing countries are more vulnerable to unilateral action and bilateral arm-twisting, it is preferable to have multilateral agreements.
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| The world is unequal and unfair. So is world trade. Given this unfairness, which won’t disappear simply because one wishes it to vanish, developing countries should prefer the GATT/WTO system, quite apart from increased transaction costs associated with negotiating bilateral agreements.
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| But one shouldn’t jump to the conclusion that WTO’s decision-making processes are truly multilateral and democratic. On the face of it, they are, and that is WTO’s party line.
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| If it comes to voting, it is one-country-one-vote. And indeed, WTO decision-making is more democratic than the IMF’s or the World Bank’s. However, it never comes to voting.
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| Bilateral arm-twisting, deals and bribery is the norm. Until not very long ago, and even during the Uruguay Round, if the US, Europe and Japan wanted something and agreed on it, they got it. That was the high table and green rooms were part of life.
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| That high table has changed a bit, a part reflection of India’s increased economic clout, even if that represents potential energy more than kinetic energy. But even on the kinetic energy, India is after all, the fourth largest economy in the world, measured in terms of purchasing power parity (PPP).
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| Japan is within striking distance, we need only a couple more years to overtake Japan on the PPP criterion. However, the US and China aren’t within striking distance.
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| And if Europe is counted as a single entity, India will continue to be ranked fourth, not third. The Goldman Sachs report has made BRIC (Brazil, Russia, India, China) part of standard economic jargon.
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| In the WTO context, Goldman Sachs got a letter wrong. It should be S rather than R, BSIC standing for Brazil, South Africa, India and China, the core of G-20.
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| It is certainly incorrect to think of G-20 as only an agriculture coalition. BSIC is much more than that. It is a challenge to WTO’s historical decision-making processes. Reforming the World Bank or the IMF will be a long haul.
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| And the UN Security Council is also a question mark. But post the Doha Ministerial in 2001, when India alone stood on the burning deck, and especially post the Cancun Ministerial in 2003, the BSIC challenge is already credible. You can’t have a WTO agreement without BSIC signing on. No more Blair House accords.
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| If we think of BSIC as a developing country challenge to developed country domination, we will make a mistake. Given developing country heterogeneity, that binary dichotomy between developed and developing countries makes no sense.
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| BSIC interests have little to do with those of 49 least developed countries (LDCs). LDCs will always remain LDCs. No LDC has ever graduated to a developing country status. There are perverse incentives against doing so.
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| Non-LDC developing countries are also heterogeneous and across a spectrum of WTO agreements, there have been attempts to splinter developing countries further.
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| Till the mid-term review of the Uruguay Round negotiations in 1988, partly in Doha in 2001, and partly thereafter, we often projected ourselves as representing the interests of developing countries, as their leader.
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| This may be politically correct and occasions may justify such public posturing (intellectual property rights is an example), but it is no more than that. In this unequal world, BSIC is now part of the high table and BSIC is not sub-Saharan Africa, north of South Africa. That doesn’t mean a BSIC challenge is always successful.
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| The election of WTO’s new Director General is a case in point. We will know three weeks from now and it is a toss-up between Uruguay and Pascal Lamy, neither of whom is a BSIC candidate, although information about whom India chose to support in various rounds is not in the public domain.
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| But clearly, unlike Nigeria, India hasn’t been successfully bribed. Being part of the high table doesn’t mean you don’t accept carrots. But they have to be large enough carrots.
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| And to preserve BSIC, they have to be collective carrots for all four countries.
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| There is yet another possible loss for BSIC brewing, although everything is fuzzy right now. That concerns the formulae and exemptions for NAMA (non-agricultural market access) negotiations, the choice of the formulae will probably be a loss and the exemptions will probably cushion that loss.
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| Inherent in NAMA is another WTO myth, that industrial tariffs have dropped because of WTO. That was partly true of GATT. But the spread between bound and applied rates (India is a bit of an exception) illustrates that tariff reductions have had little to do with the WTO.
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| However, the NAMA deal will have to be traded off against what is achieved on agriculture, this being the classic G-20 area, primarily thanks to Brazil.
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| And it is here that BSIC can now afford to call the developed country bluff. |
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