India wants upcoming mini-ministerial to focus on trade protectionism

Nations still differ widely on the key issues that will be discussed at the meeting being held in India on May 13 and 14

India wants the upcoming mini-ministerial in New Delhi to focus on ways to reduce protectionism in global trade and uphold the sanctity of the World Trade Organization (WTO). Come May 13, however, it will be hard pressed to also discuss global e-commerce rules, something it has avoided so far.

After five rocky years of choppy global trade, increasing protectionism in most markets and little headway in key trade policy debates, the government is keen to end its term with a final push at the WTO. Subsequently, the commerce department obtained Election Commission approval to hold the two-day long event. It is expected to see attendance by at least 25 key WTO member-nations, including China, Brazil and South Africa. However, most other participants are least developed countries (LDC).

Although the focus will firmly remain on the creation of a global coalition against the United States, to reduce counter-protectionism and affirm support to multilateral talks at the WTO, India and participating nations have a different view of even the topics that should get the most discussion time.

Rich vs poor nation

India is no stranger to mini-ministerial trade diplomacy, with New Delhi having held a two-day mini-ministerial in March, last year with 50 participant nations. India’s focus then — the liberalisation of services trade and the creation of a trade facilitation agreement for global services — had been discussed in working group meetings at the WTO but has lost impetus since then.

“While we will bring up the services agreement, we also have a responsibility to voice the serious concerns on behalf of the developing nations who are fighting to sustain their eligibility to get Special and Differential Treatment (S&DT) at the WTO,” a senior Commerce Department official said. The S&DT debate has seen richer nations increasingly voice their opposition towards developing countries  continuing to enjoy special provisions such as longer time periods to implement agreements and commitments, and clauses to safeguard their trade interests, among others.

Similarly, development-based issues of great importance to India, such as a permanent solution to agricultural stockpiling for the purpose of food security, are expected to be sidelined at the upcoming talks. Instead, richer nations led by the European Union, Japan, Canada and the US, have consistently pushed for newer issues such as investment facilitation, and rules for small and medium enterprises, promoting gender equality, and most importantly, e-commerce.

E-commerce battle hardens

While the proposal to create a set of global rules for e-commerce has been pushed by the developed world since the last WTO ministerial conference in Buenos Aires in 2017, things have moved fast since January this year when 77 nations agreed to officially initiate talks on the subject. On May 3, the EU submitted a nine-page proposal to the general body that aims to shield traders from attempts to restrict data flows or seize their data and source code.

The move was unprecedented since WTO protocol dictates nations set the agenda for and start talks on issues that are agreed to unanimously. But sudden, aggressive support by China set the ball rolling. “The deal has been pushed hard by Jack Ma-led Chinese e-commerce conglomerate Alibaba, which has partnered with WTO and World Economic Forum to create the Electronic World Trade Platform (eWTP) — an e-commerce trade portal for small enterprises,” an official said.

India fears that new rules could provide the pretext for unfair mandatory market access to foreign companies, thereby hurting the rapidly growing domestic e-commerce sector, which is still finding its niche. “Significant foreign business interests have also started looking for an official route to tap India’s lucrative online markets. These businesses are major players in their domains, in many cases for more than a decade, and have often been seen to exploit regulatory loopholes,” a note on the subject sent by the Commerce Department to brief the Prime Ministers Office, says.

“While India should accept technology as it comes, we need to know which segments it will hurt most. A disruptive move like this will see tech-driven commerce displacing a significant number of players in the traditional market,” trade expert and Jawaharlal Nehru University professor Biswajit Dhar said.

Finally, the government believes the push for initiating negotiations on substantive obligations related to e-commerce will oblige India to permanently accept the current moratorium on imposing customs duties on electronic transmissions. “With increasing digitisation, more and more products such as books, music, and video games are being traded electronically. By agreeing to the permanent moratorium, countries with tariff schedules, which allow putting duties on these kinds of products, will give up these rights and lose revenues,” the draft e-commerce policy says.

Fight with US

The summit is being hosted at a time when the US under the Donald Trump administration continues to question the need for a body such as the WTO. Despite condemnations from WTO headquarters in Geneva and major member nations, the US has simply stepped up imposition of unilateral tariffs on its trade partners. Earlier this week, both nations discussed a wide array of trade issues, including the impasse at WTO when US Commerce Secretary Wilbur Ross met with Commerce Minister Suresh Prabhu.

Although the US is no ally to India on most issues at the WTO, repeated clashes with its largest export destination has put New Delhi on edge. Repeated threats of high counter-tariffs on Indian goods by US President Trump has derailed the initial progress made in crafting a mutually acceptable trade package between the countries, another senior Commerce Department official said.

The package has been in the works for the past one year and trade officials have met as many as six times to hammer out a deal that provides an amicable solution to grouses from both sides. India is considering dismantling its current price cap regime for coronary stents with a trade margin policy, while it may also allow lower duties on import of certain information and communication technologies products such as high-end mobile phone from the US.

Talks finally came apart in February after Washington DC cut off India’s duty-free access to the American market under its largest preferential trade scheme, the Generalised System of Preferences (GSP). India is the largest beneficiary nation under the GSP, having exported goods worth $5.6 billion to the US in 2017-18.

The fate of the trade package now hangs in the balance with US Secretary of Commerce Ross set to finally reach New Delhi on May 6. In the meantime, New Delhi has deferred the imposition of higher duties on 29 key imports from the US, an unprecedented six times since last year. Originally set to go live from June 28, 2018, the tariffs have been repeatedly postponed by the government. New Delhi had announced higher tax by up to 50 per cent on import of agri goods and some industrial products, which are proposed to rake in an estimated $240 million worth of additional taxes. The commerce department claims the amount is equal to the estimated loss faced by India after the US imposed a 25 per cent extra levy on steel and 10 per cent on aluminium from many countries, including India, in May, 2018.

Trade Talk

• Stalemate at WTO necessitated New Delhi's second WTO mini-ministerial in as many years
• 25 key nations, including China, Brazil, South Africa and a wide group of LDCs to reach New Delhi
• The developing nations bloc will focus on their fight to preserve Special and Differential Treatment rights
• But global e-commerce talks expected to remain a hot topic