India at WTO: Ably defending the indefensible in trade negotiations

India's WTO negotiators have performed brilliantly in defending the 'perceived' national interest - but did they read the national interest correctly?

Strategies in GATT and WTO negotiations 

by Abhijit Das

Published by Oxford University Press

352 pages  ₹1,495

  This carefully researched book defending the benefits of trade multilateralism coincides with the United States effectively undercutting, if not permanently damaging, the basic framework of the World Trade Organisation (WTO). Since 2019, the US has vetoed appointments to the Appellate Body, making it and the principle of judicial review of WTO decisions non-functional. More appallingly, it has undermined the fundamental WTO principle of multilateralism by unilaterally imposing stiff across-the-board tariffs on imports. It also junked the principle of most-favoured nation tariffs being applicable for all imports by determining reciprocal tariffs for individual countries. So, is trade multilateralism dead in the water?

 

This is where a patient read of this perceptive book infuses hope. Readers will recognise in Trumpisms, a bargaining stance, adopting a “strong” initial ask for “maximum benefits.” 

How should the world respond? One option is to get around multilateralism and sign a bilateral free-trade agreement (FTA), like India. The Das principles favour building a wide cross-country coalition spanning political and ideological divides to offer only the lowest possible tariff protection to the US and to future developed-country copycats. Additionally, he argues for a “link” agreement on enhanced import protection with easier technology sharing, acceptance of minimum tax on overseas profits of foreign multinationals and an accelerated timeline for developed country decarbonisation, allowing developing countries a more gradual transition. 

Why is this not happening? According to the Das principles, three reasons explain the timid response: The desire to preserve high-value non-trade relationships (such as access to US military assets), continued access to the world’s largest and fastest-growing high-income market, and the belief that Trump’s America is a near-term aberration. Forging multilateral agreements is a long, unwieldy, and expensive haul, unsuitable to solving transient problems. Also, the looming threat of China replacing the US as the global hegemon inhibits realignments away from the latter. 

These “Black Swan” events undermine the value in learning from the past. But the Das principles forewarn that resilience and preparedness result in nimble responses even in uncertain times. Practical lessons in negotiating strategies are rooted in past events. India shines in developing country coalitions with Brazil, the Philippines, Indonesia, and South Africa, uncovering the “trip wires” in negotiations — including, shockingly, blatant executive overreach by WTO “grandees” enforcing unanimity where none existed. Building awareness of duplicity in developed country arguments advocating capped subsidies for agriculture and for food storage in the emerging world whilst protecting their own agricultural subsidies by “carve outs” exemplifies the need to know the incentives behind apparent “win-wins.” 

India and other developing country negotiators did well to expose the commercial motives behind developed country proposals based on false equivalence. Developed countries’ advocacy for equal access for foreign bidders in developing country government contracts, seemingly to enhance “competition, efficiency and reciprocal export business for developing countries” also served to enlarge global market share of developed country exporters, at the expense of developing country producers. 

Nevertheless, readers will be right to wonder whether being cleverer than the developed world negotiators served India well. China joined the WTO in 2001 with a gross domestic product (GDP) in current dollars three times of India’s. Today its GDP is five times and global trade 14 times India’s. But, as the book records, China never tried to shine at WTO negotiations, preferring to quietly and transactionally join coalitions  that suited their interests. China read the bureaucratic artifices well. WTO rules allow powerful member countries to benefit disproportionately. Instead of trying to change the status quo, as India did, it accepted the fait accompli. Instead, it grew its domestic economy and global trade to become economically eligible to join the Goliaths rather than waste time leading the “Davids.” 

India’s WTO negotiators performed brilliantly defending “perceived” national interest. But did they read the national interest correctly? Within a decade of clever and heroic attempts to scuttle limits on subsidies for food production, storage and distribution, we remain burdened by our administered system of low prices for fertilisers and agricultural inputs and high-cost government procurement, storage and distribution that is inefficient, wasteful, unsustainable, inimical to domestic growth and development of the rural economy. Instead, food markets and digital “food stamps” offer potential cost savings or enhanced coverage of beneficiaries. The bottom line is time-warped Indian economic policies were defended brilliantly at the WTO. But they served to constrain India’s growth and development. 

Practitioners would do well to absorb the many useful lessons on multilateral negotiating strategies and note the traps awaiting an uninitiated negotiator, engagingly illustrated by examples from the GATT/WTO. That India opted to successfully resist externally-driven trade and investment reform and chose to bear the cost speaks to our aversion to political risks, aided by outstanding bureaucratic skills, defending to the last whatever exists — even at the risk of scoring long-term self-goals. 

 

The reviewer is a distinguished fellow at Chintan Research Foundation and a former IAS officer and World Bank official