Another storm brewing

Indian negotiators at WTO need to push harder

The United States Trade Representative is working closely with the director general of the World Trade Organization, Roberto Azevedo, to tweak the global trade rulebook in order to address some of the concerns of the world’s largest economy. If successful, the move can lead to the WTO rescinding certain key flexibilities to some emerging countries, including India. A key element of the changes the US proposes to push relates to the developing countries availing special and differential treatment (S&DT). S&DT gives developing countries special rights and enables them to take commensurate trade commitments based on their economic capacity. It allows developing countries to tweak and, in particular, commit to less than full reciprocity in trade based on their low economic capacity.

S&DT was adopted by the WTO in recognition of the fact that developing countries don’t always have the required capacity or resources or indeed the level of market reforms for them to fully compete in all trade arenas. The US argues that many of these countries, such as India, are now members of the G20, and are no longer the weaklings for whom the provision was made. But a reversal of S&DT will not only stall the progress under the WTO but will also actively discourage the participation of developing countries in the multilateral trade framework.

For India, in particular, this development could not have come at a worse time. For a while now India has been at loggerheads with the US on trade issues. Both sides have traded protectionist barbs in the recent past in an attempt to appease their domestic constituencies. For instance, Indian restrictions on US-made medical devices, particularly cardiac stents and knee implants, did not go down well with policymakers in the US. Another flashpoint was when India prevented the import of dairy products from the US for “religious reasons”. Things came to a head earlier this month when the US decided to exclude imports from India from its Generalised System of Preferences (GSP) scheme, which allows for certain sets of goods to be imported into the US with zero tariffs. India has been the largest beneficiary of this scheme, with imports worth about $5.6 billion benefiting from the GSP. This has hurt Indian interests, especially since Indian exports have suffered a long period of middling growth.

Under the circumstances, India is likely to be hurt further if the S&DT aspect is withdrawn from the WTO. For instance, it is feared that in the absence of the S&DT provision, India will not be able to secure the livelihood concerns of its fishermen in the new trade rules for fisheries subsidies. India will also lose its 10 per cent farm subsidy elbow-room, which will be reduced to 5 per cent. When the GSP withdrawal happened, Indian policymakers tried to downplay the adverse impact. That was a mistake. With reference to the S&DT revocation, however, India has made a more forceful attempt to fight it by raising an alarm on how it can cause lasting damage to the multilateral trading system. But Indian negotiators need to push harder, as the time is ticking fast for countries such as India to have a rule-based trading regime with S&DT built-in as an instrument of natural justice.