R V Kanoria: A good trade deal

Progress on services and agriculture is critical to any solution

The negotiations on reduction of bound tariffs on industrial goods at the Doha Round of negotiations are expected to gather momentum in the next few weeks at Geneva.

The focus of the negotiations based on the discussions in the second week of September is expected to be on two main issues: a formula for reduction of tariffs, special and differential treatment and the additional flexibilities available to developing countries.

As per expectations, the discussions so far have been on divided lines. The developed countries supported by the chairman of the negotiations committee, Stefan Johannesson of Iceland have said that all the issues have to be negotiated together as a package while developing countries like India have demanded that the other issues should be decided separately after the formula is decided.

India pointed out that the flexibilities available to developing countries have no direct linkage to the formula for reduction of tariffs.

The outcome of these negotiations would have widespread impact and as a concerned stakeholder there are a few observations I would like to make on the on-going negotiations on non-agriculture market access (NAMA) in Geneva.

First of all, it is important for member countries of the World Trade Organisation to realise that NAMA cannot be isolated from the other two pillars of agriculture and services, which must also progress in the Round. It is important for all the three issues to move forward together in the forthcoming negotiations.

Second, it is even more important that negotiators do not try to balance the ambition of the Round by according lower ambition in agriculture and being extra ambitious on NAMA. It will be very important from the Indian industry perspective to ensure that the trade-offs happen within each of these negotiations and are not balanced across sectors.

The give and take on NAMA has to be within NAMA itself and not across services and industrial goods or agriculture. I strongly believe that for balancing the gains and losses there have to be intra-sectoral trade-offs and not inter-sectoral trade-offs.

The main issue today for Indian industry is the additional market access it will receive in other countries, especially the developed world. There are two issues here. First, how do we tackle the tariff peaks and tariff escalations in these countries, and second, how do we receive the flexibilities available to developing countries in the Doha Round.

Indian industry is of the view that the joint proposal from Argentina, Brazil and India provides a solution to both these issues. However, we may also need to ensure that the peak tariffs in the developed world are not more than three times the average tariff, after the Doha Round is completed. This is necessary to ensure that real market access is made available to developing countries.

Second is the issue of flexibility. We need to ensure that the very sensitive products for us are still kept in the unbound list. Second will be to ensure that duty cuts on some sensitive products are lower than the duty cuts on other products.

Third, the percentage of duty cuts for developing countries must be lower than the percentage of cuts to be undertaken by the developed world. Finally, the implementation periods have to be longer for developing countries.

The flexibilities that Indian industry wants does not in any way hamper the ambition that has been laid out in the Doha Agreement and the subsequent July Framework Agreement. Therefore, there should be no problem in developed countries agreeing to these demands.

One important aspect of the negotiations on NAMA is the focus on non-tariff barriers (NTBs). Surprisingly, this area of negotiations has not received the time and attention that is necessary. I strongly believe that the future barriers to global trade will come in the form of non-trade measures rather than through tariffs.

Member countries need to first identify the NTBs that exist and the second step will be to differentiate them into two baskets "" those that need immediate elimination and the ones that need monitoring and regulation.

They should also agree to strengthen the obligations of least-trade-restrictiveness in the next review of the Agreement on Technical Barriers to Trade; develop closer links between the WTO and international standardisation organisations; and establish national contact points to handle TBT complaints.

To deal with NTBs, specific steps would be required, such as a sectoral approach, a horizontal mechanism and/or a bilateral approach that could later be extended to plurilateral and ultimately multilateral arrangements. The time from now to Hong Kong is short but the ministerial needs to take into account the time needed for this exercise before deciding on a date for finalising the modalities for NAMA.

This may be the last substantial Round for reduction of bound tariffs on industrial goods. Therefore, the onus is on the negotiators to ensure that the benefits are well balanced for all countries of the WTO.

The author is chairman, WTO & Trade Agreement Committee of CII. Views expressed are personal