By Ankur Gautam
Late Nelson Mandela once said, It always seems impossible until its done. The same quote was reiterated by Roberto Azevedo, Director General of WTO as the Bali ministerial meeting came to the closing with the World Trade Organizations first multilateral accord since 1995 the year it came into existence. Indian trade minister Anand Sharma had made it clear that Indias food security was non-negotiable and that he would prefer no deal to bad deal. The delegates from the 159 member-states perhaps treated the WTO meet as a mere formality envisaging the formation of another bone of contention. The Bali package did seem impossible, until, as Mandela put it, it was done.
On the other side, the ever-patriotic (I did consider using over over ever) Indian media felt that India had won a great battle, if not the war, by ensuring the food security for its people and standing its ground against the developed world the US and European Union, primarily. The media over-hyped this victory by conveying that India not only saved the WTO but also facilitated a deal that would increase global trade of about $1 trillion and create more than 18 million new jobs in developing countries. I blame the medias false presentation of facts over the years for my cynicism wherein the lies the genesis of this article. Critics will always argue against the scepticism, but I could not help but bring to the forefront some of the issues that I found contradicting with Indias so-called victory at the World Trade Organization. The word bali in Hindi means sacrifice. And India, I think, did make some serious sacrifices. Let me try to elucidate.
The agreement at Bali between the 159 trade ministers comprises of three main pillars trade facilitation, agriculture (including the G-33) proposal on public stock holding for food security purposes, and a package for the LDCs. The developing world, spearheaded by India conceded to an early harvest package where these were clubbed together. The developing world agreed on committing itself to improve infrastructure at ports, faster custom clearances, automation, computerization, and homogenous documentation. These steps in order to facilitate international trade are touted to increase international trade by $1 trillion. Jeronim Capaldo in his review The Uncertain Gains from Trade Facilitation shows that the figure is fictional and does not account for the costs that the developing countries will have to incur when they go for the implementation of the aforesaid commitments. The creation of 18 million jobs, Capaldo observes, is again false. The trade facilitation deal, I thus feel, was probably more beneficial to the US and the EU nations, which already have such systems in place, than the developing world. If trade facilitation comes at the cost of infrastructure development in health, education, etc. in the country, then its perhaps not worth the victory.
The strongest tool which the WTO wanted to use to cut the deal was probably the LDC package. The LDC package which had the potential to divide the developing nations did not go beyond, as Anand Sharma put it, pious intent. While the global community felt the need for a strengthened package, the agreement failed to deliver that.
Disappointments result from expectations. The biggest disappointment was thus from the so-called victory on the food security, a tough stand by the Indian minister which set the media bells ringing. The contradiction of this victory stems from the Uruguay Round of WTO when the US and the European Union got away with very high agriculture subsidies, because they provided much higher subsidies to their farmers then (in 1994). This allowed $19 billion in trade distorting subsidies to the US and none for 61 of the 71 developing countries, including India. It is to be noted that US subsidises crops such as wheat, soybean, cotton and corn, which are exported (and hence trade distorting) while Indias subsidies are given to crops that are produced for domestic consumption. Indians have always had this strange relationship with the neighbour and perhaps that is why it was not very surprising to see Pakistan backing the claim that the minimum support price mechanism offered to Indian farmers by the government distorts global trade, while the rest of the developing world seemed to back India.
In the present, a large number of developing countries, including India, have either exceeded or are on the verge of exceeding their quota of 10% of agricultural production as subsidies that was agreed under AoA. The reference price in this agreement is the price of 1986-88 which is yet to be updated. India did not press for a redrafting of AoA, but a mere updating of price to current prices. Looking at the constructive ambiguity of the text, India agreed to the peace clause that ensures that no country can be dragged to the dispute settlement mechanism under the AoA. However, the developing countries still remain defenceless against hostile litigations (far-fetched, but possible nonetheless) from the US and EU under the ASCM.
To conclude, what is touted as Indias victory at the WTO, seems far from the truth. The Bali package could perhaps be better than a no deal but what would have really been in favour of India and the developing countries was a revamping of the AoA. India let the G-33 down by bilaterally modifying the text with the US to comply with the WTO secretariat. A basic textbook in economics can tell that international trade is beneficial with the advantage of comparative costs. The WTO sure is back in business with the deal but it needs to preserve the value of equality with which it was formed. It must ensure that international trade flourishes with freedom and equity, and not at the whims of a few powerful nations.
A self-proclaimed budding economist currently pursuing a PGDM with specialization in Development and Sustainable Finance at IFMR, Chennai. Interested in areas of development and political economy, specifically in the libertarian and Austrian approach. An anarchist and a nomad at heart, he believes in ones right to freedom in the pursuit of happiness.