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The Big Picture – WTO Meet in Nairobi

 The Big Picture – WTO Meet in Nairobi

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Summary:

Following the meeting in Paris on climate change, the attention of the whole world has now been shifted on to the 10th Ministerial Conference of the World Trade Organization in Nairobi. This meeting marks the WTO’s 20th anniversary. This will also be the first such conference to take place in Africa. The meeting has many important problems to solve before it. The WTO’s main tasks are negotiating the opening of new markets and setting the rules of world trade. Debate in Nairobi may revolve around the Trade Facilitation Agreement, a compromise deal to improve customs procedures for goods from least-developed countries, or LDCs, that the WTO says could increase merchandise exports by as much as $1 trillion a year.

Since the WTO’s creation in 1995, it has been a valuable international arena for dispute settlement, for containing protectionism and ensuring coherence of global trade rules. But in terms of concrete agreements, its only major achievement is the 2013 Trade Facilitation Agreement concluded in Bali. It’s a vital step forward, but not enough to show for 20 years of work. Trade Facilitation Agreement (TFA) is a very important agreement, particularly for developing countries which will reap the majority of the economic benefits. The TFA will simplify, standardise and speed up global customs procedures, which can lead to an average cut in trade costs by around 14%— an impact potentially greater than the elimination of all remaining global tariffs. Economists project that implementation of the TFA by WTO members could lift global exports by $1 trillion annually. Some WTO members have accepted the TFA through administrative decisions, but for many members, parliamentary approval is required.

India is seeking a balanced outcome at the World Trade Organization’s (WTO) tenth ministerial meeting even as it is striving to get a permanent solution to the public stockholding issue for food security purposes. India has already taken a strong stand to set the Bali accord straight, which was signed and agreed in December 2013. At Bali Ministerial Conference in December 2013, Ministers took a decision that they would not legally challenge the WTO compliance of the food stockholding programmes in developing countries. Simultaneously, they have instructed members to find a permanent solution within a four-year timeframe. In November last year, members clarified this decision. They have made it clear that if there was no agreement on a permanent solution within the target four-year time-frame, such eligible programmes in developing countries would remain unchallenged until such a permanent solution was found. However, despite current efforts, positions of many countries continue to remain wide apart. The consensus-driven approach at the multilateral forum has also proved difficult to reach a deal.

When it comes to hard negotiations, it is mostly a group of developing countries such as India, China and Indonesia and developed countries such as the US and Japan as well as the European Union which make or break a deal. The key contention of developed countries recently has been that China and India have achieved certain economic stature and hence should bear more burden of trade liberalization and should not insist to be treated equally with other developing countries demanding similar treatment. However, India and China insist that large sections of their population are still poor and hence they also should benefit from differential treatment that developing countries deserve under the development mandate of the Doha trade negotiations. Recent attempts by developed countries to form a new category of developing nations—Low Income Developing Countries—is seen as an attempt to weaken the developing country agenda by excluding countries such as India and China.

At the meeting, India is also looking forward for a permanent solution on public stockholding for food security purposes which it hopes will allow it to roll out new food programmes that is not permitted under the current arrangement. It has also rejected a proposal by the developed countries to scrap the Doha round as it has not made much progress and has insisted that without harvesting the key features of the Doha round, it will not agree to a new round of trade talks. India is also against giving up the limited headroom that it has in giving export subsidies under export competition.

Given the wide divergence of views among countries, the outcome at the Nairobi MC is fraught with uncertainty. India, along with other developing countries, stands to lose significantly if the Doha Round were to be abandoned without addressing its core issues, including disciplining of agriculture subsidies and market access in goods and services. Providing market access in agriculture products, especially those which are underpriced because of a high level of subsidies prevalent in developed countries, will damage Indian agriculture further and deepen the distress of our farmers.