Indian Dairyman     |     Jun 2008 Issue, Vol 60, No. 6      |    ISSN 0019-4603
Dr. N R Bhasin

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New Delhi, 21 May, 2008
The WTO’s Doha round was started as a development round but it has resulted in developed countries asking for market access and tariff reduction from developing countries, showing lack of concern for the poor.

In 2001 developing countries, under significant pressure to show global unity following the terrorist attack on 11 September, agreed to launch a new round of trade talks on condition that it would focus on development and address the problems created during the previous round of talks (the Uruguay Round). A real opportunity was created for the global community to take a new approach to international cooperation and work to rebalance unfair world trade rules. Over six year later the hopes that the Doha round would work for development have been cruelly disappointed. Negotiations remain in deadlock, whilst pretences that the talks would focus on achieving development outcome have been dropped for crude horse-trading by the richest and most powerful countries.

The main agenda for the Doha round was to ensure a level playing field for all the countries intended to reach a convergence over three main issues — Agriculture, Non-agriculture Market Access (NAMA) and Services. The key issues involved in agriculture are Domestic Support, Market Access, Export Subsidies and Non-Tariff Barriers (NTBs). There has been some progress since November 2001, at Cancun in 2003, Geneva in 2004 and Hong Kong in 2005. In the ministerial Conference at Hong Kong, it was decided to eliminate all export subsidies by 2013. The Doha Round at Geneva collapsed due to uncompromising position taken by US and EU on farm subsidies and tariff, providing a set back to developing countries aspiration to secure a fair deal in market access for their product in the developed countries.

The latest development in the series of these negotiations is the release of two drafts on Agriculture and NAMA. The draft text of agriculture demonstrate that development is not central to Doha Round, instead, it is likely to promote market access in interest of developed countries. With regard to domestic support, the draft modalities paper proposes a cut in US trade distorting subsidies which would bring its permitted level of spending to between $13 billion and $16.4 billion a year. This is higher than their support during 2006 which was only $10.8 billion and their support during 2007. The same holds true for EU, which has cleverly shifted most of its support to Green Box which has softer disciplines without any ceiling. The EU is proposed to bind its support between Euro 16.5 to Euro 20.6 billion. However, their stipulated support for 2008 is around Euro 26.8 billion.

In respect of market access, the draft has essentially gone with the G-20 proposals for tariff reduction. Accordingly the maximum average cut on final bond tariff for developing countries, including sensitive products would be 36%. For developed countries the maximum average cut would be 54%. However, the developed countries have been provided with flexibility to let them get away with lower level of cuts.

In the Hong Kong and Geneva Rounds, the developing countries were provided with the concession of identifying Special Products (SP) for self designation upto 20% of tariff lines. This would no longer be valid. The draft proposes 8-20% of tariff line to be designated as SPs. Earlier it was agreed that there would be no tariff cut for SPs, the current draft proposes that only 0-40% of the tariff line would be exempted from cuts.

In regard to special safeguard mechanism (SSM) the draft has departed from the simple and effective mechanism making its application complicated and also ineffective. Developing countries shall find it extremely difficult to invoke SSMs under these conditions, a tool that has been rendered weak and useless.

Several studies have shown that the third world developing countries are not going to gain much from the Doha Round. The current drafts allow developed countries to continue with their high level of subsidies that will enable them to keep their products competitive in the developing countries market. Developing countries will not be able to employ mechanism under SPs and SSMs to effectively protect their agriculture when faced with cheap and subsidized imports from developed countries.

India together with other developing countries has expressed reservation over the text of the negotiating drafts. Instead of appreciating their stand, an attempt has been made to divide the developing countries by offering them different sets of conditions under which they will undertake tariff reduction. Some developing countries can take a longer period to effect cut, while country such as India, Brazil and South Africa will have to undertake a sizeable percentage of cut in tariff, much higher than what even the developed countries are expected to effect. Besides, the WTO has, for the first time, sought to link the flexibilities offered to developing nations with the extent of reduction they agree to. As per the original Doha mandate, flexibility was uniformly applicable without any specific conditions imposed on nations.

Another disturbing development while negotiations on Doha Round concerns the 2008 US farm bill, under which subsidies of over $300 billion would be available to US farmers which runs counter to the long term process of reforms in agriculture. This would intensify competition between rich nations and farmers in poor developing countries. The unfair competition brought by subsides would hinder the process of market liberlization. India has said that the US influence on the negotiation was clear. Instead of appreciating India’s position, US has accused India of trying to roadblock the success in WTO talks. Hon’ble Prime Minister Dr. Manmohan Singh, has also slammed the developed world’s increasing bent towards protectionism. While addressing ASSOCHAM on June 2, 2008 he said “At a time when we in the developing world are standing our ground in dealing with the challenges and opportunities of globalization it is regrettable that the forces of protectionism are gaining ground in many countries”. Hon’ble Commerce Minister, Mr. Kamal Nath has challenged the US and EU to demonstrate whether there is a balance in the current commitments being negotiated. Farmers Unions and Associations from different parts of the country have denounced the WTO negotiating text in agriculture on the ground that it would be disastrous for the farming community in the present form.

India is a minor player in the world trade of dairy products. Although cost-competitive India has limitations on account of infrastructural inadequacies and lack of policy support to promote export. In addition, major efforts are required to improve the quality to make India’s products meet international standards to enable them to secure market access. At present the international prices of dairy products are high and there is hardly any danger of flooding Indian markets with imports.

(N.R. Bhasin)