WTO Stakeholders Consultations

Stakeholders consultations on WTO negotiations were organized by UNCTAD India Project, Centre for WTO Studies and FICCI in New Delhi on 8-9 December 2009. The meeting provided a platform for two-way interaction between stakeholders and Department of Commerce on issues related to some aspects of WTO negotiations, particularly Agriculture, industrial tariffs and services. The stakeholders consultations provided an opportunity to the participants to get informed about the outcome of Geneva Ministerial Conference of the WTO. The Meeting was addressed by experts from UNCTAD, Centre for WTO Studies, FICCI and top officials from Department of Commerce and Agriculture, Government of India.The meeting brought together representatives of farmer organizations, civil society, consumer organizations, industry representatives, experts and policy makers. GSIA President Mr. Atul P. Naik was invited to attend the conference alongwith Presidents of other MSME Association in India like KASSIA, TANSIA etc.

India is determined to take the Doha Round of talks under the WTO towards successful conclusion. When India signed WTO treaty in 1995, fears were expressed that a drastic reduction of import duty would lead to a flood of imports and kill the domestic industries.

The situation is different today, while rich nations are facing deep recession our economic growth is at a respectable rate of six to seven per cent. It does not mean that WTO treaty is good for us, but it has not been able to wreak much damage due to our fundamental strength.

Prior to WTO treaty, developing countries were imposing import duties of 50-100 % on most of the goods as against 10-20% by developed nations. India agreed to reduce the import duties because they were counter-productive for all except for inefficient producers.

India gradually reduced the import duties to the present average of about 15% whereas the developed nations have reduced to about 4%. As a result, global trade has increased, India could get access to global markets and consumers could get better quality of products –imported as well as domestic. Cheap labor available in India has been a major determinant for our success.

Developed countries are demanding that all the countries make further reductions in import duties/subsidies. India demands that the WTO takes up a project to establish an integrated database on non-tariff measures and WTO adopts international standards in respect of sanitary and technical barriers to trade.

The main concern to India is:

BROAD AGENDA IN WTO FOR INDIA

AGRICULTURE
WTO Agreement on Agriculture (AoA) seeks to improve market access and to reduce trade distortion subsidies in agriculture products. The Doha Round of trade negotiations of WTO has been to further liberalize agriculture trade and to further discipline the trade distortion.

Agriculture negotiations are of critical importance to India as two thirds of its population depends on agriculture, a large number of which includes small and marginal farmers.

On Agriculture India is defensive as we are not exporters. India’s objective is to save interests of our farmers. India has been arguing for the introduction of a regime which provides adequate protection to its domestic sensitivities. At the same time, India is seeking greater market access for its products in developed countries by disciplining and caping their trade distorting subsidies.

2. NAMA (Non Agricultural Market Access)
Major focus in WTO has been to reduce customs duties on non-agricultural products. In the NAMA negotiations WTO members discuss the terms or modalities for reducing or eliminating customs tariff and non-tariff barriers on trade in industrial products. The negotiations take place on “bound tariffs” which are the bindings taken during the negotiations at the WTO. The “bound tariffs” are the upper limit of the applied customs tariffs.

In the ongoing Doha Round, modalities for reduction of custom duties on industrial goods is a crucial issue. Reduction of custom duties is being negotiated by application of a formula called the “Swiss Formula”.

As regards tariff cuts in NAMA negotiations, India has been defensive. In the NAMA negotiations there are tariffs on which no bindings have been taken and these are known as the “Unbound Tariff Lines”. Based on the commitment taken by India, at the commencement of Doha Round in 2001, India has more than 31% of its NAMA tariff lines as unbound.

3. SERVICES
The General Agreement on Trade and Services (GATS) came in existence as a result of the Uruguay Round of negotiations and entered into force on 01-01-1995 with the establishment of WTO. The main purpose of GATS has been to create a credible and reliable system of international trade and services rules. The liberalization of trade and services helps the countries to strengthen their economic development, capitalize on their competitive strength, give wider choice to customers and encourage Foreign Direct Investment (FDI)

GATS provides for four modes of supply of services. Mode-1 Cross border, Mode -2 Consumption Abroad, Mode-3 Commercial Presence, Mode-4 Movement of Natural Persons. India has been a demandeur/aggressive in services. The modes of supply of interest to India are Mode-1 (Cross border supply) and Mode -4 (Movement of Natural Persons). Trade through Business Process Outsourcing (BPO)/Information Technology Enable Services (ITES) is undertaken through electronic modes of delivery i.e. Mode-1. Developed countries particularly the US and EC have not been forthcoming in offering substantial openings to our professionals in Mode-4. Even where these commitments have been offered, they lack in sectoral spread and/or are subject to numerical and other limitations.

In order to take the negotiations forward, a fresh round of offers would need to be tabled at the WTO by member countries once the Doha Round of negotiations gain momentum. A timeline for the submission of the second revised offers in Services would be decided after a breakthrough is achieved in Agriculture and NAMA.

4. AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES
Subsidy is an important development tool available with sovereign governments to achieve various goals. At the same time it is recognized that subsidies encourage channeling of economic resources into sectors where the country may lack comparative advantage. It also imparts an artificial competitiveness to subsidized product which can be sold cheaper in the world market than its actual cost of production. This leads to an unfair trade advantage to the domestic producers of the subsidizing country and creates adverse effects in different ways like injuring the domestic industry of importing country or displacing the products of other countries in third country markets.

In view of such adverse effects, certain categories of subsidies are recognized as unfair trade practices. To regulate subsidies and to take anti-subsidy action, there is an elaborate discipline in the WTO called the Agreement on Subsidies and Countervailing Measures(ASCM).

Subsidies and countervailing measures are the two sides of the same coin. A subsidy is a monetary benefit or compensation to a producer or exporter which could be in the form of financial grant, tax exemptions etc,. Countervailing measures are like a penalty imposed on the exporter in the form of a duty at the point of importation to balance the benefit enjoyed by the exporter. Thus, this is an attempt to provide a level playing field for the domestic producer of importing country to meet the paramount objective of the multilateral trade regime i.e. free and fair international trade.

The Doha Ministerial Conference of the WTO had mandated negotiations aimed at clarifying and improving the WTO disciplines on fisheries subsidies, taking into account the importance of this sector for both developed and developing countries as well as the impact of fisheries subsidies on sustainable development.

Proponents of fisheries subsidies disciplines such as New Zealand, Australia, US, Norway and to some extent the EC maintain that a broad prohibition may be appropriate. They advocate for strong fisheries management measures, adequate transparency provisions through strict notification requirements.

Developing countries such as India, Indonesia, China, Piliphines are demanding effective special and differential treatment considering the importance of this sector in the national economy and livelihood issues of fishermen.