Despite challenges, WTO is relevant for India

Sushma Ramachandran

Senior Financial Journalist

WHETHER the World Trade Organisation (WTO) is still relevant and meaningful for India is the question right now. With developed countries increasing their grip over the multilateral forum, it is becoming an arduous task for this country to hold on to the hard-won concessions at every negotiation.

The latest visit of WTO Director-General Ngozi Okonjo-Iweala has put the spotlight on the way in which advanced economies continue to control the agenda while whittling down space for basic trade issues concerning the less developed world. Despite her cordial talks with the government, the top WTO official concluded her trip by commenting that India’s concerns over some key issues would be heard but may not be addressed ultimately. This points to the reality that developed, rather than emerging economies, are strengthening their hold over this trade platform.

India’s role right from the inception of the institution has always been that of a leader of the South, trying to ensure that fair play is brought into a rule-based system of global trade. It has retained this role till now, given that many smaller developing countries rely on it to provide support against the influence of powerful global players led by the US and the European Union. In this context, it is interesting that while this country’s strategic relationship with the latter entities continues to strengthen, economic ties remain bogged down over predictable contentious issues.

It was anticipated there would be some welcome changes in these entrenched negotiating stances with the entry of the new Biden administration. The expectation was based on the premise that the new regime was committed to playing a greater role in the multilateral arena. This was in sharp contrast to former US President Donald Trump who preferred to play a solo game on the geopolitical stage. He distanced the US both from strategic partners like NATO as well as multilateral institutions like the WTO. It was the Trump administration which virtually dismantled the operations of the trade body’s dispute settlement mechanism by refusing to appoint officials to the key appellate body. Surprisingly, the lacuna has not been made good by the Biden team, in contrast to earlier hopes on this score. The appellate body, thus, remains in limbo even now.

The tussle between developed and developing economies over farm subsidies also continues, with rich countries reserving the right to spend billions of dollars on supporting their farmers. The livelihood issues raised by India, on the other hand, are considered only grudgingly, while the “peace” clause, allowing a 10 per cent subsidy on public stockholding of foodgrains, was extracted after uphill negotiations at the Bali ministerial conference in 2013. The issue of providing a permanent peace clause for public stockholding based on government procurement to support Indian farmers is expected to be taken up at the conference scheduled in Geneva from November 30.

But a decision may not be possible, given the opposition by developed countries which are rigid, in contrast, on not reducing their own enormous food subsidies.

The latest issue to cause friction is the fisheries subsidies. Many countries carrying out industrial-scale fishing in areas outside their exclusive economic zone provide huge subsidies to their seafood industries. India has submitted a proposal that opposes such subsidies and is stringent on the issue of overfishing and overcapacity. Developing countries, on the other hand, are not being given the needed support to develop their own vastly smaller fishing industries. The proposal is likely to be strongly opposed by countries with large fleets that engage in distant-water fishing. No wonder, the WTO chief felt the issue may not be fully addressed.

Efforts are now being made assiduously to include new items on the trade body’s agenda, including investment facilitation, e-commerce and rules of MSMEs (micro, small and medium enterprises). These are areas where developed countries feel the multilateral route could help carve out better market access. This is even as earlier issues like agriculture have not yet been resolved. In this context, one must recall that commitments had been made to reduce the North’s food subsidies even when the WTO was established 26 years ago. Such commitments have yet to be fulfilled, but new items continue to be pushed onto the trade agenda.

At the same time, being a member of the multilateral agency brings many benefits as well. The proposed waiver, for instance, on intellectual property rights for all technologies for the detection, prevention and treatment of Covid 19, is an excellent example of the way in which the multilateral agency can play a pivotal role. The TRIPS waiver, as it is described, envisages suspending certain provisions of the trade-related aspects of the Intellectual Property Rights Agreement of the WTO. It will enable all to share the various technologies to tackle the pandemic rather than making each country seek separate waivers. The proposal, mooted by India and South Africa, aims to short-circuit the entire process of waiving IPR protection. The US has, surprisingly, come on board, but limited its support to patents on vaccines alone, rather than other pharmaceutical areas.

The other positive aspect relates to trade flows as India has yet to become part of any of the major regional trading blocs. It has voluntarily opted out of the Regional Comprehensive Economic Partnership (RCEP). But it is also facing an uphill task in even finalising bilateral free trade agreements with the US, indicating its disinterest for the time being, while the one with the European Union is a non-starter even after years of negotiations.

Despite these issues, India has managed to raise its share of global trade, partly by relying on the benefits available to all of the trade body’s member countries. It has also won some significant battles through the dispute settlement mechanism.

So, there are many challenges, but it is clearly more in this country’s interest to remain an active leader of the developing world in the multilateral trade body rather than become a passive spectator. A predictable rule-based trade organisation that relies on consensus for decision-making is needed by all stakeholders. To that extent, it will remain relevant for India not only just now but even in the long run.

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