Kamal Nath outlines India's Roadmap for Post - July 1 WTO Framework negotiations

Schedule of meetings at the wto/Geneva

Delivering the keynote address at the Consultation on “The WTO Framework Agreement of July 2004: the Way Forward”, organised by UNCTAD in New Delhi on October 26, 2004, Mr. Kamal Nath, Minister of Commerce & Industry, Government of India, said:
"It seems just a few days ago that the General Council of the WTO adopted the Framework Agreement. But on closer reflection, one realizes that almost three months have passed since those hectic days in Geneva – the FIPs process, Green Rooms, Blue Boxes – even Red Alerts – and what not! And now once more negotiations begin to flesh out things, to give concrete shape to what we envisioned when we reached agreement. The Framework Agreement adopted by the General Council indicates the contours of the way forward. It provides the principles and criteria, and points the direction in which negotiations should proceed in order to bring the Doha Development Agenda to full fruition. However, a multitude of issues will have to be defined and refined, and numbers and dates will have to be specified before the final substantive agreement emerges.

I am delighted to be ‘kicking off’, so to say, the post-Framework debate in India today. It is eminently appropriate for a forum such as the UNCTAD-DFID-DOC Project on ‘Strategies and Preparedness for Trade & Globalisation in India’, to be organizing this consultation. This Project has in recent months undertaken a number of capacity building activities and studies, and has facilitated detailed consultations which provided useful inputs during our pre-Framework negotiations. The dates of the Hong Kong Ministerial in December 2005 have just been announced. Things have begun to develop a sense of urgency and gather momentum. A lot of hard work will have to be put in during the course of the next 13 months if anything concrete is to emerge at Hong Kong.

The main concern at present relates to identification of the issues and assessment of the benefits and costs, as well as the rights and obligations that may arise in case the provisions in the Framework are defined one way or the other. Tentative negotiations have already commenced in Geneva, and so it is important for us to set things on the correct course right from the beginning. This requires wide-ranging consultations with all stakeholders, including producers, consumers, academics, researchers and NGOs. I am happy that it has been possible to organize this three day consultation programme sufficiently early, so as to be both, illuminating and useful.

Prior to the July Package, the international mood was one of hesitation, even disillusionment. Cancun had ended in collapse, and the ambitious mandate captured at Doha was in ruins. Fortunately, a more constructive engagement evolved in June and July of this year, and a significantly satisfactory Framework materialized, surprising many. As we now embark on detailed negotiations on modalities, the determinants of agricultural policy and liberalization will remain at the core of how swiftly we are able to complete the exercise. As an optimist, encouraged in no small part by the resolve I witnessed at Geneva on the July Package, I hope that we will all show
an equal determination to succeed in reaching our goals.

One of India’s principal concerns relates to Agriculture. Agriculture has been a major contributor to national wealth and employment in developing countries, so much so that it determines the very social fabric of countries like India. The possibilities, therefore, of trade-offs between agriculture and other areas in the negotiations stand diminished, when we consider the role our agriculture sector plays in our economy and society, and simultaneously the malaise of high distortions and protectionist barriers that characterize the global agricultural situation. Let me elaborate. Distortions, characterized by export subsidies and high domestic support, provide asymmetric opportunities for production and export to some, leaving a multitude of poor farmers in developing countries at risk of extreme poverty and even lower standards of living than at present.

All this would point to the possibility that poor countries subsidise their agricultural activities to a far greater extent than rich countries. And it would be rational to presume this. But the truth is just the opposite - for the simple reason that poor countries cannot afford it. The disparity between interventions by governments in developed countries and those in developing countries is stark. It is estimated that subsidies given in all OECD countries put together amount to a billion dollars a day, while a developing country like India is able to provide a mere one dollar per month per farmer in the form of minimum agricultural support. In India, more than 90% of the cultivators are small and marginal with the average size of holdings being less than 2 hectares (in Europe I understand it is 20 hectares, and in the US it is 20,000 hectares!) The majority of cultivators in developing countries live on the edge of poverty. I am not speaking only of India. This is a situation that prevails across the globe: in Africa, in Asia, in Latin America.

I feel that the time is ripe for us to discuss precisely how far we can go in Agriculture, based on the elements that are contained in the Framework Agreement. I look on the consultations being held over the next few days as providing us with indicators and levers on a variety of offensive and defensive considerations. India has never taken the position that we are not ready to offer commitments, and that we should focus solely on what developed countries can and should do, and that developing countries are to do nothing. Rather, India remains committed to robust domestic reform and progress in agriculture.

I have said so publicly before, and I say so again: the Indian farmer is not afraid of the farmer from a developed country. He is willing to compete with him. But he cannot compete with the Governments of the developed countries! In the entire negotiation on agriculture, the positions we have had to take, the strategies we have had to adopt, are not because we are protectionist per se. We do not deny the developed world agricultural market access on a whim, or because we do not want to engage in trade. We have been forced to turn protectionist because we have no alternative; there is no level playing field. Agriculture sustains the daily lives of the majority of our people. Subsidised products flooding in from abroad would play havoc with the social fabric. Eliminate subsidies completely and fully, in all its guises, and we would not be hesitant to liberalise substantially. But we must be clear that this is not a chicken-and-egg situation. There is no doubt as to what needs to be done first – it is the removal of subsidies. It is logical that market access can only succeed this, not precede it.

What is paramount is that there should be effective and substantial reductions in domestic support provided by developed countries to their farm sector, which willy-nilly end up distorting production and prices. It is time to set in stone an early date for complete elimination of export subsidies in any form, without resorting to the tactic of backloading the commitments or creating loopholes in the guise of food aid concerns. I do not intend to convey that some issues should not be taken up until others are resolved. I quite realize that, in the context of negotiations on modalities, clearly all aspects of the negotiations must be discussed. But rather, I do wish to highlight the time-sequential nature of liberalization itself.

Unfortunately, the focus of attention seems to be only on market access into developing countries by getting them to lower tariffs. But I attach equal importance to market access commitments by developed countries to developing countries, so that the prospect of a wider distribution of benefits for all peoples remains. Developed countries may already have lower tariffs, but the non-tariff barriers they have erected end up nullifying our free access into their markets. Thus, when we speak of market access we should not talk only tariffs, but also about how to deal with non-tariff barriers.

India has been autonomously reducing its applied tariffs over the last several years. The country’s economic blue-print points to further reductions in applied tariffs over the next few years. This is in view of the benefits that may accrue due to such opening up. Tariff reduction has been undertaken by us in a calibrated manner so as to minimize any negative effects. But I must emphasise that developing countries cannot be asked to, nor will they agree to, make commitments beyond their capacities or by disregarding their specific concerns which relate to alleviating poverty, promoting rural development, and safeguarding the livelihood of their people. These considerations are central to their economic growth strategy. Therefore, it remains essential that developing countries like India are afforded sufficient ‘policy space’ and flexibilities in instruments so as to lift the large proportion of their populations employed in agriculture from their present level of backwardness to a viable and vibrant level.

We feel that the formula for the tariff negotiations is a critical element of the negotiations. Discussions on the formula must be accorded priority, not because it is the only significant issue – (it is not; there are other important ones too) – but because it would be more fruitful and easier to decide other issues after there is some clarity on the nature of the formula. It is essential that the formula reflects what we see as key features of the Doha mandate, namely ‘special & differential treatment’ and ‘less than full reciprocity’. If the intention is to have a formula that is aimed at harmonization, then I am afraid that it will not wash – since harmonisation is only another name for getting developing countries to do more than developed ones – which is the exact opposite of S&DT and the ‘less than full reciprocity’ principle.

We come now to NAMA matters. On the table is a proposal for sectoral initiatives in seven sectors identified as being of export interest to developing countries. These sectors include fish products, leather, footwear, textiles, jewellery, electronic goods and auto components. The proposal is for all countries, developed as well as developing, to bring their tariffs down to zero in these sectors. The only special treatment for developing countries is a longer phase-out period – developing countries would get 3 times the period that a developed country would have. India welcomes the idea of sectoral initiatives, as we see considerable scope for enhanced trade in these areas. But our concern is regarding the nature of participation as well as the equality in the tariff concession to be offered. We are clear that participation in the sectoral initiatives cannot be mandatory. It has to be voluntary. The Framework Agreement now requires the issue of participation to be specifically negotiated and agreed to, and we hope to introduce the required flexibility in this.

Flexibility for developing countries in the NAMA negotiations is important. Since the completion of the Uruguay Round, the implications of tariff commitments have become somewhat clearer and there is also more clarity about domestic sensitivities. The flexibilities for developing countries should be such that they address the specific development related requirements of all developing countries. The present Framework, by focusing on the issue of flexibilities, is certainly an improvement on the Derbez text. It provides flexibility for sensitive products of developing countries through no cuts, or through reduced cuts, for a designated percentage of tariff lines. We need to identify products that are to be covered. We are now in a position to have a more comprehensive negotiation that could result in the creation of a mechanism that would make it possible for a more substantial addressing of the sensitivities of individual developing countries.

Services is an area of offensive interest for India in view of our specific strengths and comparative advantage. We played a major role in including services in the July package by having a separate paragraph for it in the Framework along with an Annex containing recommendations for future progress. The text specifically refers to the need for “high quality of offers” by developed countries, especially in sectors and modes of export interest to developing countries. This, as well as the specific reference to Mode 4, covers India’s offensive interests in Modes 1 and 4 where we have already expressed interest through our requests. One of the few specifics in the July Package is the last date for these revised offers. It has been fixed as May 2005. It is important to note that this is the only market access area where benchmarks have been fixed, given the differing nature of the services negotiations from those on agriculture and goods – a fact which was repeatedly highlighted by India.

We are happy that out of four Singapore Issues, the three contentious ones are now off the table. Negotiations have been agreed upon in respect of Trade Facilitation only, through explicit consensus. Our reservations on the Singapore issues were regarding curtailment of development policy space if a multilateral agreement on Investment or Competition was brought in. It was also our contention that these were non-trade issues and WTO was not the appropriate forum for a discussion on them.

Trade Facilitation is in a different category. It deals mostly with procedures relating to import and export, and is of interest to India. It is universally recognized that trade facilitation improves the business climate by reducing transaction costs and lending predictability to international trade. In any case, India is already in the process of trade facilitation, and international agreement on this would not only supplement our efforts, but also ensure that Indian exports get facilitated in foreign ports. We have also been successful in introducing an entirely new element in the modalities, namely, that of having an effective customs cooperation mechanism on issues relating to trade facilitation and customs compliance.

While this consultation exercise covers Agriculture, non-Agricultural Market Access and Services as well as Trade Facilitation, a major area of interest to us, namely development related issues like Implementation Issues and Special and Differential Treatment Provisions does not seem to be specifically covered. This does not mean that this is of less priority for us. I am sure that as part of the deliberations these issues also would come up. These must consciously and thoroughly be discussed, as they are cross-cutting, and in my view, all-pervasive.

We believe that we have a balanced Framework Agreement, and during the next stage of negotiation. we have to ensure that the elements that we have built into it are fully benefited from. While we need to safeguard our concerns, we also need to identify our offensive interests, and our needs and priorities in these areas. We need to deliberate what is suitable in the Indian context and what kind of ambition level we should have when we talk of taking on commitments. We need to deliberate how we can dovetail our on-going autonomous policies and programmes in the context of the WTO negotiations. We need to assess what would help our business, trade and industry. The window of opportunity cannot be successfully exploited without concrete inputs of business, trade, industry and civil society in general.

We have with us here stakeholders from all over the country, and also well known personalities who have recognized expertise in the relevant areas.
I have no doubt that the deliberations will be fruitful and will provide useful inputs for the Government. I look forward to receiving your recommendations, and also to a continuing interaction between you and my Ministry, as events unfold in the coming months."

BACK