Representatives of 50 countries met this week in New Delhi for an informal World Trade Organization ministerial amid what can only be described as trade chaos, with US President Donald Trump threatening a global trade war from Washington, DC and the WTO facing increasing irrelevancy.
The meeting was called by India in an effort revitalize the trade organization following the December collapse of the last WTO conference in Buenos Aires without a declaration or any substantive action. The WTO more and more resembles little more than a talking-shop after the conclusion of a long list of bilateral trade agreements between participating countries that make the WTO basically irrelevant. Add to that recent unilateral imposition of import duties on steel and aluminium by the US administration amid threats of stiffer unilateral action and the decades-long inability to solve agricultural tariff and subsidy inequalities between developed and developing nations.
Washington’s latest action dragging India to the WTO over the country’s export incentive programs has fuelled insecurities among trading nations along with Trump’s arbitrary hiking of tariffs on products on the grounds of industrial security — well beyond its commitment under the WTO. Thus questions over the entire effectiveness of the 70-year-old global trading system dominated the discussions.
The world’s leading economy started systematically undermining the WTO after the Trump administration came to power in January 2017 and today is questioning the basic principles on which the WTO was founded. Washington’s trade representatives are threatening the rules-based system that has driven the trade body through the dispute settlement mechanism—so far the only arm of the multilateral body that was functioning well.
“The US wants to go back to the pre-WTO system where abiding by a verdict of the dispute settlement mechanism was not binding and the winning country had to sit down and negotiate with the losing party, which could end up giving more powers to large developed countries to arm-twist their small economic partners,” according to the Delhi-based business e-paper LiveMINT.
Despite multiple concerns and the ambition to sort them out, the Delhi participants were clear that the summit was not going be a revolutionary one ushering in a tectonic shift in global trading policies. The meeting was seen more as an ice-breaker by optimists and a desperation move by pessimists after the collapse of the Buenos Aires talks over the US’s failure to honor its commitment to find a permanent solution to the public food stock holding issue, a key matter for India.
Safeguarding and strengthening the multilateral trading system has never been as critical as it is today, not only because of the Trump-led United States’ mounting protectionism but what are widely regarded as China’s predatory economic policies. To that effect, the forum did provide an opportunity for the gathered nations to explore options on ways to reinvigorate the body, whose charter was signed by 123 of the world’s nations.
“We have very significant challenges before us. The WTO dispute settlement system by a blockage in the appointment of appellate body members will be a focus of our conversations in New Delhi,” said Director General Roberto Azevedo, adding that the trade environment globally is very risky. “We are not yet at a trade war situation, but we could get there,” he told reporters.
At the conference, India advocated a more robust multilateral trading system with a level playing field for both rich and poor nations. Commerce and Industry Minister Suresh Prabhu emphasized this in his speech: “Let us be mindful that in the past when the key economies departed from multilateral obligations by taking recourse to exceptions for agriculture and textiles, it led to other members securing similar exceptions. This only eroded the system and diminished its credibility,” he said.
Special and differential treatment, however, remains a critical and disconcerting aspect of the WTO’s framework, a prospect that is non-negotiable for India, especially over agriculture.
As Asia’s third largest economy, India pressed for removal of protectionist measures and promotion of free trade, saying it would benefit all the WTO member countries. This is vital as some experts point out that the rich nations are forming groupings to prepare the ground for pushing new issues such as investment facilitation, rules for e-commerce, promoting gender equality and reducing fishery subsidies.
Indian trade officials refuse to give up a so-called “peace clause” on food security that protects India’s food procurement programs against action from member-countries in case subsidy ceilings are breached. Food security – the desire by governments to maintain food stocks over and above normal use – has become a major issue. The US and other nations maintain that the food security issue is a cover for countries to maintain large food stocks to sell into the market during times of scarcity.
According to a 2013 clause negotiated by India in Bali, no action will be taken against India, or other developing countries, in case the subsidies on their food procurement programs breach the ceiling of 10 percent of value of food production laid down by the Agreement on Agriculture. Although the Bali declaration also stated that the peace clause was an interim arrangement, and a permanent solution should be negotiated by last December, Delhi in 2014 pushed the WTO members into making the peace clause perpetual till a satisfactory permanent solution was in place.
India is being asked to commit that it would not export from public stocks, which was not explicitly stated in the peace clause. The EU is also trying to link a permanent solution to India and China taking on commitments to reduce domestic support and give up some of the special and differential treatment it has access to.
Prabhu denied Indian blame for the failure of a ministerial round in a long time, saying the country has managed to earn international goodwill with its stance. “We had about 20-25 bilateral meetings with many countries and explained our position to them. Most understood that we our protecting our interest without harming anybody else’s,” Prabhu said.
The participants at the ministerial did signal that the WTO isn’t ready to engage new issues, be it investment facilitation, micro, small and medium enterprises or e-commerce. The idea of the meeting, the participants concurred, was to dispel the looming negativity around global trade and multilateral trading system and create a more conducive climate for trade.
Rules governing digital business also came up for discussion as currently most online businesses are owned by US behemoths like Google, Amazon, or Facebook. The developed countries, critics in poor countries charge, want rules that guarantee those companies can continue their dominance. So far, however, there isn’t even agreement on the definition of e-commerce or digital products. The poorer countries are suspicious of giving up their ability to develop even before they start.
Be that as it may, the decision of both US and China to participate in the New Delhi mini-ministerial augured well, participants said, raising hopes that WTO Delhi 2018 was able to create goodwill, and facilitate the development of a common position on important trade issues.
However, a participating US official told AS on the condition of anonymity, the mood at the meet was more of cautious optimism.
“If the WTO has to be saved from the consequences of a US-China trade war and if multilateralism in trade has to be preserved, then India and like-minded countries must secure the support of both the US and China in resolving pressing issues. They must form coalitions both with developed and other developing countries and revisit the WTO objectives,” he said.