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Free run for the rent-seekers -Biswajit Dhar
-The Hindu

With the U.S. showing a preference for plurilateral agreements over WTO multilateralism, developing nations must defend the global trading system against transnational corporations

The 10th Ministerial Conference of the World Trade Organisation (WTO), which also marked the completion of two decades of functioning of the most recent of the multilateral institutions, ended with an agreement among trade ministers of the member countries that may have pushed the organisation to the precipice. The WTO faces this existential threat for two reasons: the post-Nairobi work programme has very few substantive issues that can meaningfully engage its 162 members, and, more importantly, the Doha Development Agenda (DDA), that has been the lifeline of the WTO for nearly a decade and a half, now faces the imminent threat of closure.

The Doha agenda

When it was adopted in 2001, the DDA was seen as the collective articulation of the developing countries for working towards a just and equitable trading system, one which would provide the opportunities to laggards in the global trading system to benefit from engaging in trade. WTO members agreed that for realising this objective, the rules in each of the areas must be appropriately designed. Thus, it was agreed that agriculture must be stripped of all policy distortions, including the unacceptably high levels of subsidies that provide unfair advantage to the large conglomerates controlling global trade in commodities. At the same time, it was decided that the existing Agreement on Agriculture (AoA) would be amended to address smallholder agriculture and give developing countries new instruments to address concerns regarding food security, protection of rural livelihoods and rural development. The understanding therefore was that the trade regime would prevent the occurrence of a situation where small farmers in developing countries are pitted against the powerful commercial interests.

It was also agreed, in the same vein, that developing countries would be able to enjoy flexibility while reducing tariffs in both agriculture and industry, so as to ensure that these enterprises are prevented from facing competitive pressures before they are adequately prepared to do so. And, finally, in the area of services, most developing countries, including India, have been seeking ways to improve their presence in the global services markets, especially through cross-border trade in services and through movement of natural persons (the so-called Modes 1 and 4 respectively).

This approach towards the resetting of trade rules seems tailor-made for India at the present juncture, given the slew of initiatives that the government of the day has taken for preparing the domestic economy to face the multifarious challenges. Thus, the amendments sought in the AoA would have provided to the government the flexibility to adopt farmer-friendly policies as well as to operate a public distribution system for implementing the National Food Security Act. At the same time, calibrated reduction of tariffs, which has been one of the key elements of the DDA, must be considered critical for the pursuit of the ‘Make in India’ programme.

The Nairobi distortion

How does the Nairobi Declaration affect the DDA and its key components mentioned above? The first and the most ominous sign for the DDA is that the WTO members did not unanimously support its continuance. The United States Trade Representative, Michael Froman, was more forthright in his comments on the future of the DDA. He said that “while opinions remain divided among the WTO Membership [on the continuance of DDA], it is clear that the road to a new era for the WTO began in Nairobi”. As regards the activities of the WTO in the post-Nairobi phase, Mr. Froman stated that “as WTO members start work next year, they will be freed to consider new approaches to pressing unresolved issues and begin evaluating new issues for the organisation to consider”. Thus, even while a vast majority of developing countries, back the continuance of the DDA, the U.S. has stated unambiguously that it is no longer inclined to discuss the DDA and its covered issues.

If the DDA is being abandoned, what would be the likely content of the future deliberations in the WTO? This answer appears in the Ministerial Declaration, through the following observation of the Ministers: “... we note that WTO Members have also successfully worked and reached agreements in plurilateral formats”. This laudatory statement in favour of the “plurilateral formats” is tacit recognition of the conclusion of the Trans-Pacific Partnership (TPP), one of three mega-regional trade agreements (the others being the Transatlantic Trade and Investment Partnership and the Regional Comprehensive Economic Partnership). The TPP is a 12-member arrangement, led by the U.S., whose underpinnings are unbridled quest for markets, without any consideration being given to the ability of smaller countries in the grouping to be able to compete with the larger countries; in other words, countries of vastly unequal strengths would be treated equally. Yet another problem with the TPP is that it ignores the presence of large policy distortions, for instance, the granting of high levels of farm subsidies by the U.S. while pushing for opening of markets.

But above all, the TPP allows the large rent-seekers in the international markets, the transnational corporations, to earn unacceptably high rents through the exercise of the extraordinary rights they have been promised for their intellectual property and their investments. These transnational corporations are already making several countries pay very high prices for the products based on their intellectual property, including those of life-saving drugs, something that has been viewed with concern even in their home countries. At the same time, an increasing number of these corporations have successfully brought cases against their host countries before international arbitration panels when the latter have tried to bring domestic regulations to check flagrant violation of norms.

With the WTO facing the imminent danger of being taken over by a grossly unjust and undemocratic governance structure that would be dominated by the powerful interests, India and other developing countries need to seriously consider the contours of their future engagement with this organisation. More specifically, they must find ways of bringing back centre stage in the WTO negotiations the issues that would help their farmers and the workers in the manufacturing and services sectors get decent jobs and to put their economies on the path of sustainable development.

(Biswajit Dhar is a professor at the Centre for Economic Studies and Planning, School of Social Sciences, JNU.)