[DEBATE] : Denouement of Doha Round by S. P. Shukla, India

[Riaz K Tayob]

Please find enlcosed a critique of the latest Texts on AoA and NAMA by 
Mr. S. P. Shukla, convenor of the Indian Peoples Campaign Against WTO.

Denouement of Doha Round?

S. P. Shukla*

23rd May 2008

Implications of the Latest (19.05.08) Revised Texts on Agriculture and 
NAMA (Non-Agricultural Market Access)

Intrinsically, the latest texts do not change "the big picture" as far 
as developing countries are concerned: If anything, they confirm the 
apprehensions sounded repeatedly by many observers for some time that 
the attempted "round up" of the Doha process was tilting the outcome 
decisively against the interest of developing countries. This happens in 
the following ways.

I

In Agriculture, despite the considerable "cleaning up" of the text by 
the Chairman, the fundamental imbalance persists. The market access 
sought by developed countries into the developing countries is ensured 
by the maintenance of the three-tiered tariff reduction formula which 
has been there for some time. Which, broadly speaking, requires 
developing countries to reduce their tariffs on agricultural products by 
36 percent as against the developed countries obligation to reduce them 
by 54 percent. It must be noted that an average cut of 36 percent on 
bound tariffs in agriculture is a stiff proposition. As against this, 
the issue of elimination/substantial reduction in subsidies by developed 
countries, particularly USA, still remains hanging, awaiting “political 
solution" presumably at the ministerial conference. The possible range 
to which USA may agree to "bring down" the narrowly defined domestic 
support has been indicated at $12 - $16 billion, whereas the current 
level (2007) of such subsidies is only $11 billion per annum. Even if 
the USA finally accepts a middling figure in this range, it will be no 
great achievement towards the goal of substantial reduction. More so, 
because the subject matter of the attempted reduction constitutes only 
about 20 percent of the total state support whereas the remaining 80 
percent of such support for the US agriculture is in the form of "green 
box "subsidies which are outside the range of reduction aimed at and are 
not subject to any worthwhile multilateral discipline, despite some 
provisions sought to be incorporated in the text for better "surveillance".

India (like a large number of developing countries forming G-33 led by 
Indonesia) has basically protective or defensive interest in these 
negotiations. We missed the bus by not insisting on ensuring the right 
to impose quantitative restrictions on imports to safeguard the 
livelihood of millions of small and marginal peasants. We placed our 
trust in the mechanisms of Special Products and Special Safeguard 
Mechanism. G-33 proposed that developing countries should have a right 
to self-designate 20 percent of tariff lines as Special Products which 
would not be subject to any tariff cut. As against that the text speaks 
of only 8 percent of tariff lines being eligible to be treated as 
Special Products and of these, only 40 percent, i.e. only 3.2 percent of 
the tariff lines, to be subject to no tariff cut and remaining 60 
percent i.e. 4.8 percent of tariff lines to be subject to an average of 
15 percent cut. We have 715 tariff lines in agriculture. We wanted 140 
tariff lines to be treated as Special products; now the text implies 
that we would get only 57 lines, of which only 23 lines would be subject 
to no tariff cut and 34 subject to a tariff cut of 15 percent.. 
Considering multiplicity of our agricultural product range and the 
crucial importance of these products for livelihood, the range of 
protection available is too narrow and too weak.

As regards Special Safeguard Mechanism, the criteria in the text for the 
price-based measures are too restrictive and ineffectual. Thus, the 
provision to impose additional duty to protect indigenous peasantry from 
sharp decline in international prices and consequent surge or threat of 
surge of imports can be invoked only if the import price declines to or 
below the designated "trigger price" which the text suggests to be 70 
percent of the average import price of the preceding three years. And 
the additional duty to be levied can not exceed 50 percent of the 
difference between the actual import price and the trigger price. By 
definition, the import price will continue to remain much below the 
"trigger price" even after the levy of additional duty. Moreover, this 
measure will be applicable only on a shipment-by-shipment basis. The 
protection so offered is therefore ineffectual.

The other safeguard measure is volume-based. The text gives two 
alternative sets of criteria, one visualising relatively lower level of 
increase in imports (ranging from 105 percent and above of the average 
imports of the preceding three years) and the other visualising higher 
level of increase in imports (ranging from 130 percent of the similar 
average) as the trigger level. The former permits relatively higher 
level of additional duty while the latter prescribes relatively lower 
such level. While the former is clearly more desirable, the choice of 
alternatives would be the subject of negotiations and what would emerge 
may be somewhere between the two levels. That would not be adequate to 
protect our interests. Moreover, the text makes it clear that such 
measure can not be invoked for more than a year or a season, as 
applicable, and it can not be invoked again for the same product before 
a lapse of two years. The volume-based and price-based measures can not 
be invoked simultaneously for the same product.

It is well known that adverse impact of decline in international prices 
in a domestic market integrated with the world market is felt even 
before or without large scale actual imports. What is needed to insulate 
the peasantry from such adverse impact is a strong signal like immediate 
imposition of quantitative restrictions. Finely calibrated, halting and 
inadequate measures taken after the damage is done are of little use. 
All in all the protection regime visualised in the text is too limited 
and ineffectual to protect the livelihood of millions of small and 
marginal farmers against the surge or threat of surge of cheap imports 
of products which would continue to be heavily subsidised.

It is necessary to stress that the current situation of high 
international prices of some agricultural products should not lull us 
into a false sense of security and lead us to accept this weak and 
ineffectual regime of protection. The cyclical and speculative reasons 
are as much a part of the story as some long term factors. The story of 
sugar prices is a case in point. Despite all talk of diversion of food 
crops to bio-fuel production and increasing demand from emerging 
economies, the sugar prices are in doldrums, ranging around 10 cents a 
pound, a level below the cost of production of the most efficient 
producers. The subsidy, taxation and import regimes in USA and EU 
account for this phenomenon. One should not be taken in by self-serving 
arguments put forward by EU and USA in this context.

There are a couple of other points to be noted in this regard. The right 
of developing countries to "self-designate" Special Products is 
recognised in the text but only apparently. Otherwise there need not 
have been a detailed commentary or guidelines as provided in the 
"Illustrative List of Indicators for Designation of Special Products”. 
This restricts the right to self-designate. And that too when the 
restriction is already there in terms of numbers of such products and 
very limited level of protection visualised. The text of "Illustrative 
List...” uses the terms "significant proportion" or "significantly" too 
often. A multilateral legal text providing such criteria with 
quantitative innuendoes will lead eventually to avoidable questioning by 
interested parties and a demand for production of internationally 
verifiable data to support the fulfillment of the criteria by those who 
seek to invoke the protection for Special Products. Even at this stage, 
we must insist on deletion of such guidelines from the text. It is 
enough to have only the basic criteria of food security, livelihood 
security and rural development as earlier agreed upon. It is interesting 
to recall that when "Sensitive Product" category was invented by the 
developed countries in the negotiations leading to Agreement on 
Agriculture in 1990s, incorporation of similar guidelines was not 
considered necessary for their identification.

There are certain modifications necessary to be introduced in the text 
of Annex B (Amendments to Annex 2 of the Agreement on Agriculture) for 
reasons that are obvious:

(h)                add the following policies or programmes to the list 
already included in the text to spell out non-objectionable subsidies or 
assistance: "debt-relief to peasantry; promotion of and assistance to 
farmers’ co-operatives; comprehensive land and water use policies and 
programmes."

Modification of footnotes 5 and 6: add "fibers" to "foodstuff" and add 
"single commodity dependent producers" to "low income/resource poor 
producers" in the text. This is necessary to take care of the schemes 
like monopoly or state procurement of cotton or jute and to protect the 
interest of cotton/jute farmers.

II

As regards the NAMA text, the tilt against the developing countries is 
even more blatant. The universal binding of tariffs, the line-by-line 
tariff cutting instead of average reduction target, application of the 
"Swiss Formula" and more than proportionate reduction in the tariffs of 
developing countries through low coefficients and few exceptions, which 
constituted the hallmark of the earlier text continue to govern the 
approach in the latest text. What is worse, the "Para 8 flexibilities" 
which were insisted upon by developing countries to mitigate the 
harshness of the approach have been effectively diluted, if not 
nullified, by the latest text.

The choice of low coefficients leaves developing countries with little 
margin or maneuverability. The simulation exercise done by the Third 
World Network had shown that the developing countries which have had 
historically high tariffs would need very high coefficients to avoid or 
smoothen the adverse impact on their industries. But the ranges 
prescribed now are effectively the same as before i.e. 7-9 for developed 
countries and 19-26 for developing countries. The latter has been 
sub-grouped in three categories, each associated with different regimes 
of flexibilities, the underlying principle being that higher the 
coefficient chosen, the lesser will be the flexibility in terms of 
deviation from application of the formula cut, it being zero in case of 
the highest range of coefficients viz. 23-26 . Prima facie, it appears 
that the middle range viz. 21-23 is the one that many developing 
countries would have to adopt. This will give them the flexibility of 
having 5 percent of lines left unbound provided they do not cover more 
than 5 percent of imports, a new conditionality introduced by the latest 
text to further whittle down the scope of flexibilities.

Our current level of applied tariff is, on average, 10 percent, and the 
bound level average is 34 percent. The cut which the formula would 
likely entail will require drastic reduction of bound level of tariff. 
With few exceptions available under the dispensation of the text, the 
door to deindustrialisation will be wide open.

III

There is therefore little to "take" and quite a lot to "give" in the 
dispensation visualised in the two texts. But the story does not end 
there. USA and Australia have already called for a "A Signaling 
Conference" of the Ministers on the Services issue to give a push to the 
negotiations in that area and obtain new commitments. Which would mean 
building up of pressures on emerging economies in particular to 
integrate their services markets, particularly the financial services 
markets with the global market. This has a sinister implication at the 
present times. The "toxic waste” of the financial services market in USA 
which virtually brought the recession in US economy needs to be dumped 
somewhere. And what could be a better place, in the US eyes, for the 
purpose than the burgeoning financial services sector in a country like 
ours. We have already a powerful "in-house" lobby advocating, as in the 
Economic Survey, liberalisation and further opening of banking, 
insurance and other financial services sectors. US would, therefore, 
knowingly enhance their pressure in this regard.. And there goes another 
substantial "give" with un-be-known consequences for our financial 
sector and the economy as a whole.

IV

Last, but certainly not the least, consideration why the denouement 
being carefully planned and forced on us should be rejected totally is 
the stark fact that the present US Administration has no fast-track 
authority to conclude the negotiations in a credible manner. The 
fast-track authority which gives the credibility to the offers made by 
USTR in the course of negotiations lapsed in July 2007. There is no hope 
in the heaven that the US Congress will give it to the present 
Administration on its last legs. What happened to the US-Colombia FTA 
deal submitted by the US President to the Congress in April 2008 is an 
eye-opener for the negotiators in Geneva. The US Congress simply changed 
the timeline rule and refused to consider the FTA, despite the fact that 
the FTA deal in question was well covered by the fast-track authority. 
If any doubt was still lingering, the more recent passing of the 
outrageous Farm Bill with a veto-proof majority by the two houses of the 
US legislature should make it crystal-clear that the Congress is in no 
mood to oblige the present administration with a feather in its cap by 
allowing it to successfully wind up the Doha Round. Whatever 
"co-operation" we may extend by agreeing to the unequal bargain at this 
stage in the mistaken belief that it is good for the global economy, 
will only bind us to it , leaving free the new administration in USA and 
the Democrats-dominated legislature there to ask for "more" when time 
comes to approve the deal.

The conclusion is clear: We must not yield the ground either in 
Agriculture or in NAMA, although the position taken by us, along with 
the G-33 in Agriculture and with G-11 in NAMA, itself was not adequate 
to protect our interests. We should expose the lack of authority and, 
therefore, credibility of USTR in the negotiations at this stage. And 
refuse to proceed further until the USTR is reinvested with such authority.

***

S.P. Shukla is the former Indian Ambassador to GATT and is presently the 
convenor of the Indian Peoples Campaign Against WTO.