What makes trade so dynamic a process is its unpredictability, not to mention the intangible rules and checks needed for it to go smooth and transparent – World Trade Organisation (WTO) is nothing but all this. Keeping up its mandate, WTO conducts meetings, discussions, negotiations among member nations for trade facilitation. But since the Doha Round of talks (aka Doha Development Agenda), at the 4th Ministerial Conference, which took place in Doha, Qatar, in November 2001 there were no concrete steps for implementation of WTO rules particularly for the newly emerging economies. On Dec 7, 2013 WTO concluded its 9th Ministerial Conference in Bali and came out with an array of decisions collectively known as the “Bali Package”. The conference was chaired by Indonesia’s Trade Minister Gita Wirjawan.
The outcomes to which were under the following tags:
1. Agriculture and Cotton– reducing export subsidies was on the highlight. More opportunities to developing nations for food security were sought. However, the distribution systems of the developing countries are likely to suffer as Bali Package seeks to legally track public stockpiles of these countries. The shielding of public food stocks was advocated for. But, the solution reached at is interim which allows flexibility to countries in maintaining their food stocks subject to transparency in systems and regular notifications to the Committee on Agriculture. The permanent solution is being worked upon and will be up after 4 years.
A list of services has been suggested for Green Box for the developing nations. More explanation to the “boxes” can be found towards the end.
Tariff Quota Administration: Means to handle the under-filled quota i.e. import quota inviting lower tariffs going under-filled were looked out for.
Improvised market access mechanisms for cotton exporters from least developed countries were also focussed upon as heavy import duties were levied in the past on cotton textiles pushing them out of market owing to their soaring prices.
2.Trade - Boost to least developed countries’ (e.g. Somalia, Zimbabwe) trade was an agenda along with racing up port clearances, custom procedures, clear, transparent and simplified international trade.
3. Development – Feasibility of access to Richer Countries’ Market by least developed nations was advocated for by making the access duty-free and quota-free. Another good outcome was the easy identification mechanisms provided to the goods from least developed nations so that they may be eligible for preferential treatment in countries which import them.
4. Routine Decisions of the General Council –
⇒ Members agreed not to bring cases of non-violation of intellectual property agreement where the agreement as such hasn’t been violated, to the WTO dispute settlement process.
⇒ No charging of import duties on electronic transmissions.
⇒ Continuation in support to “Aid for Trade” programme to aid least developed/developing countries.
Yemen has been added as a new WTO member.
WTO - History
When the trading countries demanded regulations within trade, they gave themselves a multi-lateral international agreement known as the General Agreement on Tariffs and Trade (GATT) intended to reduce tariffs and trade barriers. What began as GATT in 1947, ended in 1994 with Uruguay Round of Talks (with 128 signatories) and eventually came out as the World Trade Organisation (with 159 members as on 2 March 2013) in 1995. This avoided the apparently visible fragmentation due to pluri-lateral agreements (a special type of multilateral treaty between a fixed number of states with a specific interest) among GATT members as the negotiations became multi-lateral. And today, it is the only body sitting at the helm of international trade, framing rules, resolving disputes and facilitating negotiations. In contrast to WTO which is a governing body, GATT was only a set of rules and it continues to be a mechanism to deal with trade aspects in WTO.
Since WTO stands for free and predictable trade, it came up with the notion of Most Favoured Nation i.e. every nation is favoured most by every other nation and at the same time treats locals at par with foreign trade partners. But, considering the vulnerability of the third world nations, they can be given a status of favoured partners. Free Trade Agreements can also be entered into by a group of nations for themselves.
WTO has 19 agreements in all with three being most important which are explained one-by-one below.
1. GATT: It again has two parts to it viz. Sanitary and Phytosanitary Measures Agreement (SPS) and Technical Barriers to Trade Agreement (TBT) under which a nation may frame its own quality control (logical and scientific) rules and ban certain environmentally/physiologically harmful products if they so consider. The subsidies (domestic support) and countervailing measures are also included in it.
More to subsidies and countervailing (on non-farm products): A nation may subsidize its production making it cheap and competitive e.g. export subsidies – which make exporting easy and inexpensive. But such exports try to capture markets in developing nations where in they are cheap and domestic produce is not able to compete with them. This distorts the domestic economy of the importing nation. Hence, there has been classification of subsidies as explained below and also countervailing done by countries to protect native economy.
2. General Agreement on Trade in Services (GATS): This is to achieve the aim of economic integration via. facilitation of physical movement of persons across oceans, air transport services (aircraft repair and maintenance services, selling and marketing of air transport services, computer reservation system (CRS) services), financial services, and telecom services wherein governments cannot distinguish between foreign and domestic service providers.
Modes 1-4: The definition of services trade under the GATS has been defined under four modes depending on the territorial presence of the supplier and the consumer at the time of the delivery.
⇒ Mode 1 — Cross border trade: when the two individuals are in their respective territories e.g. tele-consultations.
⇒ Mode 2 — Consumption abroad: movement of citizens of a member nation to consume services of another member nation e.g. tourism.
⇒ Mode 3 — Commercial presence: service providers of one member nation are present in another member’s territory through local representatives, affiliates, subsidiaries, etc. For e.g. Banks, Companies, etc.
⇒ Mode 4 — Presence of natural persons: Service supplier her/himself moves to another territory to deliver the service. For e.g. doctors, consultants, etc.
3. Trade Related Intellectual Property Rights (TRIPS): It is to protect intellectual property rights/patents of a nation and is an enabling agreement through which a country has to make laws and deliver punishments for breaches. Research and Development (e.g. medical drugs), Geographical Indicators (e.g. Darjeeling Tea), etc. are covered under this annex.
Few more agreements:
Information Technology Agreement: focuses to eliminate tariffs in computer related products.
Multilateral Agreement in Investments: allows foreign businesses to settle and invest.
Agreement on Textiles and Clothing: eliminates Multi-Fiber Agreements where in UK put limitation on import of Indian cotton textiles.
Classification of Subsidies/Domestic Measures by WTO: The Green, Amber and Blue Boxes
Limiting the domestic aid of a nation in trade WTO has classified the subsidies, as per the impacts caused by them over global trade, into several boxes viz. Green, Amber, and Blue. Easy to identify them with traffic signals, green box subsidies are freely permitted, amber box items need limits imposed on them and red box entries do not have a go ahead because they are trade skewing. Now, in case of developing nations, particular the transition economies, they have to compete with foreign markets which are already well established and can sell easily by use of inexpensive and readily available technology. At the same time, the burden of population in many such nations is enormous and the governments need to protect the vulnerable sections utmost. Therefore, their targeted distribution systems sell subsidized food grains which solve twin purpose – ensuring food security and ensuring minimum support prices for rural populace. So, red box cannot be applied to agricultural sector.
1. Amber Box domestic support measures of a limited value are allowed in agricultural sector but there is a strong voice to reduce / abandon them altogether. They can be allowed of up to 10% of the total value of production (de minimis level) for e.g. governments buy food from farmers at supported prices to build up stocks for their distribution systems.
2. Green Box subsidies are those which do not distort trade globally and can be implemented by member nations independently.
3. Blue Box subsidies are linked to payments in production limiting schemes, say via production quota. Countervailing duties or anti-dumping duties may be put by importing nation.
Doha Development Agenda: Briefed earlier, Doha Round aimed at giving concrete implementation steps for WTO rules with numerous relaxations to developing nations. A few outcomes are listed here:
⇒ The SPS and the TBT talked of under GATT were added during Doha talks. Under the TBT “a reasonable interval” was given to the developing nations to adapt their products or production methods to new regulations in importing countries so that they could do easy trade.
⇒ TRIPS Agreement was relaxed for developing nations by giving extending opportunities to them to frame laws.
⇒ Least-developed countries’ export competitiveness was voiced for by giving them flexibility to pay subsidies that require recipients to export allowing them to finance their exports.
⇒ Trade and Development Committee were given the onus of deciding on cross cutting issues such as what special and differential treatment provisions to be made.
Points of Negotiation at Doha:
a. Multilateral environmental agreements
b. Fisheries subsidy as it will boost up fishing and adversely impact the environment.
c. Trade barriers on environmental goods and services
Non-Agricultural Market Access (NAMA): Non-agricultural market contributes to 90% of world’s exports and includes fisheries, industrial products, manufactured goods, textiles, fuels and mining products, footwear, jewellery, forestry products, and chemicals. The negotiated point on NAMA in Doha inter alia included tariff reduction on exports with special treatment to developing countries, recently acceded members, etc. Tariff cuts were to be implemented using a Swiss formula.
India’s Stand at Doha Round: With the NAMA’s tariff reduction clause, India could be challenged by EU for we have different tariffs in different states on wines and spirits which hurdles European wines’ easy access to Indian markets. Also, the Special Safeguarding Mechanisms that we have adopted are out of tune with USs proposition. We can put a duty on imports in case of an import surge or price fall. But in freely doing so we may annoy our western trade partner.
Most of the nations have welcomed the Bali Package with the WTO Director General Roberto Azevedo himself holding high spirits. It has been a victorious outcome after years of stalled Doha Talks. Post Bali meet, maintaining the tone of time, work on Doha Development Agenda would commence. But, India having been at a loss with the Peace clause of WTO
has to be watchful till the final solution is worked out. After all the boasting and popularizing of our ambitious Food Security Act, we cannot just end up paying penalties for feeding the mouths of our masses.