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Doha Round: what India’s new government needs to do August 19, 2009

Posted by southasiamasala in : India, Kalirajan, Kaliappa , trackback

Kaliappa Kalirajan

Though India has demonstrated that there exists broad political support for its economic reform program, agricultural trade policy reforms need to be accelerated. The new government enjoys a better standing than before in terms of stability.  Its challenge now is to mitigate the inefficiency that exists in Indian agriculture and close the gap between its potential and actual performances by implementing a proper policy framework.

As a net exporter in agriculture products, India has more to gain than to lose from trade reforms. It has sufficiently high bound rates on most of the products and therefore flexibility can be ensured against unfair competition. It does not have to worry about its agricultural subsidies as they are already below the required ceiling. And it also does not have any serious domestic opposition to reckon with. All of these factors place India in an advantageous position.

Moreover, the ongoing negotiations in the Doha round are likely to yield enough flexibility in product choice and tariff selection. A multilateral trading system is in India’s interests, given it has no clear fit in any regional association. Therefore, India should work towards the success of the Doha round and in the meantime make use of the opportunity to reform its domestic markets to introduce more efficiency.

The interests of India are at variance with those of least developed countries (LDCs), which became amply clear during the Tokyo and Doha Ministerial level meetings, when the latter isolated India. Many of these countries are net importers of food and subsidies in the exporting countries advantage them. Moreover, under the Everything But Arms (EBA) initiative of the European Union, the LDCs enjoy quotas and duty-free access to the EU market for most goods – a facility that was never available to India.

Growth in both the services sector and industry are critical to India’s economy.  With favourable bound rates for agriculture onboard, the negotiating framework of India must be de-linked from that of other developing countries. The situation is critical for India, particularly in view of the fact that the developed countries have managed to link agricultural subsidies with market access in services and industry. If the European Union needs to do more on agricultural tariffs, and the US needs to do more on reducing agricultural subsidies, then the G-20 group of countries, of which India is a key member, also needs to do more on industrial tariffs. This is a hard ball game.

Moreover, all these issues are dynamically linked to the future agenda of the WTO: inter-alia in terms of substantial opening up of trade in services; rules governing transparency in bilateral trade agreements, anti-dumping and subsidies; trade facilitation; trade and environment; WTO agreement on Intellectual Property Rights (TRIPS), Convention on Bio-Diversity (CBD) and extensions to geographical indication protection (GIs); and Dispute Settlement and Aid for Trade.

Traditionally, India has fallen prey to group dynamics because its interests do not fully conform to the LDCs, whose cause it used to champion; but nor do they radically differ from those of developed countries, which it confronts. Therefore, the time has come for India abandon its position of ambiguity and take a rational step in the negotiation process to harness its own best interests. Some sacrifices are worth taking in order to gain a wider market. It appears that the new government has understood this reality.

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