The Bali myth
5 Jan 2014 4:35 AM IST
IN THE hoopla over the food stockpiling controversy at the Bali conference of the World Trade Organisation (WTO), a ‘peace clause’ doled out as a sop to some states seeking food safety nets for their hungry millions obscured the contours of a binding new agreement that signals another trade offensive launched against developing countries. Innocuously termed trade facilitation (TF), this pet project of the developed world was rammed through at the ninth ministerial conference in a victory that was clearly foretold.
The agreement was reached on the back of a well-publicised study released by the Paris-based International Chamber of Commerce that claimed TF would push up global income by $1 trillion and add a whopping 20 million jobs, of which 18 million would be in the developing world. The report was cited often by negotiators of the rich world but critics have questioned its ‘unwarranted assumptions’ and flawed methodology. Particularly suspect are its figures of employment generation.
However, industrialised nations celebrated their success in securing the TF agreement with hardly any quid pro quo as ‘the triumph of multilateralism’, leaving the developing world to pick through the remains of a negotiation that provided little comfort. The proposal of the G33 countries – this is a bloc of 46 WTO members with sizeable poor populations and small farmers – that it be allowed to stockpile foodgrains as a food security measure was met with minimal concession. This was a peace clause in that such schemes in existence could be in force for another four years till a permanent solution is found.
Not unexpectedly, the peace clause brushed aside the long-standing demand of the developing countries for a thorough overhaul of the Agreement on Agriculture with its outdated methods of calculating the support price provided to low-income farmers.
India’s Commerce Minister Anand Sharma who went to the Bali negotiations with all guns blazing and the heroic declaration that there could be no compromise on the country’s food security was clearly grandstanding. India was under tremendous pressure from the developed nations, specially the US, who portrayed it as the sole stumbling block to a pact that would revive the comatose apex trading body. Sharma and his negotiating team had aided this perception by painting themselves into a corner. Not only did they manage to alienate some members of the G33, but also failed to take on board the worries of food importing countries in this bloc, such as the Philippines.
Then there was the bloc of rival food exporters, primarily Pakistan, which stridently opposed India on the foodstockpiling issue, contending that rice procured for food security purposes was dumped in global markets. This is strictly not true, according to the International Centre for Trade and Sustainable Development (ICTSD), an independent non-profit based in Geneva which said, ‘Domestic prices were held down below international prices in most years despite purchase operations to defend minimum support prices... The MSP and domestic prices in India have not got divorced from international prices.’
But in its assessment of the G33 proposal in September, the trade thinktank also noted: ‘Government food stocks can, however, also contribute to food security in other countries. For example, following the 2007-2008 spike in food prices, India entered into a deal with Bangladesh wherein about 4,00,000 tonnes of rice was exported to Bangladesh at $400 per tonne while the world price was as high as $800 per tonne. However, such government to government deals can, particularly where sustained over time, result in significant shifts in trading patterns, sometimes to the detriment of traditional exporters to the importing country.’
India was also portrayed as being insensitive to the concerns of least developed countries (LDCs), which were supposedly one of the three main beneficiaries of the Bali agreement. But as quite a few trade ministers concede the LDC package, which was used to isolate India and the G33, there was nothing but another set of best endeavour promises. These relate to preferential rules of origin for export to industrialised countries duty-free and quota-free market access. Although India and China are expanding preferential access for LDCs, many developed countries are yet to do so.
Biswajit Dhar, director general of Research and Information System for Developing Countries (RIS), a Delhi thinktank on trade issues, says: ‘What LDCs got were just platitudes. Many rich countries have not given any tariff and quota concessions although they had agreed to 97 per cent of tariff lines. India, on the other hand, has provided access to over 96 per cent of the goods.’ He believes it is important to tell LDCs that they have gained nothing because of the perception that India was wrecking their chances by sticking steadfastly to the food stockpiling issue.
It did not help that old allies like Brazil and China, part of the erstwhile G22 that had stood together on developing country issues, had no interest in the food stockpiling proposal. Besides, Roberto Azevêdo, the newly elected director-general of WTO had staked his reputation on ‘reviving’ the organisation. However, the chief architect of the Bali outcome is undoubtedly US Trade Representative (USTR) Michael Froman who described it as WTO’s first ‘fully multilateral agreement’ since it was set up. In a WTO forum on innovation in October, the USTR had said, ‘A strong, binding trade facilitation agreement clearly is doable. And the truth is, a trade facilitation deal could represent the most significant development deliverable in the history of WTO.’
According to him, both developed and developing countries would benefit but costs would be reduced most of all for the latter. ‘By some estimates, a trade facilitation agreement is estimated to reduce costs for developed countries by 10 per cent, but for developing countries by
14 per cent.’ Froman had also issued a clear warning to the participants: ‘Make no mistake: the choice of scenario lies with those of you in this room. The success or failures of negotiations in this room over the next four weeks will write the future of this institution.’
With this backdrop it was not surprising the TF pact sailed through. On the face of it, developing countries should have no reason to cavil. The agreement seeks to streamline customs procedures by reducing red tape, bringing in more transparent operations and fostering customs cooperation among members. Primarily, it is intended to facilitate the rapid and smooth entry of their exports to the developing and least developed countries without the usual bottlenecks. TF was originally part of the Singapore agenda that rich nations had been pushing since the 1990s and was not part of the Doha Development Round until 2004 when it was squeezed in.
The main objection of the developing countries to TF is that such an agreement would require significant investments and reforms of their import regulations. But Nitya Nanda, fellow at TERI who heads its Centre for Global Agreements, Legislation and Trade, says that is only a part of the problem. ‘Developing countries don’t understand what is being discussed. It’s the rich nations who decide what facilities they need at our ports, what kind investments are mandatory.’
The fundamental question is whether developing countries should be forced to spend more on improving their port facilities at the cost of expenditure on vital sectors such as healthcare, education. This could amount to colonial style infrastructure development under which a sovereign nation cannot prioritise its spending, points out an analyst. This is because the Bali mandate ignores the ability of developing countries to undertake TF given the competing needs for limited resources.
India, for one, has already made significant investments on TF in the last few decades. Should it be spending more on computerising and streamlining its ports when it has yet to put its road network in order and is unable to ensure smooth movement of goods within the country?
By arrangement with Down to Earth magazine
The agreement was reached on the back of a well-publicised study released by the Paris-based International Chamber of Commerce that claimed TF would push up global income by $1 trillion and add a whopping 20 million jobs, of which 18 million would be in the developing world. The report was cited often by negotiators of the rich world but critics have questioned its ‘unwarranted assumptions’ and flawed methodology. Particularly suspect are its figures of employment generation.
However, industrialised nations celebrated their success in securing the TF agreement with hardly any quid pro quo as ‘the triumph of multilateralism’, leaving the developing world to pick through the remains of a negotiation that provided little comfort. The proposal of the G33 countries – this is a bloc of 46 WTO members with sizeable poor populations and small farmers – that it be allowed to stockpile foodgrains as a food security measure was met with minimal concession. This was a peace clause in that such schemes in existence could be in force for another four years till a permanent solution is found.
Not unexpectedly, the peace clause brushed aside the long-standing demand of the developing countries for a thorough overhaul of the Agreement on Agriculture with its outdated methods of calculating the support price provided to low-income farmers.
India’s Commerce Minister Anand Sharma who went to the Bali negotiations with all guns blazing and the heroic declaration that there could be no compromise on the country’s food security was clearly grandstanding. India was under tremendous pressure from the developed nations, specially the US, who portrayed it as the sole stumbling block to a pact that would revive the comatose apex trading body. Sharma and his negotiating team had aided this perception by painting themselves into a corner. Not only did they manage to alienate some members of the G33, but also failed to take on board the worries of food importing countries in this bloc, such as the Philippines.
Then there was the bloc of rival food exporters, primarily Pakistan, which stridently opposed India on the foodstockpiling issue, contending that rice procured for food security purposes was dumped in global markets. This is strictly not true, according to the International Centre for Trade and Sustainable Development (ICTSD), an independent non-profit based in Geneva which said, ‘Domestic prices were held down below international prices in most years despite purchase operations to defend minimum support prices... The MSP and domestic prices in India have not got divorced from international prices.’
But in its assessment of the G33 proposal in September, the trade thinktank also noted: ‘Government food stocks can, however, also contribute to food security in other countries. For example, following the 2007-2008 spike in food prices, India entered into a deal with Bangladesh wherein about 4,00,000 tonnes of rice was exported to Bangladesh at $400 per tonne while the world price was as high as $800 per tonne. However, such government to government deals can, particularly where sustained over time, result in significant shifts in trading patterns, sometimes to the detriment of traditional exporters to the importing country.’
India was also portrayed as being insensitive to the concerns of least developed countries (LDCs), which were supposedly one of the three main beneficiaries of the Bali agreement. But as quite a few trade ministers concede the LDC package, which was used to isolate India and the G33, there was nothing but another set of best endeavour promises. These relate to preferential rules of origin for export to industrialised countries duty-free and quota-free market access. Although India and China are expanding preferential access for LDCs, many developed countries are yet to do so.
Biswajit Dhar, director general of Research and Information System for Developing Countries (RIS), a Delhi thinktank on trade issues, says: ‘What LDCs got were just platitudes. Many rich countries have not given any tariff and quota concessions although they had agreed to 97 per cent of tariff lines. India, on the other hand, has provided access to over 96 per cent of the goods.’ He believes it is important to tell LDCs that they have gained nothing because of the perception that India was wrecking their chances by sticking steadfastly to the food stockpiling issue.
It did not help that old allies like Brazil and China, part of the erstwhile G22 that had stood together on developing country issues, had no interest in the food stockpiling proposal. Besides, Roberto Azevêdo, the newly elected director-general of WTO had staked his reputation on ‘reviving’ the organisation. However, the chief architect of the Bali outcome is undoubtedly US Trade Representative (USTR) Michael Froman who described it as WTO’s first ‘fully multilateral agreement’ since it was set up. In a WTO forum on innovation in October, the USTR had said, ‘A strong, binding trade facilitation agreement clearly is doable. And the truth is, a trade facilitation deal could represent the most significant development deliverable in the history of WTO.’
According to him, both developed and developing countries would benefit but costs would be reduced most of all for the latter. ‘By some estimates, a trade facilitation agreement is estimated to reduce costs for developed countries by 10 per cent, but for developing countries by
14 per cent.’ Froman had also issued a clear warning to the participants: ‘Make no mistake: the choice of scenario lies with those of you in this room. The success or failures of negotiations in this room over the next four weeks will write the future of this institution.’
With this backdrop it was not surprising the TF pact sailed through. On the face of it, developing countries should have no reason to cavil. The agreement seeks to streamline customs procedures by reducing red tape, bringing in more transparent operations and fostering customs cooperation among members. Primarily, it is intended to facilitate the rapid and smooth entry of their exports to the developing and least developed countries without the usual bottlenecks. TF was originally part of the Singapore agenda that rich nations had been pushing since the 1990s and was not part of the Doha Development Round until 2004 when it was squeezed in.
The main objection of the developing countries to TF is that such an agreement would require significant investments and reforms of their import regulations. But Nitya Nanda, fellow at TERI who heads its Centre for Global Agreements, Legislation and Trade, says that is only a part of the problem. ‘Developing countries don’t understand what is being discussed. It’s the rich nations who decide what facilities they need at our ports, what kind investments are mandatory.’
The fundamental question is whether developing countries should be forced to spend more on improving their port facilities at the cost of expenditure on vital sectors such as healthcare, education. This could amount to colonial style infrastructure development under which a sovereign nation cannot prioritise its spending, points out an analyst. This is because the Bali mandate ignores the ability of developing countries to undertake TF given the competing needs for limited resources.
India, for one, has already made significant investments on TF in the last few decades. Should it be spending more on computerising and streamlining its ports when it has yet to put its road network in order and is unable to ensure smooth movement of goods within the country?
By arrangement with Down to Earth magazine
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