BAD TIMING AT THE WTO

The recent collapse of trade negotiations at the WTO received widespread scrutiny from economists, public servants and industrialists. Some praised our commerce Minister, Mr. Kamal Nath’s unwavering stance to protect the interest of the Indian farmer and others warned that this breakdown in talks could reignite a protectionist era in modern trade and commerce. But the unfortunate finale of the WTO talks shed light on various macroeconomic and geopolitical issues that converged to result in a collapse in negotiations.

A pivotal factor was the severe and unpredictable surge in food and energy prices putting many countries in uncomfortable territory at the negotiating table. No country, developed or developing, wanted drastic changes in import or export policies fearing a sudden inflow or outflow of essential commodities and hence fueling regional instability. Clearly the global macroeconomic environment created temporary disincentives which were reflected in the rigid and inflexible nature of some negotiators.

The US always enjoyed the kingmaker position at global trade talks, often overpowering their way to pro-US policies. Clearly, other nations did not appear to be at the mercy of US negotiators this time around and showed resolve, not giving in to their demands. This does not symbolize the decline of American influence but instead reflects the growing clout of the BRIC countries. Emerging economies no longer have to compromise and can confidently voice their concerns not fearing any severe backlash.

Prominent voices have highlighted that this outcome could be detrimental to expanding global trade because agricultural and farming sector presented the biggest trading opportunity ever to strengthen ties between countries. These opinions cannot be discounted and our officials should ensure this does not take place.

One has to realize that food/agricultural subsidies are the most complex and sensitive areas not only for India but every country at the WTO table. Farming and agriculture is the only sector where every single government has some subsidy program in place. For example, the Americans have enormous subsidies for corn growers, China has subsidies in place for rice farmers, many European countries have widespread subsidies, and our farmers also get significant aid from the government. For this simple reason, no government wanted to risk a backlash from their farming sector, forcing them to be extremely cautious in their decision making process.

Going forward the failure of these talks should not deter economies to negotiate again, but this time exchanging ideas at a smaller scale and taking it one step at a time can help. More bi-lateral and tri-lateral trade agreements should be formed before embarking on multinational trade agreements.