India in the WTO

India’s trade minister has authored a new book titled “India’s Century : The Age of Entrepreneurship in the World’s Biggest Democracy”. A Govt of India press release informs:

…the book presents an account of India’s emergence, from the backwater of global economy to its frontline, generating aspirations for the future based on the recent outstanding achievements. The book explores and goes on to unwind the secret of India’s present day journey of transformation in to a global economy. The book goes on to explain on how an economic engagement by the leading nations of the world with India can be profitable for everybody in the coming years.
The book has gone beyond the ‘flat world’ view and explore his people’s unique can-do attitude and the entrepreneurial spirit that, in combination with economic liberalism, has put the economy on the fast track. The book, published by McGraw-Hill of New York, is a first hand account of Shri Kamal Nath’s ideas, initiatives and his successfully taking the Indian businesses on to the global platform while at the same time, laying a kind of a roadmap for the Indian entrepreneurs to benefit from emerging trade opportunities.

This title is sure to sell a good number of copies, given that many around the world would want to understand Nath’s worldview. India through Kamal Nath is playing a pivotal role in the ongoing Doha talks. Besides, India is being courted by many as a potential free trade agreement partner.

Peter Mandelson, the trade commissioner for Europe has published an article in The Economic Times, making the case for an India-EU free trade agreement. He writes:

… Europe is India’s biggest trading partner. India will improve its access to a market of 450 million prosperous Europeans. … Both sides get new markets for their goods and a bigger engine for growth and poverty reduction.

…But there is also a global rationale for an ambitious FTA and it reflects the dramatic way in which India has moved to the centre of the global economy in the last decade. Indian economic growth and poverty reduction is, of course, good for India but it will also be necessary to take up the slack if other parts of the global economy begin to slow.

… When we negotiate together in the WTO Doha trade talks or when we negotiate the trade between us, Europe is well aware of the growing weight on the other side of the table.

…Manufacturing has to be at the centre of an agreement. 

… EU exports can also be an important stimulus to the Indian economy. Three quarters of India’s industrial imports are parts or components for the manufacturing or services sectors. India’s average industrial tariff is just above 9% and it acts like a tax on those growing sectors. If we can bring those tariffs down as part of a bilateral FTA we will give India a competitive advantage vis-à-vis some of its biggest competitors. …

…We should also be pushing for an agreement that brings real benefits in services trade and investment. The Indian IT boom and its incredible success in business process outsourcing is built on open markets for these things in Europe, which is the world’s biggest buyer of computer services. We can improve conditions for this trade even further — but we need to see real improvements on the ground for EU companies as well.
…A more open market for services and investment in India can also be a stimulus to growth in India. European services companies bring with them capital, skills and experience that India wants. India gets a tenth of the FDI that flows to China. Further improving the investment climate can only open that tap wider. The Indian government has itself said that it wants to draw heavily on foreign capital in meeting its targets for massive investment in Indian infrastructure and utilities over the next decade. …

Kamal Nath on the FTA in a Hindu report :

India is ready to open 90 per cent of its fast growing market for EU companies, while it would expect its partner to reciprocate with 95 per cent of their market. Agriculture is not an issue with the EU for concluding an FTA which encompasses trade, services and investment, he said.

The Hindustan Times adds

India has stated that it does not want non-trade issues such as animal welfare and labour to be factored into the negotiations. EU, on the other hand, wants more transparency in public procurement and trade facilitation. “We would like to see openness in services and investment trade extended into government procurement in India,” Mandelson said.

As expected, it seems that agriculture is not on the agenda.

An EU-India business summit in New Delhi became a venue for trading of blows between Kamal Nath, the Indian commerce minister and Peter Mandelson, the European trade comissioner. When the EC commisioner attempted to challenge India’s WTO status as a developing country, Nath responded vigorously.

Nath took on Mandelson on India’s classification as an emerging economy, saying that in WTO there were only three categories — developed, developing and least developed — and EU had suggested that India, China, Brazil and South Africa be given the new tag so that they could take on additional burden in WTO talks.
“If India is an emerging economy, the EU is a submerging economy,” Nath said.

Remarks were also exchanged regarding the bonafides of raising non-trade issues, referring back to recent allegations of child labour use in textile exports by India:

Nath said EU was trying to raise non-trade issues, pointing to demands from Brussels to include animal welfare in talks. “I don’t know what does it have to do with trade. India is very concerned about NTBs. If NGOs in Europe are producing reports about our factories showing them in bad light, our NGOs are also concerned about forced feeding of animals,” Nath said.

The Doha talks also featured in the exchange. The Economic Times reported:

The minister said the Doha Round was supposed to be a development round where India was just going to negotiate trade issues and not subsistence.
Taking a dig at both the EU and the US on Thursday, Mr Nath urged EU trade commissioner Peter Mandelson to ask “your friends in the US” to lower their trade-distorting subsidies by just $1. “I have already told the US that if they commit on lowering their subsidies by just $1, the deal is acceptable to us. But I have not got any response so far,” he said.
The commerce minister said distortions in the global trading system had to be addressed as the ongoing WTO round was not about perpetuating these distortions.
He added that the high tariffs on finished products such as jackets and coats and the relatively low tariffs on raw materials should be corrected.
Addressing Mr Mandelson directly, the minister said India had unilaterally brought down its tariffs substantially over the last few years, but the developed countries were not ready to acknowledge it. “You have pocketed whatever tariff reductions we have made unilaterally and you are pressuring us to make cuts over and above what we have already done,” the minister said.
Mr Nath said there were millions of subsistence farmers in India whose interests had to be protected at all costs. “While we are ready to negotiate trade, we cannot negotiate subsistence,” he said.

The Financial Times reports that an Indian government owned investment company is being readied to secure overseas coal resources to meet India’s growing energy requirements for its steel and power plants.

The FT also carries an accompanying report on India’s imminent struggle for energy supplies against Chinese competitition.

The country has the world’s fourth-largest coal reserves. But a mixture of bureaucratic red tape, poor infrastructure, corruption and social unrest around the mines means the growth of the country’s domestic coal-mining industry is not keeping pace with the demands of its rapidly expanding economy.

To overcome this, India’s biggest energy producers, from Tata Power to state-run companies such as National Thermal Power Corp, are on the hunt for offshore assets.

The move, combined with a government initiative to secure overseas supplies of coking coal for the steel industry, signals the extension of strategic competition for resources between China and India to a frontier beyond oil and gas for the first time.

If India is to sustain economic growth of 8 per cent a year, it will need to nearly double the capacity of its power industry from 135,000 MW today to 250,000 MW by 2015, according to Tata Power.

But India is already running a coal deficit, with coal demand last year for the steel and energy industries reaching 452m tonnes, of which 61m tonnes had to be imported.

By 2015, the country will be consuming about 800m tonnes of coal but will have to import more than a quarter of this, according to estimates from KPMG.

Meanwhile things are heating up for movement towards a new WTO accord on trade in energy. Pascal Lamy, the Director General of the World Trade Oreganization recently addressed the World Energy Congress and suggested that “The WTO can contribute to a more efficient allocation of energy resources and generally a better trading environment for energy”.

Gerald Doucet, World Energy Congress secretary-general is reported to have

urged WTO Members to “open a new chapter” of energy negotiations, looking in particular at new issues arising due to the need to significantly increase the use of clean and renewable energy. Currently, standards, subsidies and other measures to encourage the development and use of renewable energy have not been comprehensively considered within the WTO, leaving the legality of certain measures unclear.

Doucet warned against a “trade war between those who are concerned over carbon emissions and those who are not.” This could come about if countries with stringent climate change policies decide to slap border taxes on imports from nations that take a more lax approach to emissions controls.

BI-ME has a detailed piece on Lamy’s speech and on how energy trade already features in the ongoing Doha talks.

The first area where energy stands explicitly on the Doha agenda is the services negotiations. For the first time WTO members are discussing energy as a specific services sector.

Energy was not addressed in any comprehensive manner during the Uruguay Round, because the liberalisation of the sector was not yet on the political agenda. As a result, WTO members undertook limited commitments to open their markets to foreign operators in energy services, including services incidental to mining at oil and gas fields, services incidental to energy distribution — of, inter alia, gas and electricity — and pipeline transportation of fuels.
However, progressive unbundling of state-owned integrated utilities and technological developments have created room for private operators. This, in turn, has raised the profile of energy services in the WTO.

The current negotiations on energy services cover a broad range of activities relevant for energy companies and span all energy sources, including renewables. Commitments are sought on activities such as drilling; engineering; technical testing and analysis services; construction work for long distance and local pipelines, and for mining; wholesale trade services and retailing services of fuels.

The negotiations are addressing the establishment of commercial presence as well as easing the intra-corporate transfers of specialists and professionals working for energy services companies.

Furthermore, some WTO members have proposed to negotiate additional disciplines which would address, for instance, regulatory transparency, non-discriminatory third-party access to networks and grids, the need for an independent regulator, and requirements preventing certain anti-competitive practices. All this is already on the table.

A second area of the Doha Round relevant for you relates to clean technology. The Doha Round aims at opening markets to environmental goods and services. Many of these have a direct application for promoting energy efficiency, such as material needed for production of renewable energy, heat management and pollution control. Examples of environmental goods that have been proposed include wind turbines, solar panels, geothermal energy sensors, fuel cells and electricity meters. Eliminating or reducing tariffs on environmentally-friendly goods and technology would facilitate their wider dissemination.

Similarly, the negotiations on environmental services include negotiations on energy-relevant activities, such as services to reduce exhaust gases and improve air quality, nature and landscape protection services or services for the rehabilitation of mining sites. The environmental chapter of the WTO Doha Round can therefore make a very concrete contribution to the promotion of energy-efficient technologies. It is a contribution in the making that the trade community can bring to the upcoming UN Climate Change Conference in Bali.

A third area of importance comes under the “trade facilitation” negotiations. Here WTO members have been discussing possible improvements and clarification to the “transit” obligation contained in the old GATT rules that oblige member states to allow passage of goods in transit across their territories. This provision was drafted in 1947. In the current Doha Round, proposals have been tabled to clarify the meaning of this obligation and whether it includes fixed installations, such as pipelines.

Energy-related concerns also underlie proposals on export taxes and subsidies. There are proposals on the table addressing export restrictions on energy goods and other raw materials because these restrictions are more prevalent than in other traded goods, and represent a source of concern for importing countries as they increase prices of inputs. The question of subsidies in the form of low-priced energy products, especially natural gas, has recurrently stirred hot debates among WTO Members and is also part of the on-going negotiations.

Finally, Lamy said, the picture would not be exhaustive without a word about bio fuels. While bio fuels can provide us with the opportunity to address climate change, energy security and rural development, careful planning needs to be undertaken to make sure that they do not create new environmental and social problems. The negotiations to cut tariffs and discipline agriculture subsidies have the potential to contribute to the development of orderly trade in bio fuels.

It’s certain that the interlinked trio of issues: trade, energy supplies and climate change are likely to remain on top of the international negotiating agenda for some time.

According to Mr. Leeladhar, the deputy governor of the Reserve Bank of India, the United States has failed to match Indian generosity in allowing foreign bank entry.  According to a Reuters report, he pointed out

While 19 U.S.-based banks had Indian branches approved between 2003 and October 2007, no Indian banks had received U.S. approval in the period, Leeladhar said.

Indian banks had applied to set up three branches, two subsidiaries and nine representative offices in U.S. territory, with some requests pending for more than five years.

The Indian official also stated that the regulatory regime in India provided a level playing field for foreign and domestic banks, unlike in other jurisdictions.

Prudential rules were the same as for local banks, he said, adding foreign banks even enjoyed a lower priority-sector lending requirement of 32 percent of adjusted bank credit against 40 percent for Indian banks.

Foreign banks had 6.1 percent of deposits and 6.8 percent of advances in the commercial banking system as at end-June, he said.

Foreign banks dominated the off-balance sheet business with a market share of as high as 72.7 percent, and they had 52 percent of total foreign exchange turnover in the first half of 2007/08 (April-March) from 41 percent in 2005/06, he said.

Foreign banks also recorded a higher rate of return than local banks from local operations. Net profit per branch for foreign banks in 2005/06 was 119.9 million rupees ($30.3 million) compared to 3.3 million rupees for local banks.

For the report see http://www.reuters.com/article/governmentFilingsNews/idUSBOM17501920071126?pageNumber=2&virtualBrandChannel=0&sp=true

The Business Standard reports that the Kerala state government has expressed its displeasure at India’s offer to reduce tariffs on crude and refined palm oil, tea, coffee and pepper in FTA negotiations with ASEAN. The political economy of trade policy in India is increasingly seeing contests between divergent federal interests. Note however, that the Kerala response indicates a wllingness to adjust to increased competition and the intention of the state to seek Central assistance in efforts to ward off any negative impact.

Kerala’s Finance Minister TM Thomas Isaac said the move might benefit the country as a whole but one should not lose sight of the regional perspective. “The body blow would be huge. The farm sector is likely to be hit hard,” he said.

“Such a situation calls for a mechanism on the part of the Centre to ensure that farmers in different regions, including Kerala, are not made to suffer,” Isaac said, adding the state would oppose any proposal that puts pressure on the farmers.

He said Kerala’s plantations were seeing low output and diminishing stocks. “The Centre should see to it that the replantation of these crops is prioritised. Unless the produce from our farm sector is made competitive, things are not expected to change,” he added.

Meanwhile, CP John, former Planning Board member and senior leader of the Communist Marxist Party (CMP), which is a United Democratic Front (UDF) ally, reacted strongly. “This is going to be worse than the WTO agreement,” he said.

“What would be good for the North-Eastern states or Maharasthra would be bad for Kerala. Such agreements will bring in more regional imbalances,” he said.

He suggested massive replantation till 2018, the year the duty cuts could come into force. “We could also try switching over to organic farming in case of tea, coffee and pepper,” he added.

Meanwhile, Jojan of the Spices Exporters Association ruled out any impact of any reduction in tariffs. “The deadline is far off and we do not need to be wary of things that will happen after that,” he said.

See http://www.business-standard.com/economy/storypage.php?leftnm=lmnu2&subLeft=1&autono=305209&tab=r

Indian newspapers are reporting on a potential new WTO dispute against India. Australia and Thailnd have sought clarifications from India on what could be Indian government subsidies to Indian sugar exporters.

The Hindu explains

The Indian government has been compensating exporters to the extent of Rs 1,350 per ton in coastal states and Rs 1,450 per ton in other states. However, the government has remained cautious in usage of the words for extending the sop lest the move should attract WTO provisions against subsidy.

The government says it is only “defraying” the transport cost, which should not be treated as subsidy.

India is set to displace Brazil as the number one sugar producer in the world with an estimated output of 30 million tons and double its exports to 4.5 million tons in 2007-08, according to the UN body – Food and Agriculture Organisation.

The world sugar production this year is estimated to reach 169 million tons (raw sugar equivalent), 2.7 per cent more than in the previous year, and about 12 million tons higher than the projected global sugar consumption of 157 million tons.

See http://www.hindu.com/thehindu/holnus/015200711251040.htm

Update

For more detail about the sugar industry in India and domestic support measures that are being questioned at the agricultural committee of the WTO,

see the India Sugar Annual GAIN report (IN7035) by the USDA Foreign Agricultural Service dated 20 April 2007, available here http://www.fas.usda.gov/gainfiles/200704/146280893.pdf

Also see the more recent GAIN semi-annual report on India sugar IN7092 here http://www.fas.usda.gov/gainfiles/200709/146292539.pdf

Even though this article dates from September, it makes for interesting reading on Indian struggles with the Doha negotiations on services.

We will not brook any inequity, India tells US

From D Ravi Kanth,DH News Service,Geneva:

India issued a stern warning, on Friday, to its trading partners, especially the United States, at the World Trade Organization that the take and take approach adopted by them in liberalising global trade in services will not be tolerated.

At a special meeting of the Doha negotiating session on how to liberalise global trade in services, the Indian trade envoy Ambassador Ujal Singh Bhatia said in unmistakable terms that New Dehli has failed to secure any genuine response to its demands in Mode 1 relating to cross-border services and outsourcing and Mode 4 concerning the movement of short-term services providers on non-immigration basis.  “This is a negotiation and it involves ‘give and take’ not ‘take and take’”, he told members pointing that without clear signals in these two areas, India will not be able to join the consensus in other areas.
Ambitious outcome
“For some of us at least, the lack of ambitious outcome in services, would seriously, perhaps fatally, impact the prospects of an early conclusion of the Round,” he told the meeting.  Ambassador Bhatia said India has “defensive” concerns in agriculture while it has liberalised a great deal in opening its market for industrials. The only area where India can secure some concrete gains is in the arena of Doha services, he added, pointing an accusing finger that so far there is no response from the major trading partners.
Clear imbalance
On Wednesday, the United States categorically told India that it will not provide any access on Mode 1 and Mode 4 because it has no mandate from its Congress to negotiate on this issue. The US was not even prepared to talk on some minimal issues in both these modes during the plurilateral meeting, trade diplomats said.

India’s ambassador said “there is a clear imbalance in the responses” adding “by and large, developing countries have been more forthcoming in their responses to plurilateral requests, than developed members.”
“On the issues of most concern to us (India), Mode 4 and cross border supply, the responses have been specially disappointing,” he maintained. India is also unhappy that Washington is not prepared to provide access to Indian banks which want to expand their operations within the United States. When Indian raised the issue of difficulties faced by the Indian banks in the US, an American  services negotiator told the meting  “all banks are not equal,” trade diplomats said.

source: http://www.deccanherald.com/Content/Sep302007/business2007092928009.asp Sunday, September 30, 2007

The Independent has a report today about an Indian govt project to compile a multi-lingual digital database of traditional knowledge.

See http://news.independent.co.uk/world/asia/article3187089.ece

“The battle for ayurveda: India is racing to record the details of its traditional medicine

By Andrew Buncombe

Published: 23 November 2007

They range from the everyday to the decidedly obscure, from items with a specific, specialised use to those with a host of applications. Their common heritage is one of the world’s oldest cultures, and their details are being gathered together to guard against theft by the West.

For several years the Indian authorities have been collating information about hundreds of thousands of plants, cures, foods and even yoga poses to create a vast digital database of traditional knowledge dating back to up to 5,000 years ago, available in five international languages. Now, the first part of that database – relating to ayurveda or traditional Indian medicine – has been completed and it is set to launch the fight back against what some have termed “bio-colonialism”.

“The ayurveda part has been completed,” said Dr Vinod Gupta, the chairman of India’s National Institute for Science Communication and Information Resources (Niscair), which is overseeing the project. “Now we are negotiating an agreement with international patent offices [for access to this database].”

The database, totalling more than 30 million pages and known as the Traditional Knowledge Data Library, has come about for one very simple reason: to prevent Western pharmaceutical giants and others using this traditional Indian information to create a product for which they then obtain a patent.

The danger of such “misappropriation” is all too real. In 1994 an American company was granted a patent for a product based on the seeds of the need tree, an item that had for centuries been used in India as an insecticide. It took the Indian authorities more than 10 years to have the patent overturned. Similar battles were fought over a product based on the spice turmeric – traditionally used to heal wounds – as well as a Texan company’s attempt to trademark its strain of rice as “Texmati”.

“In 2000 we did a study of the US patent database. We found there were 4,986 patents for products based on medicinal plants,” said Dr Gupta. “Of those around 80 per cent were based on plants from India … 50 percent of those patents should never have been given – there was no change to the traditional knowledge.”

Under international guidelines, patents should not be given if it is shown there is “prior knowledge” or existing information about the product or item. In the United States – where many of the patent applications have been made – this prior existing knowledge is only recognised if the information has been written down. It does not consider information passed down for centuries by means of oral tradition to be valid.

Unlike many cultures from which traditional information has been misappropriated, India has an extensive written tradition. But most of the writing was in languages not widely read in the West. For example ayurvedic texts were written in Sanskrit or Hindi, writings about unani medicine – based on Ancient Greek practices now only practiced in the sub-continent – were in Arabic and Persian, while writings about another form of traditional medicine known as siddha was in the Tamil language.

To get around this challenge, Dr Gupta called in more than 100 practitioners of Ayurveda, siddha and unani to help compile the information using computer software. The database is being made available in Japanese, English, German, French and Spanish and the contents will be made available to patent officials once agreements on protecting the information and preventing it from being passed to corporations, are reached.

Also included within the database are more than 1,500 positions or asanas of yoga. This is because in recent years several yoga teachers in the West have tried to copyright methods of teaching yoga that they are argue are unique but which have existed for centuries in India.

One high-profile case involved Los Angeles-based Bikram Choudhury, the self-styled “yoga teacher to the stars”. Mr Choudhury, who moved to America in the 1970s, first obtained a copyright for a book he wrote. But when other teachers began copying the way he taught yoga – with 26 specific poses performed in a room heated to 41C (105F) – he sought legal advice and was told to obtain a copyright for the moves themselves. It has been recognised by the US courts despite India’s objections.

Dr Dinesh Katoch, an adviser on ayurveda within India’s Ministry of Health and Family Welfare, said more than 50,000 different ayurvedic formulations for treating everything from heart disease to memory loss had been entered into the database. Some of the information is mentioned in the Vedas, the ancient Hindu texts that date back several thousand years.

“We want to use this information for the global benefit but it should be done in a judicious way, not by stealing,” he said, sitting in his office in central Delhi. “We want to prevent misappropriation. Prevention is the most important thing because it is not easy to repeal a patent.”

In addition to the considerable cost incurred by the Indian authorities fighting patents they do not believe are genuine or fair, there is a widespread feeling that Western corporations should not be making vast profits from traditional knowledge while the people who discovered the information receive no benefit.

But campaigners say the misappropriation also has cultural and political implications. “I have termed it bio-colonialism,” said Vandana Shiva, an Indian environmental activist and author.

“The international intellectual property laws as promoted by the World Trade Organisation [WTO] promote bio-colonialism because while they say there should be a global system to patent everything, the reality is that patent inspection is done at a national level. If you want to have a global system you have to have global inspection,” she said. “This would involve setting up a global database. This will take a decade and cost billions of dollars.”"

“Fact Sheet
Bureau of South and Central Asian Affairs
Washington, DC
March 2, 2006

The U.S.-India Economic Dialogue

In July 2005, President Bush and Prime Minister Manmohan Singh agreed to revitalize the U.S.-India Economic Dialogue, giving a major boost to bilateral economic engagement in a wide range of areas. With two-way trade growing at over 20 percent annually, the U.S.-India relationship is increasingly broad, complex and complimentary. The Economic Dialogue provides regular channels to resolve outstanding economic issues, address legacy commercial disputes, develop capacity building and technical assistance programs, and boost bilateral trade and investment. Economic Dialogue working groups have met and corresponded regularly since July 2005.

The Economic Dialogue has four tracks: the Trade Policy Forum, a cabinet level dialogue launched in July of 2005, the Financial and Economic Forum, the Environment Dialogue and the Commercial Dialogue. In July, three new initiatives were launched – the Information and Communications Technology Working Group (ICTWG), the CEO Forum, and the U.S.-India Agriculture Knowledge Initiative (AKI) – and the High Technology Cooperation Group (HTCG) was re-energized. The U.S. and India also established a separate Energy Dialogue to further cooperation on a broad range of energy-related issues.

On March 1, 2006, the Co-conveners of the Economic Dialogue, Assistant to the President for Economic Policy and Director of the National Economic Council Allan Hubbard (U.S.) and Deputy, Planning Commission Dr. Montek Singh Ahluwalia (India), together with U.S. Trade Representative Rob Portman and Commerce Minister Kamal Nath, the Co-Chairs of the Trade Policy Forum, and Undersecretary of State Josette Sheeran Shiner and Foreign Secretary Shyam Saran, the Executive Secretaries of the Economic Dialogue, met to review the Dialogue’s progress and discuss next steps to further enhance our economic relationship. In particular, Undersecretary Shiner and Secretary Saran will host a High-Level Public-Private Investment Summit in 2006 to advance the Dialogue’s economic and commercial goals.

The CEO Forum

The CEO Forum, established in July 2005 as a high-level private sector forum to exchange business community views on key economic priorities, presented its recommendations to President Bush and Prime Minister Singh on March 2. Mr. Hubbard, Dr. Ahluwalia and other senior officials from both governments also met with members of the CEO Forum to discuss the Forum’s policy recommendations. Membership of the CEO Forum consists of ten chief executives from each country, representing a cross-section of industrial sectors. The CEO Forum’s recommendations cover the breadth of the U.S.-India economic relationship, and aim to enhance economic growth and job creation for both countries, to improve market access for goods and services, and to promote bilateral trade and investment. The U.S. and Indian governments welcome the recommendations, and will continue working with the CEO Forum members to address the issues they have raised in the coming months. ”

see http://www.state.gov/p/sca/rls/fs/2006/62493.htm

It would be interesting to study how this kind of high level bilateral engagement with the US has impacted upon how trade policy is made in India.