India in the WTO

Kamal Nath and the Singapore trade minister announced the successful end of the talks in Singpore today. Read more here. Some facts:

Total trade between the 10-member ASEAN and India amounted to 37 billion US dollars in 2007, up 29 percent from the previous year.

India is seventh on the list of ASEAN’s biggest trading partners, trailing Australia, South Korea, China and others, according to ASEAN figures.

The FTA covers only goods, but talks are expected to follow on a services and investment agreement.

The Business Standard reports on the renewed urgency that the Geneva Doha failure of July lent to these talks being finally concluded after having been delayed. It also has more information on what the deal contains:

India, on its part, has agreed to lower import duties on nearly 96 per cent of the items it trades with Asean, while protecting nearly 490 highly sensitive products in the agriculture, textile and chemicals sectors. Asean, too, has shown ample flexibility in accepting some Indian positions though it had, in the last annual India-Asean summit in Singapore in November, virtually ruled out further negotiations until India came up with substantially better offers. Most of the group’s members were unwilling to allow protection for over 400 items and especially not to the ones of interest to them in agriculture as well textile and chemicals. These included, besides palm oil, items like pepper, tea and coffee. However, all that is past, though in the process Asean has also got concessions from India to shield its turf when it comes to automobiles and steel. In the case of the almost intractable issue of duties on palm oil and its derivatives, equally critical for a major importer like India as it is for exporters like Malaysia and Indonesia, the two sides have agreed to follow a middle path, agreeing to a tariff ceiling of 37.5 per cent for crude palm oil and 45 per cent on its refined version. In the event, this turned out to be the clinching point for the pact.

Is the future an Asian common market, with Asean already having signed agreements with South Korea, China and Japan, and negotiating with Australia and New Zealand?

The Business Standard yesterday reported that on his recent trip to India, Lamy compared his role to a midwife to deliver the Doha round deal. The article reads:

Pascal Lamy, the World Trade Organization’s (WTO) embattled director general, says he wants to perform the role of a “midwife” to salvage the Doha trade negotiations. This is what he confessed to the Indian trade team during his closed-door meetings in New Delhi last week. Apparently, Lamy said that the Indian trade minister Kamal Nath and the United States Trade Representative Ambassador Susan Schwab are “pregnant”. As a midwife, he said, it is his duty to ensure a smooth delivery so that the faltering Doha project comes to fruition.

The formidable Indian reporting on the Doha round was once again visible as the reporter commented that Lamy might not be the best midwife in town.

Besides, such a pronouncement is bound to make WTO members sit up and ask whether the director general can offer neutral and unbiased services like a classical midwife. Because of his diverse roles in the past ranging from a banker to the European Union’s top trade policy job, there will always be nagging doubts about his new role.

Some more criticism of Lamy’s role:

An impression gathered ground that Lamy tends to be soft when it comes to dealing with Washington while displaying unusual exuberance when dealing with developing countries. Lamy, for example, suspended the negotiations to help Washington which had refused to budge from its unsustainable position of bringing down farm subsidies below $22 billion in 2006. And during this period he was sending missives to developing countries like China, India, Indonesia, and Philippines questioning their hard-line stance on special products and the Special Safeguard Mechanism for developing countries.

By the time the negotiations came back on the rails last year following a series of failures, he ought to have drawn important lessons on how to maintain equidistance from key players. But that did not quite happen as can be seen from the manner in which negotiations evolved in different Doha dossiers, especially in the case of the rules and the three TRIPS-related issues, as they would have created difficulties for Washington.

It always remains a mystery as to why Lamy did not fix the final figure for the US overall trade-distorting support for agriculture at $13 billion as demanded by six out of seven trade ministers during the failed mini-ministerial meeting at Geneva last month. Though it is important for the director general to be close to the US because of Washington’s influence over the global trading system, it is also equally important that he calls a spade a spade when that country adopts unyielding positions. He cannot remain silent for the sake of the elephant that is in the room when life-and-death-issues such as cotton for the poorest of the poor remain unresolved.

The report is authored by D Ravi Kanth, who if I am not mistaken was a highly visible participant in the press conferences in Geneva during the July 2008 mini-ministerial convened by Lamy.

In a interesting article in the Hindustan Times, the shipping problems on account of security concerns faced by Indian firework manufacturers is highlighed. Apprarently, both Singapore and Sri Lanka have recently denied access to ships with fireworks coming from India on-route to places like Durban. Other Indian ports like Nava Sheva in Mumbai have also had there own problems. As a result, firework manufacturers from India have tied-up with Chinese manufacturers and export products from China under the Indian maker’s label.

Sivakasi firecrackers made in China? Ganesan gets his firecrackers made in China, and then obfuscates where they are made. The individual cartons simply say “Sony Fireworks” — there’s no mention of Sivakasi, India or China — but the crate says “Made in China”.

A town of 4 lakh that makes Rs 800 crore worth of firecrackers every year, Sivakasi has had to adopt this ingenious practice after exports plummet by 320 per cent over a decade to no more than Rs 20 lakh today.

There are two, diverse reasons for this: Sivakasi’s fireworks need trans-shipment to reach the world, either through Chennai port or through Tuticorin, 100 km to its west — and then to Colombo or Singapore.

Singapore won’t allow ships laden with fireworks because of tightened safety laws. Sri Lanka, on the other hand, cites security reasons for stopping the transhipment of Sivakasi fireworks.  

“Colombo is terrified of anything to do with fireworks because of the LTTE threat,” said M. Selvaraj, a leading Sivakasi manufacturer.

Tying up with the Chinese, then, is the only way out. China is the world’s largest fireworks manufacturer, exporting nearly 95 per cent of its production, earning Rs 5,000 crore every year. There is no chance of Sivakasi matching that figure.

The town’s manufacturers tried to reach the world through other Indian ports but failed. Since 2003, the Centre has allowed export of fireworks through the Nava Sheva port in Mumbai, but exporters say the authorities are so wary that the ships often sail away.

“The authorities think militants could use firecrackers as a cover for moving explosives,” said Ganesan. “We have discussed our problems with the Chief Controller of Explosives in Nagpur, but he was not really helpful.”

Some need for trade facilitation measures here? And what exactly are the security concerns? Are fireworks exports covered by WTO rules?

Sometime ago, the International Economic Law and Policy blog had a post on trade in fireworks. See here. It also discussed shipping problems for the fireworks industry and quoted a press release from the US fireworks association. The press release:

International Shipping Problems Affect the US Fireworks Industry

2008 is proving to be a very difficult year for the Fireworks Industry in the United States.

Recent problems in China which include a shortage of shipping lines and ports, are now causing a severe shortage of fireworks.  This will affect both consumer fireworks stores and stands, as well as the annual July 4th Display in many cities and towns across America.  Most companies are reporting dramatic increases in both product and shipping costs.  Many companies are reporting a severe shortage  of inventory as fireworks that have been ordered and in many cases, paid for, are still sitting in China with little or no chance to arrive in time for the busy July 4th season.

Reports from China indicate that the current port accepting fireworks for shipment may close at any time as China prepares for the Olympic Games.

Fireworks Company owners are at a loss as they have no control over the severe price increases nor the lack of shipping coming from China.

There is no indication when or if this situation will get better.

With national elections looming, the Indian government will issue a White Paper in October to explain to ordinary Indians and stakeholders what the Doha negotiations are all about, what is at stake and what is India’s negotiating position based upon.

The Financial Express in a report quoting a senior commerce ministry official discloses:

India would give another shot at taking forward the talks next month if the US gives positive signals and then the Centre would come out with the ‘white paper’ by October-end , a senior government official told FE. The ‘white paper’, devoid of all the jargon, would contain the nitty-gritty of the multilateral trade negotiations, India’s stance on all the issues on the table alongwith the positions of other countries as well as the reasons for the failure or success, the official added.

Once again, this proposal shows how trade policy making processes in India have evolved since the Uruguay Round. This move is commendable for promoting transparency about the WTO system at the domestic level. However, the government should encourage transparency in international trade negotiations through similar iniatiatives throughout the WTO negotiation rounds and not just before an election.

The Business Standard carries an article today which suggests (and it seems based upon access to information from people who were in the negotiating room) that the issue that sunk the mini-ministerial wasn’t special safeguards for agriculture but cotton subsidies.

According to Bhaskar Goswami, the author of this article:

On the 8th day of negotiations the talks were deadlocked and Pascal Lamy, Director General of the World Trade Organisation (WTO), circulated a revised draft on Special Safeguards Mechanism as a compromise move (trade circles in Geneva suggest that the proposal was drafted by European Union). As is widely known, all drafts of developed countries are circulated at the WTO with US approval and this draft was no exception. Besides, Lamy is not exactly known for producing surprises for the US.

The revised text, although undermining the rationale of safeguarding before harm could occur, was acceptable to India on the 9th day. This was admitted by Kamal Nath. However, midway during the discussion Susan Schwab, the US Trade Representative, hardened her stand. Not only did she turn adamant against accepting a reduced import trigger, she suggested that it be revised upwards by 10 percent! Somebody sure was desperate to ensure that the negotiations fail while the discussion was on Special Safeguards Mechanisms, and India and China take the blame for it.

At the WTO, the US either negotiates from a position of strength or, if its defensive issues are raised, scuttles the negotiations. This is exactly what it did in Geneva this July. What activated this sudden hostile line of argument by the US is not very difficult to gauge. Since Special Safeguards Mechanisms were the second-last topic under discussion, an agreement on this would have brought the discussion to the last issue — cotton subsidies.

Here is a YouTube video featuring Dr. Rajeev Kumar, Director and Chief Executive of ICRIER speaking to the Warwick Commission on ‘The Future of the WTO from an Indian perspective’.

Watch here

CUTS and Federation of Indian Chambers of Commerce and Industry are organizing a 2 day conference in New Delhi on 12-13 August 2008.

Kamal Nath, Pascal Lamy, Supachai Panitchpakdi and perhaps Dr. Manmohan Singh are expected to be there.

The conference theme is ‘Global Partnership for Development – Where do we stand and where to go?’

The sessions will cover the following themes:

• Global Partnership for Development: Where do we stand?
• LDCs and SVEs in the International Trading System: What future for them?
• Operationalising Aid for Trade: Who is (should) doing (do) what?
• UK’s Aid for Trade Strategy: Lessons for future effective international trade and development architecture
• Services Liberalisation and Domestic Regulation: Why it is so important?
• Mainstreaming Development in the WTO
• Trilateral Development Cooperation: How to make it more effective?
• The Future of the Global Trading System
• Global Partnership for Development: Where to go?

The  detailed program is available here