Rising from the ashes

 Despite the failure of the World Trade Organisation (WTO) talks in Geneva in July, Pascal Lamy, head of the multilateral trade body, is still hopeful that members can reach a deal on the Doha development agenda by the end of this year. What is needed to make it possible is just one more shot by WTO trade ministers at bridging differences. Lamy's confidence does not seem to be misplaced, given that agreement on 17 out of the 20 key issues on the Doha agenda has already been achieved. And it seems that member countries are not averse to meeting again to thrash out differences over the remaining issues. However, these calculations could still go wrong if the political leadership in India and the US does not show the required will to conclude the negotiations.

The wrangling between the US and India over the agriculture special safeguard mechanism (SSM) led to the final collapse of the Geneva negotiations. The negotiators from the two sides could not agree on where to peg the trigger for use of SSM by developing countries on the basis of import surges. Besides, the US was also opposed to any possible breaching of the Doha tariff ceilings by developing countries to deal with import surges.

Meanwhile, Lamy plans to convene another meeting of WTO trade ministers in Geneva in early September to give a final push to the Doha negotiations. To mobilise political support, he is touring capitals of major trading members.

In Delhi, Lamy sought India's support, saying that the Doha negotiations should not collapse over SSM in agriculture for developing countries. Striking an emotional chord with Indian public opinion, Lamy blamed the subsidy payouts to farmers in developed countries for high global food prices. This has held back investment in the developing countries' farm sector, causing food scarcity, the WTO chief said.

And a successful conclusion of the Doha negotiations would help in capping farm subsidies in developed countries, thereby making exports from developing countries competitive. This will, in turn, encourage their farmers to invest more to tap export markets, paving the way for a turnaround in the global food supply scenario, he said.

And India has responded favourably to Lamy's call, with Commerce Secretary GK Pillai saying we are willing to get back to global trade talks if the WTO chief gets a positive signal from the US over resolving the Doha deadlock on the proposed SSM.

Meanwhile, the inclusion of the proposal for sectoral tariff cuts in the revised non-agriculture market access (NAMA) draft text has sent the Indian industry into a tizzy. While for SMEs the anti-concentration clause of the text is a cause of concern, it is the draft proposal on sectoral deeper tariff cuts that is alarming, says Anil Bhardwaj, secretary-general of the industry body Federation of Indian Micro and Small and Medium Enterprises (FISME), while talking to Hardnews.

If the proposal is agreed upon, there are 14 sectors, including auto parts, bicycles and parts, hand tools, chemicals and pharmaceuticals, in which duties could come down to zero, Bhardwaj points out.

 For Indian SMEs, the greatest worry is that if the country decides to participate in the sectoral initiative, while import duties on their final products will come down, raw materials will continue to attract higher duties. That will lead to reverse tariff escalation. 

For example, bicycles could be imported at zero duty but the tariff on steel might remain between 7 and 10 per cent. Such anomalies will wipe out entire sectors, the FISME secretary-general warns, and says if sectoral negotiations are to be pursued, participation in the initiative should not be contingent upon deeper tariff cuts. And in any case, it should remain a voluntary initiative.

Similar concerns have also been voiced by CII, Assocham and FICCI.