11 May, 2007

No More One-Way Globalisation, Say India And China

Imtiaz Muqbil

China and India are coming together to defend the wider economic and trading interests of the developing countries in the World Trade Organization.

1. NO MORE ONE-WAY GLOBALISATION, SAY INDIA AND CHINA: China and India say they plan to defend the wider economic and trading interests of the developing countries in the World Trade Organization. If it succeeds, their push could help pave the way for a similar effort in the travel & tourism industry, especially in tackling controversial travel advisories and visa restrictions.

2. INDIAN MINISTER: OUR FARMERS CANNOT COMPETE WITH THE U.S. TREASURY: Excerpts from Indian Commerce and Indian Minister Kamal Nath’s Special Address at Oxford University on how India perceives the future of global trade talks.

3. WTO DIRECTOR-GENERAL: RISK OF ANOTHER GLOBAL TRADE TALKS FAILURE STILL LOOMS: Excerpts from WTO Director-General Pascal Lamy’s speech to the US Chamber of Commerce in which he says that the US, too, will have to walk the talk of open markets and free trade.

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1. NO MORE ONE-WAY GLOBALISATION, SAY INDIA AND CHINA

China and India are coming together to defend the wider economic and trading interests of the developing countries in the World Trade Organization (WTO, not to be confused with the UN World Tourism Organization, the UNWTO). If it succeeds, their push for “an open, fair, equitable, transparent and rule-based multilateral trading system” could help pave the way for a similar effort in the travel & tourism industry, especially the long-standing desire among developing countries to combat the double-standard and hypocritical travel advisories and visa restrictions imposed by developed countries.

In a little-reported statement issued after their meeting last April 16, Indian Commerce Minister Kamal Nath and his Chinese counterpart Bo Xilai called on the developed countries to “show their readiness to implement measures that remove trade distortions and significantly open their markets” to agricultural products from the developing countries. The statement said the ministers “agreed that the major issue holding back and impeding the progress in (the Doha) Round is the lack of movement by the developed countries in terms of early removal of distortions caused by huge subsidies and significant market access barriers in developed countries.” [http://pib.nic.in/release/release.asp?relid=26914]

What has this got to do with travel & tourism?

Agriculture and trade in manufactured products are far more important to developing countries in terms of job creation and poverty alleviation than travel & tourism. For the past few years, developed countries and their multinational corporations have chanted the mantra of globalisation, deregulation, liberalisation and privatisation to promote open markets and free trade. Today, developing countries realise that they have been doing most of the market-opening, and received little in return. India and China say that needs to change. If they hold their ground, the spin-off impact will soon be felt in travel & tourism, which comes under the “services” sector of the WTO agenda, and encourage developing countries to similarly assert themselves in that, too.

In a speech at Oxford University on 03 May, Mr Kamal Nath summarised the frustration thus: “Over three billion people on this planet continue in the clutches of poverty. Yet they are imbued with a vision of hope. They do not know what International Economics is, they have not heard of the WTO or the Doha round. But what they do know is that there is a world out there in which a privileged few consume twenty times more oil, fifty times more energy and a hundred times more electricity than they do.” [http://commerce.nic.in/May07_release.htm#h6]

Unable to take on the developed countries by themselves, the developing countries have long sought help from China and India. In November 2006, a statement issued after a China-India presidential summit said the two countries agreed “to strengthen the cooperation of the two countries in the WTO and safeguard the legitimate rights and interests of the developing countries.”

Building upon this in their April 2007 meeting, Mr Nath and Mr Bo Xilai took it one step further. Their statement said: “Unless the outcome of the (WTO) negotiations upholds the proposals of developing countries resulting in real and effective reduction of trade distorting domestic support coupled with meaningful disciplines, substantial improvement in market access by developed countries and eliminations of all form of export subsidies the aspirations of the developing countries, as built in the mandate, will not be fulfilled.”

According to the Indian Commerce Ministry, the two ministers reaffirmed their desire “to safeguard the common interests of developing country Members in the future course of negotiations.” They also “reaffirmed their support for an open, fair, equitable, transparent and rule-based multilateral trading system and their determination to coordinate with other members of the WTO, especially the developing countries, in order to ensure placing the development dimension at the heart of this Round….”

In language clearly indicating their desire to resist further pressure or negotiating gambits, the two ministers “rejected any renegotiation of the principles and elements embodied in the Doha mandate and any proposals on these crucial development instruments which could have the effect of undermining the ability of developing countries to meet their food security, livelihood security and rural development needs.”

Significantly, “they urged the developed members, in particular the major trading countries, to realize that they bear a special and specific responsibility for the outcome of the Round. They must show their readiness to implement measures that remove trade distortions and significantly open their markets. Their current positions do not provide an adequate basis for leading the agriculture negotiations to a successful conclusion. They must, therefore, significantly improve their proposals especially in the two crucial areas of domestic support and agriculture market access as well as be prepared to deliver on the development dimension of the DDA.”

Two weeks after the Sino-Indian ministerial meeting, India publicly voiced its “disappointment” with a Paper on Agriculture circulated at a Special Session of the WTO in Geneva on 30 April, 2007. It said in a statement [http://commerce.nic.in/May07_release.htm#h5] that “while the concerns of all the developed countries have been taken fully on board in a spirit of mutual accommodation, the sensitivities of developing countries with millions of resource poor farmers, have been left effectively unaddressed”. The statement added, “India strongly feels that any outcome of the Doha Development Round, which tends to perpetuate the structural flaws and distortions in agriculture trade and does not address the sensitivities of the agriculture of the developing countries and LDCs, will run counter to the Doha mandate and risk another failure of the recently resumed negotiations.”

WTO Director-General Pascal Lamy is now pressuring the United States to realise that the ball is in its court. In a speech to the US Chamber of Commerce in Washington on 23 April 2007 [http://www.wto.org/english/news_e/sppl_e/sppl61_e.htm], he noted that the hand of the developing countries was strengthening. Said Mr Lamy, “During the last Round of trade negotiations in 1995, the Uruguay Round, US and EU leadership was determinant to the fate of the Round. Today, leadership from these two economic giants is a necessary albeit insufficient condition for a success of the Round. Leadership from key emerging players and ownership by developing countries is now just as important.”

Reminding the Chamber members that trade is a vital component of the US economy, he said: “Since the US is a relatively open economy, with trade barriers being among the lowest in the world, it is clearly in the US interest to ensure a reduction of barriers to trade abroad. And this is why it is in the best interest of the United States to ensure a robust and rapid conclusion of the Doha Round.” At the same time, he added, “It is clear that if we are to progress towards freer trade, (US) policymakers need to make sure that the benefits of greater global economic integration are better shared and that the instruments to help those affected by the changes are adapted to today’s new circumstances.”

The stand being taken by the India and China exonerates the view long held by many non-governmental organisations that the WTO agenda is stacked in favour of the developed countries. It also explains the reason for the collapse of the WTO talks in Hong Kong in December 2005 where developing countries sent a clear signal that “no deal is better than a bad deal.” Finally, it provides a clear window of opportunity for the tourism industries of the developing countries to similarly join forces and start rectifying some of the glaring imbalances they, too, face in their relations with developed countries, especially in dealing with travel advisories and visa restrictions.

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2. INDIAN MINISTER: OUR FARMERS CANNOT COMPETE WITH THE U.S. TREASURY

The following are excerpts from Mr Kamal Nath’s Special Address. The full text can be read at: http://commerce.nic.in/May07_release.htm#h6

I come to you to speak to you of my country and how it engages with the world of commerce, how we perceive the new globalised world, how it perceives us, and how we confront the challenges of the new economic architecture.

It is not just that the world’s perception of India is changing; India’s own perception of herself is changing. How an ancient culture engages with the New Economy is one of the most fascinating and exciting developments of the past decade. There are two worlds: one is the world that is viewed through ‘screens’ – the laptop, the TV, the mobile phone. But there is another world – the real world beyond the virtual – a world whose many realities do not succeed in seeping through the many screens that have so become part of our lives.

When we talk of the WTO negotiations and the challenges this poses for India, we need to look at the flaws, the inequities and the opportunities in the current global trading system. It is important to understand the many nuances of India and its changing economy, its changing society – its successes as well as its continuing socio-economic problems; its giant strides as well as the chains that continue to hinder its footsteps. Only then will you be able to see India’s position in the WTO negotiations in perspective.

The economic reform process in India is irreversible. A succession of governments during the last sixteen years, representing a spectrum of political alliances, have all conceded that. This is because economic reform has found resonance with the people. There is popular support for the process. People are impatient for prosperity – not for their children or grandchildren, but for themselves.

What has all this got to do with the WTO? If India is doing so well, then why is it perceived as ‘being difficult’ in the negotiations? The answer is that it is precisely because we cannot afford to jeopardize what we all are seeking: a more balanced, a more just and a more development oriented outcome in the WTO; an outcome that does not perpetuate the structural flaws in global trade, but redresses them.

There are many realities that co-exist in India. Just because Indian industry has matured to the extent of aggressively pursuing acquisitions abroad, and we are witnessing an outward flow of FDI, does not mean that we have reached first world status. Sixty percent of India’s people are dependent upon agriculture for their livelihoods. Indian agriculture is characterized by small holdings of less than five acres. Ninety percent of landowners are also tillers. Indian agriculture is predominantly ‘subsistence’ agriculture, not ‘corporate-for-profit’ agriculture. In spite of this, the Indian farmer is willing to compete with the American farmer. But he cannot compete with the US Treasury. We cannot allow what has happened to West Africa, to happen to our farmers.

The cotton issue is a bleeding sore on the conscience of the world. It is tragedy of a proportion equal to the war in Rwanda or famine in Ethiopia. Whole populations of some nations in West Africa have been reduced to abject poverty through unfair trade. And we are still ‘negotiating’ about it. Let us not mince words: however much we may want a world without tariffs, we must admit that tariffs are legitimate economic instruments. Subsidies, on the other hand, are not. How fair is it to ‘trade off’ legitimate instruments against illegitimate ones? Quid pro quos are all very well. We understand that. But when we are asked to abandon the only defence we have against illegitimate subsidies, and that too on the basis of a promise that these illegitimacies will be dismantled at some point in the future (and that too, not entirely), don’t you think it’s a bit rich?

Even the window of Special Products and the Special Safeguard Mechanism that was devised in the July Framework as a means of safeguarding livelihood security and rural development needs – even this is being sought to be tied up in knots so as to render it ineffective. Low-income or resource-poor rural households have little ability to absorb price fluctuations and a flood of subsidized imports of agricultural products. If developing country governments are not able to provide a safety net – a safety net for livelihoods, mind you, not for corporate profits – then it would be the surest recipe for social disaster and instability.

We must not lose sight of the fact that unrestrained tariff liberalization can have disastrous effects on a country’s industrial economy. The former Trade Minister of Zambia told me that his country actually experienced de-industrialisation after its membership of the WTO. The harsh truth is that the most vulnerable in any re-adjustment are women and artisans, small scale industries run by local entrepreneurs and those that are located in geographically disadvantaged pockets of the country. Flexibilities in the application of a NAMA formula remain an inviolable essential to ensure balanced regional and sectoral development.

Does all this mean that India is aiming for a ‘low ambition’ outcome? Of course not. We are as ambitious as any one else. But ambition can mean different things to different people. I believe that the only way to qualify ambition is to measure it against the goals we have set for ourselves. The goal of this round of negotiations is development, and so our ambition ought to be oriented towards achieving it.

Ladies and gentlemen: I believe that the mandate and the principles of a Development Round hold the promise of the most ambitious interface between national economies and the international environment ever undertaken by governments across the globe. Though development was enunciated as the centrality of the Round, some seek to weave it in a mesh of ifs and buts. The current freeze we are witnessing is because the debate is being deflected from an unconditional delivery of the development dimension to conditionalities that expose what seem to be the real intention of some. We have engaged in this Round in the belief that it is a Development Round. And we shall continue to proceed on that premise.

The need for delivering on the development dimension rests not merely on fairness and equity and justice – though that would be reason enough. But healthy economics itself demands it. Where would Europe and America sell their goods if Asia and Latin America and Africa were sick and poor and floundering? An economically healthy developing world is important to the continued prosperity of the North, as it is also the only guarantor of international peace.

Over three billion people on this planet continue in the clutches of poverty. Yet they are imbued with a vision of hope. They do not know what International Economics is, they have not heard of the WTO or the Doha round. But what they do know is that there is a world out there in which a privileged few consume twenty times more oil, fifty times more energy and a hundred times more electricity than they do. That is the ‘virtual’ world. The WTO negotiations are relevant only insofar as they can answer the question: How and when will the virtual and real converge?”

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3. WTO DIRECTOR-GENERAL: RISK OF ANOTHER GLOBAL TRADE TALKS FAILURE STILL LOOMS

Excerpts from WTO Director-General Pascal Lamy’s speech to the US Chamber of Commerce in Washington on 23 April 2007. Read the full text: http://www.wto.org/english/news_e/sppl_e/sppl61_e.htm

During the last Round of trade negotiations in 1995, the Uruguay Round, US and EU leadership was determinant to the fate of the Round. Today, leadership from these two economic giants is a necessary albeit insufficient condition for a success of the Round. Leadership from key emerging players and ownership by developing countries is now just as important.

Today we know that the Doha Development Round will not be concluded until and unless all these participants are ready to walk the extra mile and table additional contributions to the collective success of this multilateral enterprise. It is clear that the contributions will be linked to the degree of development and wealth of each participant, with the world poorest countries making the smallest contribution. It is also clear that no one will be asked to move first: countries will have to move in concert, like a big orchestra playing to the same tune.

For the moment, a group of major actors — the EU, US, Brazil, India — despite being politically committed to concluding this negotiation by around the end of this year, are somewhat paralysed by fear that any move in the negotiation by any one of them will be pocketed by the others and will not lead to reciprocal moves. They are locked in a sort of “prisoner’s dilemma”, as if the only concern of each individual player would be maximizing his/her own payoff, without any concern for the other player’s payoff. It is as if the cooperation, essential to the multilateral trading system, was dominated by withdrawing, so that the only possible balance for the game would be for all players to withdraw.

As we mark the 60th anniversary of the creation of the multilateral trading system, it is time to go back to the basics of trade negotiations, a win-win game where the sum of the collective gains is certainly much larger than the contribution each participant makes.

……trade is a vital component of the US economy. Since the US is a relatively open economy, with trade barriers being among the lowest in the world, it is clearly in the US interest to ensure a reduction of barriers to trade abroad. And this is why it is in the best interest of the United States to ensure a robust and rapid conclusion of the Doha Round.

Given the complexities of a multilateral deal involving 150 members and covering over 30 topics, I know that many countries — and the US is no exception to this — may be tempted to give priority to bilateral deals. This is nothing new. While bilateral agreements can be a useful complement, I do not believe they can substitute a strong multilateral trading system. Bilateral agreements are by their very nature discriminatory. They have obvious limitations in terms of issues covered since they do not tackle the toughest areas where trade restrictive and distorting measures, such as subsidies, still prevail. They may lead to trade diversion as opposed to trade creation. And they complicate the trading environment of economic operators who have to abide by a spaghetti bowl of different rules. In short, bilateral agreements are not the easy way out.

But while freer trade is key to the growth of the US economy, here as in many other countries around the world, concerns are growing over the current pace of global economic integration, of which trade opening is seen as a salient element. Similar episodes have occurred in the past, but today’s scale and pace is unprecedented and is creating frictions which are resulting in a sort of “malaise” about trade. Shifts in production structures impose costs on workers and entrepreneurs in some industries and leads to constituencies opposing greater economic integration. There are also growing concerns over the impact on the environment or the effects for the weakest countries. It is therefore clear that if we are to progress towards freer trade, policymakers need to make sure that the benefits of greater global economic integration are better shared and that the instruments to help those affected by the changes are adapted to today’s new circumstances.

But as the US discusses these issues, the world watches carefully to read the commitment of the US Administration and Congress to the Doha Round. Signals coming out of Washington on the extension of Trade Promotion Authority, on the shaping of the new Farm Bill or over the future Trade Adjustment Assistance, even if clearly US internal affairs, are read with great attention by trade negotiators around the world, and especially in Geneva.

Recently major WTO players meeting in Delhi pledged to conclude the Doha Round by the end of this year, when the stars will be aligned. If we take just agriculture and industrial goods, working back from the conclusion of the Round, participants will have to elaborate their detailed schedules of commitments, which in turn will have to reflect agreed modalities. And to achieve those modalities, a cross-cutting negotiation will need to take place on both issues. And this does not take account of progress needed on services, trade facilitation, rules or the environment, just to name a few of the topics on the agenda. I am not offering a specific timeline for these steps, but it is obvious to that there is precious little time to waste.

If WTO members do not energise the negotiations soon, governments will be forced to confront the unpleasant reality of failure. This will mean throwing overboard the very significant package of trade opening and rule-making that is available and stripping the global economy of one of its most powerful and enduring sources of strength and stability.

It will also mean failure to address remaining inequities in the multilateral trading system. Improving trade opportunities for developing countries, eliminating trade restrictions that continue to penalize their exports and handicap their economic growth, is at the heart of today’s international agenda to promote political stability, development and alleviate poverty.

Finally, it would mean failure of the first WTO trade Round, and of one of the most important exercises in multilateral economic cooperation of the past decade. The basis for international economic cooperation can never be taken for granted. The complexity of the process of globalisation presents a constant political challenge to measure up to its critics and to manage economic adjustment, particularly at the national level. The rules-based, multilateral trading system is there to help governments deal with that challenge. Failure to complete the Doha Round would undermine the system and weaken the ability of member governments, individually and collectively, to stand firm against trade protectionism. That is a risk which we cannot afford to take lightly.

A breakthrough in the negotiations in the next few weeks would send a much needed message of confidence, that WTO members remain committed to open markets and multilateral rules and that the foundations of the global economy are reinforced. This is perfectly doable. The challenge is less technical, than political. It is about leadership, about compromise, about countries recognizing their common interest in success and the collective costs of failure.

I am confident that the United States will put all its energy and commitment into concluding the Doha Round. US leadership is always required to sustain the WTO but the exercise of this leadership by the Administration and Congress in the weeks and months ahead will be key to the fate of the Round. At this critical juncture in the negotiations, the WTO urgently needs their full support.