Dr Bharat Jhunjhunwala
The NDA Government is about to complete two years of its tenure. NDA had come to power on the twin issues of good governance and achhe din for the aam aadmi. The NDA had indeed delivered on the promise of good governance. Corruption is certainly down especially at the higher levels. Corruption at the ground level continues as usual but NDA may be given more time to control this problem. Difficulty is that achhe din are nowhere to be seen even on the horizon. There are many dimensions to the failure of the NDA in providing relief to the aam aadmi. One dimension is that India’s membership of the WTO stands against bringing in achhe din for the people of the country. The WTO may have helped the middle class gain access to imported goods like Swiss Chocolates but it had hurt the aam aadmi. There is a need to take a relook at how the WTO stands against the common man of the country.
The first issue is that of free trade. It must be accepted that WTO has made a seminal contribution in fostering global trade in manufactured goods. The sticky problem has been that of trade in agriculture. The Developed Countries had agreed at the time of signing the WTO Treaty to phase out all agricultural subsidies in 10 years. However, instead of truly removing the subsidies they have mostly shifted them to forms of subsidies that are allowable under the rules of the WTO. For example, the United States gives money to the farmers not to cultivate their fields. Such payments are not restricted under the WTO. As a result the cost of production in the United States is less and the farmers are able to sell goods cheap in India. Moreover, these subsidies keep prices low in the United States and deprive our farmers from benefitting from exports to that market. The ground reality is that our farmers have been hit badly by surging imports of items like apples and milk products from the developed countries; while they have not gained by exporting their produce to these countries.
The Nairobi Ministerial of the WTO held few months ago made some feeble moves to provide protection to the farmers of the developing countries from these negative impacts. A Special Safeguard Mechanism has been instituted under which developing countries are allowed to impose higher tariffs in case of a surge of imports. Free access to cotton products has been agreed to. Developing countries have been allowed to stock large amounts of grains to meet their requirements of food security. These gains are genuine but they are in the nature of firefighting. These help us protect ourselves from the negative impact of the WTO. These measures do not remove the negative impacts. It is like we losing 50 points due to the WTO Treaty but retrieving 10 points by abovementioned measures. There would be no need for these measures if the WTO had a positive impact. Free trade also stands against our energy security. The WTO has recently ruled that Indian Government cannot procure solar panels from domestic manufacturers at preferential prices. This means that we cannot create indigenous capacity for making solar panels in order to establish our energy security.
The second issue is of movement of natural persons. The idea of free trade is that people will produce goods in their home countries. Their labour power will be exported to other countries after being packed in the goods. It is not recognized that even more gains to global economy can be made if the workers were themselves allowed to migrate to the target markets. The India worker himself can be exported instead of he making a car in India and the car being exported to Europe. Exporting the worker himself is more efficient because cost of transporting the car will be saved. The car will be manufactured in Europe by Indian workers instead of being manufactured in India and exported. Large numbers of studies have shown that the gains from free trade can also be secured by free movement of natural persons. This issue has never been raised in the WTO, including at Nairobi.
The third issue is that of Intellectual Property Rights. These have been integrated with the trade mechanism under the WTO Treaty. These have been responsible for large scale draining of our income to the developed countries through royalty payments. The IPRs were diluted a bit at the Doha Development Agenda agreed at the Doha Ministerial. It was decided that Governments could override the patents in case of public health requirement. Members of the WTO had unanimously agreed to take this further in future negotiations. The Nairobi Ministerial has jettisoned this clause. It has now been recorded that many countries do not agree with the Doha Development Agenda. Thus, the unanimous decision in favour of loosening the patents regime has now been replaced by a division. This means there will be no progress on this issue in future.
The fourth issue is that of the “Singapore Issues” of investment protection, government procurement and competition policy. These were new issues that are of great interest to the developed countries. They had managed to make the IPRs an integrated part of the WTO in 1995. This led to their extracting huge amounts of monies from the developing countries. They made huge efforts at the Singapore Ministerial to have these included in the WTO but failed and these issues were ruled out of the WTO at previous ministerial meetings. These have been brought back and placed on the WTO negotiating table at Nairobi. The victory attained by the developing countries previously has been washed away.
The WTO is moving negatively for us. The so-called gains in the area of agricultural trade are actually in the nature of firefighting the negative impacts. The loosening of the IPRs unanimously agreed at Doha has been reversed. The issues of investments and government procurement that had previously been ruled out of the WTO have been brought back. The issue of movement of movement of natural persons has not been raised. The Government should think hard where it is leading the country.
(The author was formerly Professor of Economics at IIM Bengaluru)
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