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TWN Info Service on WTO and Trade Issues (May 07/06)

27 May 2007


Making SP and SSM ineffective is disaster, says Indian Minister

The Indian Commerce Minister Kamal Nath has criticised opponents of the Special Products (SPs) and Special Safeguard Mechanism (SSM) proposals in the agriculture negotiations at the WTO as wanting to tie up the SP and SSM concepts in knots, such as to make them ineffective. It would be the "surest recipe for social disaster and instability" if developing countries are deprived of such a safety net, he added.

The Minister made this point on 3 May, three days after a paper by the Chair of the WTO's agriculture negotiations proposed that "special products" designated by developing countries be subjected to whether they meet conditions of certain indicators in order to be eligible for such a designation, and that they be restricted to 5-8% of tariff lines.

The suggestions on SPs in the paper by Ambassador Crawford Falconer of New Zealand has been criticised by officials and diplomats of several countries advocating the SP concept for what they say will deprive countries from being able to "self designate" their special products, and for rendering the SP instrument ineffective. 

Below is a report on Kamal Nath's speech, made at Oxford University.

It was published in SUNS of 7 May.

With best wishes
Martin Khor
TWN

Making SP and SSM ineffective is disaster, says Indian Minister

By Martin Khor (TWN), 4 May 2007

The Indian Commerce Minister Kamal Nath has criticised opponents of the Special Products (SPs) and Special Safeguard Mechanism (SSM) proposals in the agriculture negotiations at the WTO as wanting to tie up the SP and SSM concepts in knots, such as to make them ineffective. It would be the "surest recipe for social disaster and instability" if developing countries are deprived of such a safety net, he added.

The Minister made this point three days after a paper by the Chair of the WTO's agriculture negotiations proposed that "special products" designated by developing countries be subjected to whether they meet conditions of certain indicators in order to be eligible for such a designation, and that they be restricted to 5-8% of tariff lines.

The suggestions on SPs in the paper by Ambassador Crawford Falconer of New Zealand has been criticised by officials and diplomats of several countries advocating the SP concept for what they say will deprive countries from being able to "self designate" their special products, and for rendering the SP instrument ineffective.

Earlier, some proposals to restrict the number and eligibility of products to be categorised as SPs had been made by a few countries, including the United States, Thailand and most recently, Pakistan. The US proposed a maximum of 5 tariff lines as SPs, while other proposals are that products can be allowed to be SPs only if they meet several conditions, including if they are above a minimum "score" related to indicators, and if they satisfy several stringent criteria.

Commerce Minister Nath also reiterated that developed countries must cut industrial tariffs by a higher percentage on average than developing countries through the "less than full reciprocity" principle agreed on by the WTO.

The coefficients (in the Swiss formula in the NAMA negotiations) are only numbers, said the Minister, and what is important are the reduction commitments arising from the numbers. If the coefficients chosen lead to developing countries cutting tariffs more than developed countries, what "Development Round" would this be, he asked.

Nath was giving a lecture on 3 May on "India and the World Trade Talks" at Oxford University in the United Kingdom, on the occasion of the launch of its new Global Trade Governance project within its Global Economic Governance programme.

Nath started by speaking about India's economic reform process which he said was "irreversible". He asked, if India is doing so well, then why is it perceived as 'being difficult' in the WTO 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," he said.

Many realities co-exist in India. Just because Indian industry has matured to the extent of aggressively pursuing acquisitions abroad, does not mean that India has reached first world status, he remarked.

Sixty percent of Indians are dependent upon agriculture for their livelihoods; Indian agriculture is characterized by small holdings of less than five acres; 90% of landowners are also tillers; and 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," said Nath.

What happened to West Africa cannot be allowed to happen to Indian farmers, he added, describing the cotton issue as "a bleeding sore on the conscience of the world", a 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," said the Minister. "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?"

Nath referred to the window of Special Products and the Special Safeguard Mechanism that was devised in the July Framework (of 2004) as a means of safeguarding livelihood security and rural development needs, and said: "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."

Referring to the negotiations on non-agricultural market access (NAMA), the Minister said: "On the industrial front, developing countries have agreed to a non-linear Swiss formula. We have agreed to this, only in the hope that developed countries, which in spite of their seemingly low average industrial tariffs continue to maintain high tariff peaks and tariff escalations on products of export interest to developing countries, will be forced to reduce these peaks and escalations.

"India has not been averse to high ambition levels, provided the mandate of less than full reciprocity in percentage reduction commitments is met. Coefficients are only numbers. What is important is the outcome of those numbers: the reduction commitments. What kind of development round would this be if the formula coefficients chosen are such that developing countries end up cutting tariffs by a higher percentage than developed countries?"

Nath said that unrestrained tariff liberalization can have disastrous effects on a country's industrial economy. He recounted how the former Trade Minister of Zambia told him 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," he said. "Flexibilities in the application of a NAMA formula remain an inviolable essential to ensure balanced regional and sectoral development."

Nath added that all this did not mean that India is aiming for a 'low ambition' outcome (in the Doha negotiations). India is 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," he said. "The goal of this round of negotiations is development, and so our ambition ought to be oriented towards achieving it."

The Minister said 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.

"Though development was enunciated as the centrality of the Round, some seek to weave it in a mesh of ifs and buts," he remarked. "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, but healthy economics itself demands it, said Nath. 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.

The Indian Minister said that the three billion poor people on the planet 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.

There are two worlds, concluded Nath. One is the "virtual world", viewed through screens, the laptop, the TV, the mobile phone. "But the real world is beyond the virtual, a world whose realities do not succeed in seeping through the many screens that have become part of our lives. 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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