TWN Info Service on Trade and WTO Issues (July08/33)
24 July 2008
Third World Network

Trade: Kamal Nath sets conditions for success of WTO talks
Published in SUNS #6524 dated 24 July 2008

Geneva, 23 July (Kanaga Raja) -- A successful Doha Development Agenda outcome has to address the need to ensure that the outcome results in healthy economies in developing countries, as well as correct the structural flaws in subsidies (in developed countries) so that it stimulates investment in agriculture in the developing countries, Indian Commerce and Industry Minister Kamal Nath said Wednesday.

Nath was speaking at a media briefing at the WTO after his return to Geneva following the Indian parliamentary "trust vote" which the government won.

Nath said that "this time, we are confronted with global economic crisis. An economic crisis which has the three F's as challenges - food, fuel and finance."

This dictates that the responsibilities of all members to have a successful round and to complete this round is an imperative in these times, Nath stressed, adding that "these are depressing times and I think it's the collective responsibility of all members to ensure that everybody puts their foot forward, to ensure that the content of this round, which is a developmental content, is achieved."

Nath pointed out that the developmental content "essentially means to have healthy economies in developing countries. If there are healthy economies in developing countries, then only do they provide markets for the developed countries."

Noting that India is a healthy economy, Nath said that it is because of that that India's imports from the United States last year went up by 74% compared to the previous year. Exports from the European Union (to India) went up by about 32%.

Nath cited two reasons for this, that India is open and that India is a healthy economy. "If you're open, and you are not a healthy economy, there aren't going to be any trade flows. So, at the heart of any developmental round lies the need to ensure that the outcome is healthy economies in developing countries."

The second developmental component is to correct the structural flaws in global trade headlined by subsidies, he said. "And it's because in the last two, two and a half years of a failure on this front that there was not much progress."

"I think that a DDA (Doha Development Agenda) outcome has to be addressing these two basic things," Nath stressed.

As to how this can be done and how to get the politics of the negotiation right, the Indian Commerce Minister said that most important of all "we have to correct the structural flaws in subsidies so that it stimulates investment in agriculture in developing countries. The greatest impediment to investment in agriculture in developing countries has been the subsidies, where investment is just not worth it."

He also mentioned strong disciplines in the various boxes and a strong result in tariff simplification and tariff capping in agriculture.

This is extremely important "if we are to ensure not only the success of this round, but a successful outcome commensurate with the objectives of this round," said Nath.

Nath noted that the developing countries have millions of poor farmers - in India, there are 650 million poor farmers. "So, an outcome which protects the vulnerable farmers in terms of an appropriate SPs (special products) and SSM (special safeguard mechanism) mechanism is extremely important."

When we talk of sensitivities of developing countries, said Nath, we talk of the sensitivities of poverty and the sensitivities of livelihood security. "When the developed countries talk about sensitivities, they are talking about preserving or promoting prosperity."

On one hand is protecting and promoting prosperity and on the other hand, is protecting the livelihood security, ensuring the need to reduce poverty in terms of employment generation, added Nath. "So, these are the two windows through which every outcome has to be looked at. Is it promoting or protecting prosperity or is it generating economic activity in developing countries to ensure that these are healthy economies?"

With regards to NAMA, the Indian Commerce Minister said "we have to see that the outcome combines ambition with balance." He noted that a large number of developing countries have very infant industries, and industries that have a small-scale sector which have just evolved over the last 5-15 years.

"The manufacturing industries in developing countries are getting more and more competitive, and as we all know, the manufacturing industries of the developed countries are getting more and more non-competitive. Now, to sustain the non-competitive industries of the developed countries, we cannot put at jeopardy the manufacturing sectors of developing countries," said Nath.

He also said that the round needs a very successful services outcome. Services represents in excess of 50% of the GDP of India and a large amount in the United States, said Nath, adding that services is a very important component and "we have to see in this that all sectors of interest to developing countries, the development interest, is kept in mind and that there is correction in domestic regulations." Domestic regulations also lie at the heart of improvement in services, said Nath.

Nath pointed out that India is also very concerned with fisheries, and that the protection of the small artisan and marginal fishermen is extremely important. "We must see that the outcome does not put this into jeopardy or in no way is left uncertain."

On the TRIPS/CBD issue, Nath said that India would like to see that biodiversity and preventing piracy is adequately reflected.

Nath believed that the next couple of days are going to be useful. "I am optimistic," said Nath, adding that he considered the next 3-4 days very crucial. "I do hope that we can make progress towards completion of this round by the end of this year."

Asked about the US offer to cap its OTDS to $15 billion and Schwab's comments at a media briefing indicating that the US could not go below $13 billion, Nath noted that "the United States is moving. And these negotiations will determine how much they will move."

"Obviously, what she'll say in the negotiation will be much better than what she tells in an engagement with all of you (the media)."

"Up till now, there was no movement. The fact that movement has started is a good sign and I look forward to much greater movement than this." Noting that the US applies about $7 billion, Nath said "we have to see how far they can go, and negotiations in the next couple of days will determine what is finally on the table."

"So, I really was quite optimistic when I heard about this $15 billion, and I am looking forward to similar movements by developed countries in other areas also," said the Indian Minister.

Asked about the issue of anti-concentration clause and whether India would accept a proposal from the EU and Germany, Nath said that he was surprised about the anti-concentration clause when Germany was especially mentioned. Noting that one of the anti-concentrations was in automobiles, Nath said that German automobile manufacturers in India, through their association, told him as late as last week that they did not want it. "There seems to be some disconnect somewhere."

In response to a question in relation to the US offer of $15 billion in OTDS and whether there is a corresponding figure in NAMA coefficients that India would put on the table, as well as the US opposing the SSM, Nath said that "we have not as yet linked numbers in OTDS to the coefficient in NAMA, but obviously it's in the Hong Kong text that there is a correlation between the ambition in agriculture and NAMA. This is what negotiations are all about."

"... When I am negotiating, I am willing to negotiate commerce. I am not willing to negotiate livelihood security, I am not willing to negotiate subsistence, I am not willing to negotiate poverty. So, if I am here, I am here to negotiate commerce."

Where SSM is concerned, Nath made clear that "we've got to have an effective SSM." He noted that an SSM is only a contingency. It only comes into play in the happening of a volume or price event. It is not something which is a market access barrier, Nath stressed, adding that SSM is extremely important and crucial, at least where India is concerned, to the closure of the deal.

Nath also believed that the TRIPS/CBD issue is part of the mandate. "We would like to ensure that it is locked in, in some form or another." He said that while it is not part of the modalities, it is part of the Doha Round.

Asked as to what areas he would foresee India moving on this week, Nath said that India will have a good offer on services. He said that services is extremely important and that both USTR Susan Schwab and EC Trade Commissioner Peter Mandelson had written to him, telling him that their flexibilities also depend on a good services package. "I completely share the views of the United States and the EU on this."

"We have to ensure that the Signaling Conference just doesn't remain a cocktail party but gives signals which are non-reversible."

Nath elaborated that India is seeking from the United States and the European Union good offers on Mode 1 and Mode 4 including domestic regulation. He stressed that India is not looking at any immigration issue. "India has no demands on immigration."

Asked about the impression that India is waiting for developed countries to give their absolute bottom-line before it puts anything on the table, Nath said "Of course, I want them to put everything they have. This is a round they are supposed to be giving, not taking."

Asked about the issue of tariff capping, the Indian Minister said that certain countries do have a problem with tariff capping and that India recognized that Japan is a very large food importer. This will be part of the overall negotiation, said Nath, adding that India, in all the earlier meetings, has said that there has to be an exception in the case of Japan. "We would go along with that."

In response to another question, Nath noted that in agriculture, he has always said that subsidies are a distortion, and tariffs are not a distortion. "We are talking about removing distortions," he said, adding that in the WTO everything is on bound levels. In respect of the US subsidies, it is talking in terms of bound levels.

"But in NAMA, if you talk about applied (levels), then we need to talk in agriculture also about applied." +