The Telegraph
Since 1st March, 1999
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More than a year has passed since the Doha round of talks of the World Trade Organization was launched. This round of trade liberalization negotiations has come to be known as the “development round”, because it is supposed to take care of the special concerns of the developing countries.

These concerns are mainly in the areas of agriculture, intellectual property rights and market access. Developing countries felt that they had a raw deal in the previous Uruguay Round, particularly in the area of patent rights, which predominantly benefited the developed countries. In agriculture, too, much of the reduction in subsidies promised in the Uruguay Round did not materialize. But developing countries were assured at Doha that some special concessions would be given to them. For instance, they would have improved access at lower prices to patented medicines to tackle diseases like AIDS, malaria and tuberculosis. Moreover, they would be given a better deal in agriculture which would enable them to increase agricultural exports to the developed countries.

The deadline for completion of the Doha round of talks is January 2005, about two years from now. So, it is time to take stock of the progress made so far.

Very little headway has really been made in moving towards free trade in agriculture by removing agricultural subsidies in developed countries, including the European Union, United States of America and Japan. In fact, the recent US farm bill, by providing additional subsidies to farmers, has given the wrong kind of signal. The EU has also ruled out any reform of its common agricultural policy, at least until 2006.

Under the CAP, massive subsidies are being given to, mostly large, European farmers. All these subsidies keep local agricultural production artificially remunerative in those countries, keep out imports from more efficient producers abroad, while at the same time pushing exports to other countries with the help of export subsidies. The US has, however, come up with a proposal to eventually abolish all agricultural export subsidies and limit production subsidies to 5 per cent of the value of domestic production. The EU and Japan have greeted the proposal with stony silence.

A word of caution here. One should not think that the removal of agricultural subsidies would benefit all developing countries. No doubt, this would generally lead to higher prices for agricultural products. But all developing countries are not exporters of farm products. In fact, 33 out of the 49 least developed countries are net importers of farm products and would be hurt. This point is often ignored.

Several contentious issues have bogged down moves that would provide relief to developing countries in the area of expensive patented drugs. The Doha talks agreed that countries having an epidemic can have access to cheaper generic drugs even if this violates the patent rights of multinational drug companies. But then, who is going to decide whether there is a national medical emergency' Should it be left to the country concerned which might use it as a pretext to bypass patent rights' Understandably, big drug companies which have patent rights would like to restrict the right to declare emergency.

The second problem arises because some countries (such as Gabon in Africa) do not have their own drug-manufacturing capability. Should such countries be allowed to import drugs from countries like India or Brazil, that are able to supply generic drugs at prices lower than that charged by, say, US drug companies' The Gabon government and Indian drug companies would be on the same side of the debating table while patent-holding companies and their governments would be on the other side.

The third issue: what kind of diseases to be covered under these exemptions' The US trade representative has so far agreed to grant these exceptions to only AIDS, malaria and tuberculosis. The developing countries want to include other diseases too which may create a national medical emergency.

Several other questions are dominating the on-going Doha round. Should the agricultural trade liberalization issue be linked to liberalization of industrial protection' Supporters of linkage argue that no additional market access should be allowed to developed countries unless they agree to reduce agricultural subsidies. Others think that this way the chances of making any rapid progress are rather slim. A better strategy would be to delink the two issues and try to make whatever progress is politically feasible in the respective spheres. According to this view, even the developing countries can benefit a lot by reducing industrial protection to match similar reduction in developed countries. That should proceed, irrespective of progress on agricultural subsidies.

The world is getting divided into a number of regional trading blocs. In addition to major blocs like the EU, the North American Free Trade Agreement and the Association of Southeast Asian Nations, the US is trying to form the free trade area of the Americas, an area encompassing almost the whole of North and South America. Opinions differ sharply on the feasibility and wisdom of such an initiative. More fundamental is the question: is the world moving away from the vision of attaining global free trade through multilateral negotiations, as opposed to the regional fragmentation of the world'

Two schools of thought are present here. One school sees, in the recent developments, a departure from the goal of global free trade and a movement towards protectionism against other regions. The other school thinks that it may be easier to have free trade within a trading bloc first. Then a small number of such blocs can negotiate free trade between the blocs. This way, a surer and quicker progress can be made toward global free trade than negotiations among all member countries of the WTO.

A related issue for India: should it try to be a member of a trading bloc' The answer is: yes. The problem is the South Asian Free Trade Area won’t do. We need to be a member of some big trading bloc. Our gains from forming a free trade area with the South Asian Association for Regional Cooperation countries would be minimal since India constitutes about 70 per cent of the total regional market. Moreover, given our relatively high tariffs, a free trade area may imply trade diversion from more efficient non-member countries to the less efficient bloc partners. This possibility would be less if India can become a member of some big bloc like ASEAN since they include countries which are efficient producers of many goods. Such membership may also attract more direct foreign investment.

Finally, trade negotiations often proceed on brinkmanship and alliances. For a change, India could take the leadership (along with Brazil) of the developing countries at Doha. China has recently been allowed to be a full member of the WTO. Developing countries can have bargaining strength if China joins hands with India and Brazil in trade negotiations. Such economic cooperation is possible even if countries have outstanding political differences. For example, Pakistan sided with India in supporting a quicker dismantling of global restrictions on the textiles trade in the earlier Uruguay Round of talks.

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