The Telegraph
Since 1st March, 1999
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Halfway through, but poles apart

Cancun, Sept. 13: Deal-making in Cancun hung in the balance on a day of hectic confabulations as trade negotiators scrambled to find the centre of gravity in each of the contentious issues that has pitted the rich North against the poor South.

“The 148 countries are going through successive steps to find the centre of gravity on each of the issues — whether it is agriculture, non-agriculture market access or the Singapore issues — and then define how those individual centres of gravity align to create one centre of gravity for balance across the whole agreement,” said deputy US trade representative Peter Allgeier.

“We have reached the midway point of the conference and the governments still remain very far apart,” said WTO spokesman Keith Rockwell. “Over the next two days, the members will have to show greater urgency to reach a compromise and the success or failure of this conference will depend on the ministers’ willingness to cooperate.”

Commerce minister Arun Jaitley, who has been locked in a flurry of meetings with the US and the EU, said he was looking to come away with a deal on agriculture that would please farmers back home, but there seemed to be no sign that the Big Two would relent to make that possible.

Indian officials reported signs of strain in the US-EU axis with the Americans ready to set aside the Singapore issues — a ragbag of issues that include investment, competition policy, trade facilitation and transparency on government procurement — if they could close a deal on agriculture.

However, the facilitator on Singapore issues, Canadian trade minister Pierre Pettigrew, said there was a hardening of positions at the two ends with about 30-40 countries in the middle with intermediate soft positions, and hinted that he would suggest to Luis Ernesto Derbez, the Mexican foreign affairs secretary and chairman of the Cancun ministerial conference, that they look for a solution by focusing on the soft centre.

Indian officials said Pettigrew — who has been a strong advocate for starting negotiations on the hugely contentious Singapore issues — was clearly bluffing about the size of the soft centre.

However, officials representing Indian industry — who are here to advise the government negotiators — were more upset over the aggressive posturing on industrial tariffs and market access even as the deal-makers continued to focus on agriculture.

“It is horrendous how the EU and the US are trying to back off from their previous commitments,” said Ficci president A.C. Muthiah.

Indian industry is worried by the US proposal to extend the zero-for-zero principle to 37 items from seven earlier. The zero-for-zero principle postulates that countries will totally eliminate, in the shortest possible time frame, all tariffs, all export subsidies and all trade-distorting domestic subsidies in the concerned items.

The initial list covered items like textiles, apparel, footwear and sporting goods. But the US is now pushing to extend the zero-for-zero principle to items like auto components and gems and jewellery where India has huge interests.

Sources said the National Association of Manufacturers, a powerful industry lobby in the US, had been pushing its government to widen the application of the zero-for-zero principle. NAM represents 14,000 members (including 10,000 small and mid-sized companies) and 350 member associations serving manufacturers and employees in every industrial sector and all 50 US states.

NAM has initiated a call for a meeting on October 3 in Geneva to discuss the possibility of framing a global policy on automotive components — an area where India has slowly built up some competitive advantage against very challenging odds. A global policy could seriously undermine that advantage as the extension of a zero-for-zero principle to auto components would signal the death-knell of the Indian industry.

The Automotive Component Manufacturers’ Association has said exports of auto components could touch $1 billion by 2005 — a projection that could go up in smoke if the principle is applied here. The auto components industry has seen exports grow at a remarkable rate of 35 per cent last year, higher than other high performing export industries like software which grew by 30 per cent.

Industry mavens were equally upset over the way that the EU was shifting its stand on the rollback of export subsidies. Back in February, it had said that it would roll back export subsidies on all items of interest for developing countries. Just before the Cancun meeting began, it said the rollback would be only on items for which specific requests were made. It is now saying that it would withdraw the benefit it provides to its local manufacturers in only those areas that are under negotiation. “This is a sinister move to cull the list of products,” said industry leaders — a point that Jaitley had also forcefully made yesterday at his meeting with the EU negotiators.

Two other areas on which no progress has been made are the movement of natural persons — the software programmer who moves to the US to work under H1B and L1B visas — and geographical indications, which is currently restricted to only wines and spirits.

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