WTO NEWS: SPEECHES DG PASCAL LAMY
New Delhi, 06 April 2006
“The WTO and the Doha Round: The Way Forward”
Indian Council for Research on International Economic Relations
Thank you Isher, My friend Kamal,
Ladies and gentlemen,
When a child is born in some of our traditional societies, the family only gives it a name seven days after its birth. On the seventh day, the parents throw a big party and the relatives collectively decide on the name of the child. Then the eldest man of the family holds the baby in his lap, turns his face to the South, and whispers the name into the ear of the baby three times. Thus a name has been given to the child.
Giving a name to a round of trade negotiations is also a complex business. As in our traditional societies, there is a collective decision, a celebration and quite a lot of movement and whispering amongst the WTO family. What trade negotiators have not yet learnt from the wise people of our villages — is to wait a while until they give a name. The current round of trade negotiations — the Doha Development Agenda, or DDA in our jargon, bears the name of the city of Doha, the capital of Qatar, where the round was launched in the WTO Ministerial in 2001. It also has the word “Development” in it — meaning that this round should be focused on, or aimed at, development.
The decision by WTO Members in 2001 to designate the Doha Round a development Round was a recognition that there remain, in today's multilateral trading system's rules and disciplines, imbalances that penalise developing countries — and this must be corrected. The intention, therefore, is to try to improve the multilateral disciplines and the commitments by all Members of the WTO in such a way that they establish a more level playing field and provide developing countries with better conditions to enable them to reap the benefits of opening trade.
What are these imbalances? Many of them affect North-South trade and are a remnant of the old colonial relations. High agriculture trade distorting subsidies granted by rich countries, agriculture export subsidies or high tariffs on exports of agricultural and industrial products of interest to developing countries. But they are also more and more South-South. Today around 70% of duties paid by developing country are to other developing countries. A lot of these issues are carryovers from the previous round of trade talks, the Uruguay Round which, although hugely beneficial for all WTO members, is in need of updating to respond to the new realities of the multilateral trading system.
Started in 2001, the end date for the Round is soon approaching — it is the end of this year as a matter of fact. This is not a date that our membership has picked out of the blue; it is not a date that has fallen out of a hat. Rather, it is a date that corresponds to the expiry of the Trade Promotion Authority of the United States. And conventional wisdom has it that it will not be extended. We therefore have little time to waste and a huge task in front of us.
It reminds me of the days prior to the opening of the Olympic Games:
construction works everywhere, signals to be put up, paint not finished,
computers still to be cabled and only days before sportsmen and women
jump on the arena. What is needed in these days is hard work,
determination and nerves to focus on the final goal: a strengthening of
the multilateral trading system to the benefit of all but in particular
Where are we in these negotiations?
With the progress made in July 2004 and late last year during the Hong Kong Ministerial, we are now at roughly 60% of the Round. Substantial progress has been made and there is already a sizeable package on the table but still many hard nuts to crack.
Let me first quickly summarize what is already on offer on the table. On
agriculture, 2013 as the end date for the elimination of export
subsidies. Agreement that the EU, US and Japan will undertake the
biggest reductions on agricultural subsidies that distort trade and that
these will be effective cuts, which is a serious improvement as compared
to the previous round. On cotton, which is of key importance to many
African countries, export subsidies on cotton to be eliminated by 2006
and cuts to domestic subsidies will be greater and faster than for the
rest of products. Special agriculture products and a safeguard to
protect those agricultural products of developing countries with
concerns about livelihood security, food security and rural development.
On industrial products, a Swiss formula to cut tariffs, with high
tariffs subject to bigger cuts, thus addressing tariffs peaks and tariff
escalation in particular on products of interest for developing
countries. A step forward towards a completely duty-free and quota-free
access for the world poorest country Members of the WTO. On Services,
the door has been opened to plurilateral negotiations. Countries have
started tabling collective requests in the services of sectors that are
of particular interest to them. Finally, an Aid for Trade package, to
help developing countries address their supply-side constraints. The
hope is that this will help those that now constitute around two thirds
of our membership to translate the market access gains they make from
the Doha Round, from theoretical into real commercial possibilities.
The moment of truth approaching in these negotiations
Since the beginning of this year, intensive activity has been taking place at various levels across the whole spectrum of the DDA in order to improve what is already on the table. The negotiating machine is humming and buzzing with activity. Work in Geneva has been complemented by a number of initiatives among some Members aimed at trying to take the negotiation forward. This seminar today is one of these activities and as such a valuable contribution to realising what is at stake for India but also for the multilateral trading system.
The focus of negotiations today is reaching an agreement by April on three key issues: the quantum of reduction of agricultural domestic subsidies, the quantum of reduction of tariffs on agricultural products as well as on industrial products. The WTO 150 members agreed in Hong Kong to reach convergence on the key numbers on these three areas by April.
This triangle of issues corresponds to a triangle of members: the European Union needs to do more on agricultural tariffs; the United States need to do more on reducing agricultural subsidies and the G-20 group of countries, where India is a key member, needs to do more on industrial tariffs. What is already on offer is important compared to what was done in the Uruguay Round but more is needed to reach a deal on thee core issues. Given the high expectations of developing countries in this round, there is no way that WTO members will settle for a “cheap round”. Finding the right level of ambition on the triangle of issues, which will serve as benchmark for the remainder of the issues on the agenda is our challenge number one.
There are only 24 days to go to the end of April. The moment of truth is therefore fast approaching. We do not have time to waste. It would be a huge collective mistake to postpone the establishment of modalities by the end of April. Back loading the three key areas of agriculture domestic support and market access in agriculture and industrial products is, in my view, a recipe for failure. We need to make rapid progress in these three areas as soon as possible as they hold the key to unlock the many other issues which also need to fall into place to conclude this Round by the end of the year.
Setting these three issues is by no means the end of the round. We will
need to continue advancing the agenda on opening up trade in services,
rules (including transparency in bilateral trade agreements,
anti-dumping and subsidies), trade facilitation, trade & environment,
TRIPS, Dispute Settlement or Aid for Trade to name a few. As you can see
the menu seems almost as challenging as a cricket One Day Match. I hope
over the coming days WTO negotiators follow the spirit of the India’s
cricket team as it plays against England today and go for a win rather
than for a draw.
India's broad agenda in the Doha Round
Now let me turn to India. India has a tradition of contributing to success stories. One of them — a universal success story, whose importance is often underestimated — is the consolidation of the decimal system. Pierre Simon Laplace, the XVII century French mathematician — who comes from Normandy, my hometown region, once noted that “the ingenious method of expressing every possible number using a set of ten symbols emerged in India. The idea seems so simple, that its significance and profound importance is no longer appreciated”. Well, with or without appreciation, the fact is that India has given the world a system of thought. I am sure India can and I hope will today contribute to another success story that of the Doha Round. This would fit with India’s broad interest, which span the entire Doha agenda of negotiations.
India's economy has grown at a healthy pace for the last years and is now the 11th world largest economy. In 2004, India was the world's 20th largest exporter and 11th largest importer. India's merchandise exports have grown at an average of 10% for the last 10 years. The growth reached 32% in 2004 and 19% in 2005, well above world average. On services trade, India is now among the top 10 world traders, with exceptionally high performance on computer related services. Data for the first 2 quarters of 2005-2006 fiscal year shows a 76% increase in Indian exports of commercial services.
Being a founding member of the old GATT, India has long been an important member of our organization. India has always played an active role in almost all negotiating areas. India is a key Member in the G20 and G33, coalitions formed by developing countries, which have played an important role in particular in the agricultural agenda of the negotiations. But India has also been active in the service negotiations, in particular on Mode 4, pushing for less restrictions on movement of natural persons, especially medium and highly skilled professionals and on cross border supply, actively seeking full market access and national treatment.
On Trade Facilitation, as a member of developing countries Core Group, India not only supported most proposals, but also helped bring the Group's most sceptical partners towards a middle ground. During the negotiation of the Protocol amending the TRIPS Agreement on Public Health last December, India’s contribution was key to reach a final agreement. India leads a group of developing countries seeking a better relation between the WTO agreement on intellectual property rights (TRIPs) and the Convention on Bio-Diversity (CBD). It is also active in the extension of geographical indication protection (GIs) to many of India's homegrown Darjeeling Tea, Basmati rice or Alphanso mangos. In other areas of the negotiations, such as Rules or Special and Differential Treatment for developing countries, India has been active as well.
By saying so, I would like to make two points: firstly, that India is a key Member in the WTO; secondly, that India has benefited from a more open global trading environment and the healthy development of this system is very important for India's economic take off and its efforts to become a global power. The WTO Dispute Settlement system has also allowed India to successfully challenge major WTO players such as the EU, on the case concerning bed linen or the Generalised System of Preferences, or the US on several cases including one on shirts and blouses or on the Byrd amendment. It is thus clear that India has a strong systemic interest in safeguarding and strengthening the multilateral trading system.
India’s offensive interests in the Doha Round cut across the entire negotiating agenda and are a sign of India’s insertion in a globalised world.
Take agriculture. A little know fact is that India is a net food exporter. In fact its share of exports in world exports is greater for agriculture than it is for manufactured products. India’s agricultural exports have continuously grown since 1999. It is therefore clear that India is on the offensive on agriculture. It is in India’s interest that the EU, the US, Japan and other major agriculture subsidisers significantly reduce their farm subsidies; it is also clear that the elimination of export subsidies by 2013, with an important part frontloaded by 2010, will eliminate a source of distortion to Indian food exports. The same can be said of the elimination of export subsidies on cotton by 2006. It is also in India’s interests that other countries decrease tariffs to its farm exports on products such as basmati rice, meat or cotton. But modern India also has the capacity to tap into new market with agricultural products such as fruits and vegetables, organic food or flowers. These labour-intensive exports are expected to grow at almost three digits as a result of the Round, translating into benefits across a large group of farmers and contributing to stabilising their incomes.
Next to this thriving agriculture sector, there is also a large part of the Indian rural population in subsistence farming. The Indian government has fought hard, and my good friend Kamal knows that only too well, and obtained measures to protect fragile rural populations from the instability caused by sudden changes in their environment. Developing countries will for a start cut tariffs only in proportion to the cuts by developed countries. Secondly, India together with the G-33 have secured protection for agriculture products there where it is needed with the recognition of a category of special products as well as a special safeguard mechanism.
I am confident that in the coming weeks India will cleverly balance these two interests by insisting on an ambitious tariff reduction formula while at the same time forcefully making the case for the protection needed in certain sectors of its farming.
Turning now to manufactures, using a Swiss formula with a coefficient in the range of what members have tabled for developed countries would translate in a reduction of the EU's average bound rates to 2.3% and that of the US to 2.1%; If we consider that these two Members alone absorb over 40% of India export products, and that manufactures account for over 70% of India's total exports, any meaningful tariff reduction in these markets is commercially very valuable. Furthermore, it is in India’s interest to see a drastic reduction of the tariff peaks applied by these two countries on a number of key Indian export items such as textiles, clothing or leather products. It happens to be in these sectors where the EU and US have their tariff peaks. Again, with such coefficient, EU and US tariffs on textile would be reduced to around 6%. This will greatly expand India's export potentials. It is clear, therefore, that India has a lot to gain on the negotiation on industrial products. At the same time, India is also been asked by a large number of members, whether developed or developing, to reduce its own tariffs on manufactures. This is not news to India since the government has embarked for some time now in a gradual opening of its market by reducing imports tariffs in a harnessed manner. This means India has margins of manoeuvre to be ambitious in the negotiation on manufactures, which are only likely to continue to grow in the coming years. Given the experience and shrewdness of Indian negotiators, I would fully expect them to try to trade these self-serving reductions against concessions in this or other areas in the WTO.
Another area in which India has been very active is in trade facilitation, our jargon to define a set of measure to simplify customs procedure and cut red tape. A recent World Bank study has showed that in Peru, custom staff training and introduction of a code of conduct shortened customs release time from 15-30 days to 2-48 hours. In Costa Rica, electronic declaration and the switch towards a single window warehouse clearing reduced customs clearing time from average of 6 days to 12 minutes. There are of course many other examples in this regard.
On services, India’s interests extend from Mode 4, i.e. temporary movement of professionals, to cross border supply of services or computer and related services. It is a clear reflection of the modern India and an area with enormous potential for many developing countries. In my discussions with the business community over yesterday and today they have indicated their interest in an ambitious agenda in this area, in areas such as engineering, architectural services, or health related services, which I believe is a clear reflection of ‘modern India’. I have also heard concerns from members of civil society to commitments on sensitive sectors, which would impinge on the ability of the government to regulate. I can only recall that negotiations on trade in services in the WTO are based on request and offers, where each member decides on the sector it opens to foreign competition and under which conditions provided these are not disguised discriminations. Again, an area where I believe India has all to gain from an ambitious approach to these negotiations.
Finally, let me mention another area where India is also playing a very
important role: rules, and in particular anti-dumping. Both as user
number one but also major target of anti-dumping proceedings India is
pursuing moderate and realistic positions reflections its dual interest.
India has a lot at stake in this negotiation given its interests across the entire negotiating agenda and given the dynamism of its economy. As I often say, India is one of the elephants of the world trading system of the XXI century together with countries such as Brazil, China or South Africa. But with this also come the responsibilities.
We are at a stage of the negotiations where the three key actors need to move: the EU needs to move, the US needs to move and the G-20, including India, needs to move. The key to progressing towards the success of the Round lies today in their hands.
Who would be the main losers from a failure of the Round? First would be the developing world, the opportunity to redress the existing imbalances in multilateral trade relations will diminish. Were this Round to fail, developing countries would pay the highest price. Next would be the smallest and weakest economies, for which the multilateral process acts as an “insurance policy” against the pressure exerted by the strong in bilateral trade accords. The biggest loser, however, would undoubtedly be the WTO, the system that has served the collective interests of 150 different members, and that has ensured a trade opening that is adapted to changing realities and that is based on a consensus between us all.
India has been a key player in the multilateral trading system for more than 50 years. It is in India's interests to fight for an open, stable and predictable global trading environment. India would be the first to suffer if protectionism prevails. Given what is at stake, I trust India will make its contribution to a win-win outcome.