Bali is over, now look to the TPP summit in Singapore and beyond

Tuesday, 17 December 2013 - 8:48am IST | Place: Mumbai | Agency: DNA
Post the WTO agreement, alliances based on geostrategy could tilt the economic balance.
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The ancient island of Bali must have seen many enactments of the legendary fight between good and evil as the Ramayana war remained a national passion. Recently, it saw the end of a protracted war of words over trade. The WTO ministerial summit in Bali, reconvened many years after the failure of the Doha Round, reached a final agreement. This has been hailed as the first global trade pact since 1995 when the WTO itself was created.

The WTO negotiations for further liberalising global trade had gone moribund after the failure of the Doha Development Round. The advanced countries were now setting great store on the current round of negotiations. This is supposed to once again revitalise the WTO. 

A new agenda this time has been worked out. This replaced the 12-year old Doha Development Round which stalled years ago on grounds of disagreement among developed and developing countries as well as among developed countries themselves. After several false starts, the trade negotiators now thought of throwing out the Doha Development Round and taking up a new agenda for world trade talks.

The Bali ministerial summit’s fame had preceded itself. As the sherpas for the summit had worked out an agenda and a draft agreement, the details of the provisions about the farm agreement kicked up huge row. India was particularly rattled as the proposed agreement would have made any food security programme  we were launching ultra vires the WTO rules. The agreement attempted to enact at the global level a WTO rule that any food subsidy which exceeded 10 per cent of the domestic production would become inadmissible and the country in question could be hauled to WTO’s Disputes Settlement Body.

The agriculture agreement was one of the trinity of pillars of the new agenda which was worked out. The other two were on trade facilitation and on the least developed countries’ concerns. The trade facilitation agreement was viewed as critical for further enhancing global trade. A study by Washington based Peterson Institute had estimated that this should push up global trade by close to a billion dollars and create 21 million fresh jobs of which 18 million would be in the developing countries.  Big stakes indeed.

But then, the farm agreement also was a big political stake for many countries, including India.

This was that grey zone where economics and politics intermingled, leaving no demarcation. To overcome the opposition of these countries a clever bypass was proposed: that is, for four years the clause will not kick in. This was the so-called “Peace Clause” to buy peace with the critiques of the Bali agreement and salvage trade talks.

No wonder, India stuck to its opposition, even when similar other countries (including China) preferred to play along with the advanced bloc. The summit looked at the point of running aground. But then, a compromise was worked out that not will only the farm agreement provisions on subsidy not kick in before four years, but a permanent solution to the vexed issue will be worked out within that period. This was in response to India’s insistence that a permanent solution to the subsidy issue should be incorporated in the Bali declaration itself.

With the deal done , the new director general of WTO, Roberto Azevedo, had reportedly said jubilantly: “Bali is just the beginning”.

Whether this is a beginning one has to see. For one, it is not quite clear what happens if no permanent solution to the farm subsidy issue is found within the stipulated four years. Will those who transgress the subsidy rule be liable to be drawn to the Disputes Settlement Board or will the farm agreement lapse? And then, even bigger things are happening.

Look at what the United States is doing. Right at the end of the Bali summit, US trade officials, instead of returning home, chaperoned a select group of trade ministers straight to Singapore for talks on the Trans Pacific Partnership (TPP). On Sunday night last, they are supposed to have inched forward towards an eventual draft for an agreement on trade among countries around the Pacific Rim from Australia to Chile and up north to USA. If successfully concluded, this could be the mother of all regional pacts and the most ambitious.

Unlike the WTO talks, the TPP negotiations are being held in total secrecy. But for sporadic reports and leaks, one being from the Wikileaks, trade talks are trade talks and issues could not vary at different fora. From the reports it appears that the same sore points that bedevil the WTO talks are sticking out.

USA’s closest trade ally, Japan, had entered the TPP talks late. And whenever Japan is negotiating on a trade pact you can bet that it will present the most dug-in position over its farm sector. Japan is forever scared of someone else making an attempt to occupy the space of its own “sticky rice”— a sacred as well as staple dish for the Japanese.

In TPP talks Japan has demanded exclusion of five sector products, these being obviously rice, wheat, beef and pork, dairy items and sugar. The other issues include Internet freedom and intellectual property rights. If these issue are bulldozed and an economic community is created out of this diverse group of countries having only one similarity—that they all share the same ocean—then this could become the most powerful economic bloc.

This bloc will keep out two of the world largest economies — India and China. For sure, the trade agreement under the TPP is more a geostrategic alliance than purely aimed at concentrating economic power. How about then making a pitch for the Indian Ocean Rim countries as an economic bloc?  This will rope in some of the most resource rich countries of Africa as well. And if India led within the WTO to take out some concessions, it might just as well lead in forming blocs which serve its twin interests.

The author is a Delhi-based analyst and commentator

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