The World Trade Organization (WTO) Ministerial Conference at Abu Dhabi (MC13) was never expected to be a great success. It was known in advance that the United States (US) would not agree to restore the Appellate Body, a key demand of the rest of the WTO members. But the scale of failure is troubling. An agreement on fishery subsidies contributing to overcapacity and overfishing (OCOF) was widely anticipated, but it didn’t materialise. In agriculture, the prospect of a permanent solution for public stockholding for food security purposes (PSH) was uncertain, but there was little doubt that members would agree to continue work until MC14. The fact that no text emerged at all on this was a setback. On three top subjects, MC13 drew a blank. An agreement on the extension of the moratorium on the levy of customs duty on electronic transmissions is poor consolation.
The US is undoubtedly the sole member behind the impasse on the Appellate Body matter. Several members had criticised the stand taken by developed country members on PSH and subsidies leading to OCOF, but it was left to India to pull the trigger.
What exactly is the problem with PSH that has led to this stand-off? One of the aims of the WTO Agreement on Agriculture (AoA) is to commit members to undertake the reduction of domestic support of agriculture. For this, they had to first compute the aggregate value of their support (AMS). Market price support is one of the product-specific measures that go into the computation of the AMS. The rules require market price support to be calculated on the basis of the difference between a fixed external reference price and the applied administered price. The fixed external reference price was determined originally with reference to the period 1986-88. Further, an important point in the rules was that the external reference price was fixed in nominal terms. The objective of the negotiators was to allow the external reference price to be eroded by inflation.
The rules above were laid down in the AoA with the relatively short period up to 2000 in mind and negotiations were to continue thereafter for the continuation of the reform process. It is ridiculous to expect the rules framed four decades ago, with a reference price fixed on the basis of 1986-88, and that too in nominal terms, to govern the policy on agriculture of WTO members. In search of a permanent solution, a number of WTO members, including the African Group, the ACP countries and the G33, made a proposal in May 2022 suggesting the use of the moving average international price in place of a fixed external reference price provided for in the rules. However, the developed countries and the Cairns Group did not heed the proposal; they took the stand that the PSH problem and other issues in agriculture can be looked at only as a single undertaking. It is not surprising that India disagreed with the whole text on agriculture.
Coming to subsidies leading to OCOF, the Indian minister seems to have been equally incensed by the fact that the proposed Fisheries Agreement envisaged that the top fishing nations would only be obliged to demonstrate that they have implemented measures for maintaining the fishery stocks at a biologically sustainable level. No obligation has been imposed for refraining from granting prohibited subsidies. The minister was particularly concerned about the possible unrestrained use of non-specific fuel subsidies.
There was no positive outcome with respect to proposals in two other areas. The suggestions for allowing open plurilateral agreements or reinforcing the deliberative functions of the WTO were both shot down. Lack of success in these areas reflects a lack of trust among members at different levels of development. Open plurilateral agreements (OPAs) have been used during the GATT 1947 days, as well as in the early days of the WTO. About four decades ago, they were extensively used in the rule-making areas during the Tokyo Round. Most of the non-tariff measures (NTM) agreements in the GATT 1947 days began as OPAs evolved into full-fledged multilateral agreements in the course of time and were then assimilated into the WTO Agreement. It would be fair to say that OPAs eventually helped to strengthen multilateralism. The joint-sector initiative (JSI) on Services Domestic Regulation has also advanced in a similar fashion, and may now be bringing benefits to India.
The European Union's (EU) suggestion for reinforcing the deliberative function of the WTO did not have any takers among developing countries. The WTO’s past history on the so-called Singapore issues may have contributed to the failure of the European Union initiative. At the same time, it must be said that the way international economic relations have evolved, it may be necessary in the near future to consider favourably some of the suggestions that are being made, particularly those on trade and industrial policy, and trade and environment. We need now to reckon with the rising tide of industrial subsidies in developed countries and take into account the widening sphere of national action in response to the climate crisis, including carbon border adjustment.
On the Appellate Body, PSH and OCOF, India needs to keep the fight on. But on OPAs, and on commencing a dialogue in the WTO on trade and industrial policy and trade and environment, it is time for India to take a hard look at its existing stance and consider the need for change.
Anwarul Hoda is honorary professor, ICRIER. The views expressed are personal
To save the WTO system, India must pick its fights
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12.03.2024
The World Trade Organization (WTO) Ministerial Conference at Abu Dhabi (MC13) was never expected to be a great success. It was known in advance that the United States (US) would not agree to restore the Appellate Body, a key demand of the rest of the WTO members. But the scale of failure is troubling. An agreement on fishery subsidies contributing to overcapacity and overfishing (OCOF) was widely anticipated, but it didn’t materialise. In agriculture, the prospect of a permanent solution for public stockholding for food security purposes (PSH) was uncertain, but there was little doubt that members would agree to continue work until MC14. The fact that no text emerged at all on this was a setback. On three top subjects, MC13 drew a blank. An agreement on the extension of the moratorium on the levy of customs duty on electronic transmissions is poor consolation.
The US is undoubtedly the sole member behind the impasse on the Appellate Body matter. Several members had criticised the stand taken by developed country members on PSH and subsidies leading to OCOF, but it was left to India to pull the trigger.
What exactly is the problem with PSH that has led to this stand-off? One of the aims of the WTO Agreement on Agriculture (AoA) is to commit members to undertake the reduction of domestic support of agriculture. For this, they had to first compute the aggregate........
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