The two-day informal ministerial meeting of the World Trade Organization (WTO) in New Delhi on March 19 and 20 could not have been more timely. It came nearly three months after the collapse of the previous round of ministerial talks in Buenos Aires, Argentina on the issues of food subsidies and investment and hot on the heels of US President Donald Trump’s unilateral decision bypassing the WTO to slap duties on import of steel and aluminium from the European Union and China citing national security.
The Trump administration has also dragged India to the WTO for providing subsidies to exporters through half a dozen schemes.
Trump threatened to clamp reciprocal tariffs on countries like India and China if they did not match the US duties on similar goods. One of the things Trump was referring to was that while India cut its import duty from 75 to 50 per cent on Harley-Davidson motorcycles from the US, Indian motorcycle exports to the US enjoy zero duty facility.
By announcing import on steel and aluminium and threatening reciprocal tax, Trump has lived up to his billing as a disrupter of the international trade order.
The EU and China have already responded to Trump threats by holding out their own sets of counter-measures. All these developments have no only raised the spectre of trade war through scaling up of protectionist measures but also put a big question mark on the future of the WTO.
In fact, the multilateral trade talks have been in limbo for the last decade and a half since the launch of the exercise in Doha. While all this was happening, eleven countries in the Asia-Pacific region, including Japan, Australia, New Zealand, Canada, Malaysia, Chile, Mexico and Peru, signed a landmark agreement to cut tariffs among them under the banner of Trans-Pacific Partnership (TPP).
It was the same TPP which was rejected by Trump as one of his first actions after moving in the White House last year. In the midst of these contradictory signals, the questions that immediately come up: where is the world trade regime headed to? What is the future of the WTO?
These were the questions which came up in the informal meeting of trade ministers and senior officials from 50 countries in New Delhi. It was not expected to take any decision on any issue confronting the WTO but just explore how the multilateral negotiations can be resumed and taken forward.
The meeting reaffirmed the commitment to preserving a rule-based global trading system and heard calls for a calibrated approach to Trump’s unilateral protectionist moves. A vast majority of the speakers at the meeting also flagged the issue before the Deputy US Trade Representative Dennis Shea about the US resistance to key appointments to the WTO appellate mechanism that deals with trade disputes. The American opposition has severely hit the functioning of the appellate body and the need of the hour is a fast resolution of the deadlock
The US has repeatedly blocked a selection process to fill three vacancies at the highest adjudication entity for trade disputes at the WTO appellate forum. If not resolved, this could make the entity non-functional by as early as December 2019.
A clear consensus emerged in the New Delhi meeting that the Doha developmental round of the talks, which focuses on farm and industrial tariffs and services trade, should be continued. WTO Director General Roberto Azevedo said although there are concerns on unilateral decisions by some countries and their potential escalation, members are committed to actively engage to find solutions.
He agreed that the trade tensions are sparked by the US unilateral actions and agreed that “it has a very real potential to aggravate.” As a major developing country, India has chosen to be circumspect in reacting to Trump’s actions of tariff hike and threat of reciprocal duties. In any case, India’s exports of steel and aluminium to the US are at present very limited but the issue concerns India as a matter of principle of fair play in the game of international trade.
Indian Commerce Minister Suresh Prabhu said India has been a votary of multilateral trading system and pointed out that in the past when the key economies departed from multilateral obligations by taking recourse to exceptions for agriculture and textiles, it led to other members securing similar exceptions, leading to erosion of the WTO system and its credibility.
Reflecting the stand of developing and least developed countries, he also pushed for preserving the mandate of special and differential treatment to poor and developing nations in WTO negotiations. The special treatment allows longer time lines to poor and developing countries than their developed counterparts to implement a particular trade agenda, among other facilities.
The New Delhi meeting stressed the need for a permanent solution to the thorny issue of public procurement programme and all other issues relating to agriculture which is one of the reasons for the impasse in WTO talks.
The developing countries have been calling on the developed nations to cut their massive trade-distorting farm subsidies. This was one of the key issues of the Doha development round of WTO talks but it is now being sought to be undermined by the rich countries.
India did not want to be seen as a naysayer or a deal-blocker. So, displaying flexibility, Prabhu said India was willing to look at certain new issues (like e-commerce) only after it is convinced that these issues are trade-related and negotiating binding rules on them would be beneficial for poor and developing countries.
The coming months are going to be a time of great uncertainty for the WTO. As of now, the developing and least developed countries seem to opting for caution in reacting to Trump’s actions and watch how economic giants like the EU and China grapple with the problem. But wait and watch may not be an option for long. The deadlock in WTO talks is not going to help any country and a solution brooks no more delay.