India holds the key to a post-Bali world trade agenda

India holds the key to a post-Bali world trade agenda

India, a key player in earlier multilateral trade negotiations, including during the latest talks in Bali, will play an even more vital role in future WTO developments. However, Delhi is not likely to change its protectionist stance.

For a country that was once one of the most closed economies in the world, India boasts a strong record of having its voice heard in the liberalization-friendly World Trade Organization (WTO). That streak has shown no signs of abating in recent months.

India was right in the thick of things during the December 2013 WTO Ministerial Conference, which was held in Bali, Indonesia and aimed to revive the long-moribund Doha Round of negotiations on international trade liberalization. This was more by design than by accident. After five long days (and nights) of intense talks, a long-awaited multilateral compromise was made in the form of the “Bali Package,” which was largely comprised of trade facilitation matters. India proved to be a tenacious force in the negotiations.

With Indian general elections coming up in April and May 2014, and with the Congress Party-led coalition government desperate to counter a tide of rising private sector support for the opposition BJP, the Asian giant struck a stringent tone during the course of the negotiations. India effectively held the summit hostage and threatened to scuttle it altogether if  delegates did not agree to India’s fairly fresh proposal of reinstating the agricultural “Peace Clause,” which would eliminate the limit on domestic food subsidies for an indefinite period.

In fact, Commerce and Industry Minister Anand Sharma refused to budge “even an inch” on the issue. Much to his pleasure, Delhi emerged victorious.

Due to the “single undertaking” approach of WTO trade rounds, in which all 159 parties must agree on a point for it to become law, forceful countries like India can hold out and stifle reaching an agreement until its demands (usually protectionist) are met. This is what occurred in Bali. India was able to ensure the survival of its domestic agricultural subsidy and food stockpiling program by not budging, at a time of high poverty rates and rising global commodity prices.

In theory, all WTO member states can do this, ensuring that WTO agreements reflect nothing more than the least common denominator of its constituents’ widely varying trade liberalization preferences. The process often features sizable doses of bickering and infamous “Green Room” power wrangling. But India is more well-versed than other nations in stalling WTO talks.

During the WTO’s Doha Ministerial Conference in 2001 Indian remonstrations were the primary force behind the Doha Declaration, which provided effective waivers to the organization’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) enacted six years before. With the help of a massive NGO-led campaign, India was able to give member states the green light to bypass certain pharmaceutical patents when faced with public health crises, a result that boosted the country’s growing generic drug manufacturing industry.

Delhi once more flexed its obstructionist muscles throughout the 2003 Ministerial in Cancun, Mexico, where it took on a leading role in the influential G-20 coalition of developing nations. It was notably able to bring together the “offensive” interests of the group’s agricultural exporter nations with the “defensive” interests of those states (like India), which wanted to maintain some restrictions on agricultural market access. Besides renewing the focus on agriculture, the other result was familiar – three major issues (investment, competition policy and transparency in government procurement) were permanently dropped from Doha’s platform.

The world’s third largest economy (by PPP) has a clear history of punching above its weight in the multilateral trade arena. It is by far the largest user of anti-dumping measures – about 20% of the world’s total – even though it only accounts for 2% of global imports. And if recent trade controversies are any sign, India will continue to take a firm, dogged stance as one of the WTO’s premier spoilers.

In spite of some concerns that the Congress Party may have overplayed its hand last December, one conclusion is clear: the post-Bali WTO agenda runs through Delhi.

There has been no better time to capitalize on negotiating momentum since the Doha Round’s inauguration over twelve years ago. There is still potential for unlocking the gains of trade from a number of key, protectionist-prone sectors, such as agriculture, non-agricultural market access (NAMA), services and environmental provisions. Such domains are sure to be full of rent-seeking interests intent on halting or even reversing the trend towards more open economic borders, particularly in graft-rampant India.

Will a new government in Delhi do the trick? Probably not. Politicians have flirted with Swadeshi economics for more than a few decades. Ultimately, is not a static economic ideology, but Indians themselves, who must decide on whether to embrace economic globalization, as the Asian Tigers largely did, instead of attempting to avoid it.

WTO-linked mechanisms and liberalization have indeed come to the aid of both India’s poor masses and its private sector through several significant avenues and are integral to the Asian powerhouse’s future economic success. Unfortunately, until Delhi recognizes that, it is other WTO members who will continue to see their own economic progress checked.

Categories: Economics, International

About Author

Kevin Amirehsani

Kevin is a Denver-based policy and public engagement consultant. He was previously the head of operations for a solar energy startup in Lagos, researcher for the US Commercial Service in Cape Town and the Institute for Democratic Governance in Accra, and Peace Corps volunteer in Cameroon. He holds an MSc. in International Political Economy from LSE along with a B.S. and B.A. in Industrial Engineering and Political Science from UC Berkeley.