Imbalances Remain in the WTO Texts of 6 December 2008

COMMENTARYDECEMBER 27, 2008 EPW Economic & Political Weekly8Imbalances Remain in the WTO Texts of 6 December 2008Martin KhorIn early December, the World Trade Organisation’s Director General Pascal Lamy, in yet another attempt to push the Doha round ahead, came up with new proposals on agriculture and industrial products. These were not new ideas; they merely recycled earlier proposals made by the United States and the European Union. The imbalances in the texts explain why Lamy’s bid to have another ministerial meeting in mid-December failed.The World Trade Organisation (WTO) on 6 December issued two revised texts by the chairs of the agricul-ture and non-agricultural market access (NAMA) negotiations relating to the eight-year-long Doha round of trade negotia-tions. The texts are on “modalities”, or the formulae and numbers on how much tariffs and subsidies are to be reduced, and some changes in the WTO rules on agriculture and industrial goods.Many of the main components of the two texts are drawn from the previous drafts and especially from the one-page paper of the WTO’s Director General Pascal Lamy of 25 July, which he presented to the inner group of seven ministers during the last (and failed) mini-ministerial. They thus contain the in-built imbalances as be-tween developed and developing coun-tries, and as between agriculture and NAMA that were in those documents.The new papers cater to the sensitivities of developed countries, which are not obliged to undertake as much commitments as they are given flexibilities to avoid painful real cuts to applied tariffs or subsidies. On the other hand, many developing countries are required to undertake commitments – some of them proposed only months ago by de-veloped countries and now accepted in the drafts – that either cut their tariffs signifi-cantly or drastically reduce their policy space for future development strategies.Industrial TariffsIn theNAMA paper, the coefficients for im-port duty reductions are the same as the Lamy paper, and they require developing countries applying the Swiss formula to undertake far deeper tariff cuts than devel-oped countries, thus reversing the mandate of “less than full reciprocity for developing countries” that is to govern the Doha talks. The text fixes a coefficient of eight for developed countries, which would mean that the average bound tariff of the three major developed countries would be re-duced by about 28% (i e,EU by 33%,US by 29%, Japan by 22%). The text fixes coeffi-cients 20, 22 and 25 for developing coun-tries (with flexibilities for 14%, 10% and zero in the numbers of lines of products respectively); the countries are asked to choose one of the three options. A choice of the middle coefficient 22 would reduce the average tariff of developing countries like India, Brazil, Indonesia, and Venezuela by about 60%.The flexibilities for developing countries inNAMA are very meagre, with a very low percentage of tariff lines allowed exemp-tion (5%) or relaxation (10%) from the Swiss formula cuts. This is worsened by the extra constraint that the tariff lines selected cannot exceed a low percentage (5% for exempted products or 10% for products with more lenient cuts) of the to-tal value of a country’s NAMA imports. But these meagre flexibilities are sought to be further constrained and squeezed by two recent proposals by developed countries (now sanctioned by the NAMA draft):an anti-concentration clause (i e, in choos-ing flexibilities, countries cannot focus too much on particular sectors) and a compulsory participation (by selected de-veloping countries including India, China and Brazil) in what was mandated as a voluntary sectoral approach (in which tariffs in whole sectors have to be elimi-nated or brought to very low levels).According to trade officials in the know, bound tariffs of developing countries ap-plying the formula would average 11-12% and only a few tariff lines would be above 15%, after implementing what is in the chair’s paper. These are very low in-dustrial tariffs for developing countries, whose industries are still at an infant or nascent stage, and unlikely to be able to compete with imports without signifi-cant tariffs. The developed countries had much higher tariff levels when they were at the developing stage. Agriculture TextThe agriculture text takes on the numbers proposed in the Lamy paper with regard to cuts in overall trade distorting subsidies Martin Khor (mkhor@igc.org) is with the Third World Network.

COMMENTARYEconomic & Political Weekly EPW DECEMBER 27, 20089and in tariffs, as well as the number of sensitive and special products. The chair’s draft enables the developed countries to have many flexibilities to continue to shel-ter their agricultural subsidies (including the creation of a new Blue Box window, the fixing of overall trade distorting sup-port (OTDS) bound levels above the ap-plied or planned levels, and the retention of relaxed rules including no ceiling for Green Box subsidies), and to have sizeable numbers of sensitive products (without the trade value constraint, unlike in NAMA) to cushion tariff cuts.In the chair’s text, the allowable OTDS for the US is to be cut by 70%. The present $48.3 billion (bn) allowable level is cut to $14.5 bn. The $14.5 bn level is far above the estimated 2007 actualOTDS of $7-8 bn. The US actual or applied OTDS level in 1996-97 was also $7 bn before rising to $19 bn in 2005 (according to the US data notified to the WTO) before dropping to $11 bn in 2006 and $8 bn in 2007 (accord-ing toG-20 estimates). Thus the proposed $14.5 bn allowable level is double the 2007 level, or even the 1996-97 level, allowing theUS to have a lot of “water” to increase from the $7- 8 bn level.Although developed countries’ domes-tic subsidies are hardly curtailed, the de-veloping countries are asked to undertake significant agricultural tariff cuts. In the chair’s new text, tariffs above 130% are to be cut by 46.7%, tariffs in the 80-130% range by 42.7%, tariffs in the 30-80% range by 38% and tariffs below 30% by 33.3%. The overall maximum average cut is set at 36%, which is much higher than the Uruguay round average cut of 24%. Moreover in the Uruguay round, develop-ing countries had to cut only by an aver-age of 24% with a minimum cut of 10% in each line, unlike the present prescribed large cuts in each band.Special Products One method advocated by the majority of developing countries (championed by the Group of 33) to defend their food security and farmers’ livelihoods is to establish the concept of “special products” (SPs) which should not be subjected to agricultural tariff cuts (or at most have minimal cuts) especially since developed countries’ sub-sidies continue to distort the market. TheG-33’s amended position was for at least 20% of tariff lines to be self desig-nated asSPs (with half of that having zero cut) and for a three-tier system of cuts. TheG-33 then made concessions in mid-2008 with a two-tier system (one-tier of zero cut, second-tier with average 12% cut). The G-33 rejected a one-tier system because the tariffs with zero cut within that would mean that other tariffs have to “compensate” by being higher than other-wise (to meet the average cut).The Lamy draft had rejected the G-33 position by having only one tier. Only 12% of tariff lines can beSPs (which is on the low side of the chair’s former range of 10-18% in his July text). Within the 12% tariff lines, 5% can have zero cut, but the 12% as a whole will have an average cut overall of 11%. The new chair’s text has taken the fig-ures and structure of the Lamy draft. The single tier in this text makes it difficult for developing countries to have zero-cut SPs as well asSPs with a low cut. If the country chooses 5% of tariff lines to have zero cut, the other 7% of tariff lines have to be cut by an average of 19%, so as to meet the overall average cut of 11% for all the 12% SP tariff lines. This is far from the original G-33 position of at least 20% of tariff lines asSPs, with half of that having zero cut, a quarter having 5% cut and a quarter hav-ing 10% cut.Special Safeguard Mechanism Most developing countries, led by the G-33, have also been battling for the creation of a special safeguard mechanism (SSM) in agriculture that developing countries can use to raise duties above the bound rates if so needed in the event of a fall in the price (or the rise in the volume) of an import that could adversely affect food security, farmers’ livelihoods or rural develop-ment. However, agricultural exporters led by the UnitedStates(US) have been against an effectiveSSM and insisted on limiting when and how it can be made use of. A clash on this issue between the US and India (led by India’s Commerce Mini-ster Kamal Nath) was the immediate cause of the collapse of the lastWTO mini- ministerial in July.In the chair’s new text, the SSM provi-sions remain problematic – it has so many conditions attached to its use and with remedies that are so restrictive, that it would in practice be of little utility. It is supposed to be easier to use than the normal safeguard (i e, the existing safeguards agreement in theWTO) and the existing special agricultural safeguard (SaS), used mainly by developed coun-tries. But it is turning out to be more re-strictive in crucial areas – such as that the extra duties underSSM can be allowed to exceed the Uruguay round bound rates only under limited conditions and the quantum of the extra duties is very limit-ed, while there are no such conditions under the normal safeguard or the SaS.There are already some problems with regards to the SSM, its triggers (at which stage of the imported good’s price decline or volume increase theSSM can be put into effect) and remedies (the extra duty that can be imposed). However, the major issue that preoccupied the July mini ministerial was whether the extra SSM duty could in-crease the overall duty to above the pre-Doha (i e, the Uruguay round or the acces-sion bound rates, which are the rates cur-rently in place), and if so whether there should be special triggers for this and special limits on the extent to which the pre-Doha rates can be exceeded.The major problem with the new chair’s draft is that it severely restricts the ability of SSM to bring the applied tarifftoabove the current (the Uruguay round or the pre-Doha) bound levels, and to the extent necessary to fulfil its task, i e, to be a special safeguard so as to avoid losses to local farmers and displacement of their products. The original Lamy proposal (25 July) was that the “SSM for bound rate trigger is 140% of base imports”. This created a new condition and limitation – that a separate and more difficult trigger is set for prod-ucts where the SSM will lead to tariffs ex-ceeding the pre-Doha level. Before this (for example, in the chair’s previous texts and inG-33 proposals), the same triggers are used for cases where the extra duties cause the total duty to be below or above the pre-Doha levels. There were no sepa-rate triggers for SSM use that exceeds the pre-Doha bound levels. Having this high volume trigger of 40% increase in volume of imports would mean

MANOHAR

COMMENTARYEconomic & Political Weekly EPW DECEMBER 27, 200811the calculation of triggers and the applica-tion of measures “shall be on the basis of MFN trade only”. In an earlier draft, the chair had agreed that the SSM mechanism can also apply to FTA-related products if the country had, with consistency, also done its calculations with the inclusion of the FTA products. The G-33 has also insisted on the inclusion of FTA products. But the chair’s proposal met with opposi-tion from exporting countries, and he has reversed his previous position, to the det-riment of theSSM’s utility. At the least, the chair could have remained silent on this point. According to a trade expert, silence on this issue would allow the country the choice of making use of SSM for FTA imports, unless the relevant FTA explicitly prohibits the use of the SSM. All these and other conditions severely limit the usefulness of the SSM, and makes even this limited use very cumbersome, such that developing countries will be dis-couraged from using it.Starvation Deaths and ‘Primitive Tribal Groups’Reetika KheraThe deaths of 35 Birhors – a “Primitive Tribal Group” – in Jharkhand in October and November 2008 have been ignored by the national media. Official apathy contributes to the vulnerability of such very poor tribal communities. In comparison to Jharkhand, administrative steps taken in Rajasthan since 2002, when the Sahariyas (another tribal community) faced starvation deaths in that state, show how this vulnerability can be tackled.Their lives are like earthen pots which may break any moment – Bela Bhatia 2001.Since October 2008, the media have reported the deaths of 35 members of the Birhor community (a so-called “Primitive Tribal Group”(PTG)) from vari-ous districts of Jharkhand.1 These deaths havebeen attributed to starvation by some and food poisoning by others. As often happens, the noisiness of the ensu-ing debate has obscured the real issue – the vulnerable situation of persons belonging to these groups.Fragile ExistenceI visited Hindiyakalan hamlet (Narayan-pur gram panchayat, Praptapur block) of Chatra district on 18 October 2008. Nine Birhors (four women, three children and two men) lost their lives in this small hamlet in early October.2 The Birhors live deep in the forest: their hamlet is 10 kms from Narayanpur (the main village of which it is a part). There is a kachha road through the forest to Narayanpur, but not even that from the village to Hindiyakalan. There is no hand-pump in the hamlet, and no primary school. In fact, Tulsi Birhor said that when their children try to go to the school in Narayanpur, the teacher shoos them away, saying bartan ganda karenge (“they will pollute the utensils”) – a stark case of caste discrimination against Birhor children. As a result, these children do not have access to education, or to the hot cooked meal served at school every day. The Birhors’ livelihood in Hindiyakalan is very fragile: they collect minor forest pro-duce (such as honey or wood) and eke out a living by making soops (used in cleaning grain) out of bamboo. They can earn up to Rs 20 a day doing this. Much of their food requirement is also met from leaves (genthi, a sort of spinach) collected from the forest.Most of the nine deaths in this hamlet have followed a similar pattern: people ate something the night before which caused diarrhoea and vomiting. Soon after – within a few hours in most cases – they were dead. Mansabad Birhor’s wife, he said, died within 10 minutes at around 3 am. Being ill himself, he could do nothing for her. He is now left with two young sons, Budhan and Sudhan (less than a year old). He says he cannot go to work because he needs to be around for them. When asked what can be done to improve the situation, he says there should be some arrange-ment for his children during the day so that he can go and earn a living. But in a hamlet where there is no road or primary school or handpump, the prospect of an anganwadi that might serve this purpose is remote. Government ApathyWhether or not the recent deaths in Hindi-yakalan are due to starvation, the govern-ment’s negligence in this particular matter is clear. In just three hours spent in the hamlet, we noticed three glaring exam-ples of this neglect.First, in May 2003, following reports of starvation deaths in Baran district (Rajas-than), the Supreme Court of India in the “right to food case”3 had ordered that all PTG households (along with other vulner-able groups such as widows and single women) be covered fully by the Antyodaya Scheme.4 In Hindiyakalan, this Supreme Court order was being violated, more than five years after it was issued: we met I was taken to Chatra district by Balram. I would like to thank him, Gurjeet and Dinesh for sharing background material on the recent deaths in Jharkhand, and Jean Drèze for comments.Reetika Khera (reetika.khera@gmail.com) is affiliated to the G B Pant Social Science Institute, Allahabad.