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Seattle's Seven Myths

Who gains from a stronger World Trade Organisation? It's time to set the record straight.

Seattle's Seven Myths
outlookindia.com
-0001-11-30T00:00:00+0553

In the aftermath of Seattle, I think several people have misinterpreted what has happened. In what follows, I list seven propositions. In some quarters, popular perception holds these propositions to be true. I will argue that each of them is false.

Proposition 1
India opposed the Millennium Round and our stance has been vindicated.

It is true that until about five months ago, India had a pig-headed stance that there should be no Millennium Round and only the built-in agenda should be discussed. The built-in agenda consists of areas that would have been negotiated (or renegotiated) regardless of whether there was a Millennium Round or not. Examples are agriculture, intellectual property rights and services. However, in the last few months, India had changed to a more sensible stance that some areas over and above the built-in agenda needed renegotiation. Examples are anti-dumping, export subsidies, dispute resolution, textiles and garments and industrial tariffs. We were unhappy with what happened during the Uruguay Round. The only way to rectify the unhappiness was through renegotiation. Take high tariffs on garment imports in the US, or the fact that tariffs on garments are far higher than those on yarn or fabrics. How do you address this issue unless you push for renegotiation of industrial tariffs? The Uruguay Round textiles and garments liberalisation package is such that bilateral quotas on imports of garments will not be phased out before January 2005. But if you leave the Uruguay Round package intact and refuse to renegotiate, how do you solve this problem? We have problems because the sanitary and phytosanitary measures allow steps that act as non-tariff barriers and constrain our exports. This too requires renegotiation.

Proposition 2
The Millennium Round will not happen.

All that has happened is a postponement. The built-in agenda has to be discussed from January. And the Millennium Round, or whatever it is now called, may not begin from July. But it will probably begin towards the end of 2000. Work's already begun in Geneva towards that end.

Proposition 3
Protesters were successful and demonstrated that you cannot force free trade down the throats of countries, without ensuring that trade is fair.

World trade is not fair. The world is not fair. But screaming these facts from the rooftops does nothing. Whatever limited success protesters may have had on the streets had nothing to do with what happened. Had the US, EU and Japan not disagreed, the Millennium Round would have been launched in Seattle, regardless of fairness or what the protesters thought. By the way, do protesters mean the ones who were protesting against child labour, or the others?

Proposition 4
Once developing countries act in consonance, developed countries will learn that you cannot ram agreements down developing country throats.

Where did the developing-developed dichotomy exist, barring unified opposition among developing countries on core labour and environmental standards? Even here, the US almost succeeded in weaning away least developed countries by offering them aid. Had the US, EU and Japan agreed, even the issue of linking unilateral trade sanctions to labour standards might have happened. The point is that these three disagreed. Since '95, the US has brought its farm subsidies in conformity with wto norms. This has not happened in EU and Japan. Had the US not been so rigid on anti-dumping and biotechnology (genetically modified organisms), we would have had the Millennium Round agenda by now. If anything, there was a US versus non-American dichotomy.

Proposition 5
Seattle demonstrates that wto has no business to discuss agriculture.

Had the Millennium Round succeeded, our self-reliance in foodgrains would have been lost and we would have been forced to import food. It is the EU and Japan that should be arguing this, not us. In any case, agriculture is part of the built-in agenda and will be liberalised regardless. If our agricultural prices are lower than global prices, as they generally are, who in his right mind would import agricultural products into India? Even if there are no import licences and no import duties (the duties on agriculture we have temporarily proposed are between 150 and 300 per cent). Instead, we will be exporting the stuff. Together with the Cairns Group, we should be pushing for liberalisation of agriculture, not opposing it.

Proposition 6
Green Room negotiations are unacceptable and all countries must be a party to Green Room negotiations.

If you have 135 countries, you can't have all of them negotiating at the same time. So, over a period of time and not in Seattle, multilateral trade negotiations have evolved the Green Room system, where a limited number of countries negotiate at a time. These then become multilateral agreements. The Organisation of African States was unhappy at Green Room negotiations and complained of being presented with a fait accompli. Has it ever been otherwise? Let's go back to December '90, when the Uruguay Round negotiations temporarily collapsed over agriculture. Then there was a Blair House accord between the US and EU and we eventually had the Uruguay Round agreement. Who asked developing countries for their views? Were they involved in the Blair House process? So the Green Room system will continue when the Millennium Round takes place and when the Americans have become less obdurate and have learnt to unruffle feathers better. That is precisely what Arthur Dunkel accomplished in '91 and '92.

Whether Mike Moore is capable of doing that is a different issue. But once developed countries arrive at agreements - and as a developing country, you have to decide whether to stay inside or outside the system - there is little to choose. The costs of staying outside the system are too high. This is one reason India signed plurilateral agreements like the information technology agreements, without there being any compulsion to do so.

Proposition 7
We were happy with gatt and Seattle demonstrates that this was fine. We shouldn't have had the wto. Because of wto, we are being forced to eliminate quantitative restrictions (QRs) on imports.

In essence, what is the difference between gatt and wto? Services and intellectual property rights have been included and rules improved. Who benefits from better rules? An example is wto's more efficient dispute resolution mechanism, as compared to gatt's. Relatively weak developing countries benefit much more from stronger multilateral rules and disciplines, since their arms are twisted much more easily in any process of bilateral negotiations. It is thus in India's interests to have a stronger wto, not a weaker one. A stronger wto makes trade fairer. As for services, we opposed their inclusion in the Uruguay Round because we wished to project ourselves as the leader of the South, not necessarily because that was in our best economic interests. There are several service sectors (software, music, films, medical services, tourism) where India should potentially gain from liberalisation. So why should we oppose their inclusion? Ditto for intellectual property. Admittedly, there are some problems in some areas of intellectual property. But with our strengths in science and technology and the vaunted pool of scientific and technical manpower, we should happily venture out and get royalties from other countries. As for QRs on imports, these are prohibited under Article XI of gatt. This goes back to '47, not '95. There was some leeway that we no longer have because our balance of payments situation has improved.

In contrast to these seven fallacious propositions, I think the following statements are true. There was not enough preparation leading up to Seattle. It was not that the proposed Millennium Round agenda was overloaded (that's bound to happen). Instead, the five days that the ministers had was overloaded. Given the election year, the Americans bullied too much. Had President Clinton not had an eye on the elections, he might not have pushed so much on labour. In Seattle, the countries went, saw and differed. But in Geneva, they will go, see and concur. When the US, EU and Japan do so, we had better be prepared.

(The writer is an international trade expert.)

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