Doha trade talks fail, but developing South wins

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Sushma Ramachandran | 08 Aug, 2008
Headlines can be misleading! The media stories on the recent trade negotiations at the World Trade Organisation (WTO) in Geneva had banners saying "Talks fail" or "Doha Round Collapses". These gave the impression that calamity had struck the prolonged negotiations among its 153 members. But the ground reality was quite different. The talks did fail, but it also had a great outcome, at least for India and all the other developing countries, given the state of play.

The collapse of the WTO talks has meant that developing countries have united against the rich nations and prevented them from concluding a trade deal that would have been one- sided. The tough stance taken by Indian interlocutors led by Commerce Minister Kamal Nath and their counterparts from China led to vociferous complaints by the US and the European Union over the intransigence of these two emerging economies that did not accept the terms laid down in the draft agreement on agriculture.

Many years ago when the Uruguay Round was being negotiated, developing countries got the short end of the stick mainly because most of them did not understand the technicalities of the deal. The world trade scenario has changed enormously since that time and developing countries are now realising that not only do they have a voice but they also have enough muscle, if they remained united, to ensure their concerns are brought on board.

In the latest round of ministerial negotiations, India was adamant that it would not agree to drop the provision for special safeguard mechanisms (SSM) that will allow developing countries to use tariffs to protect their farm commodities from cheaper imports. In addition, neither India nor China - nor other developing countries - was satisfied with the extent to which developed countries had reduced their trade distorting subsidies on agricultural products. The rich countries, on their part, felt that developing economies were not opening up their markets sufficiently and this would in turn impede global trade flows.

The unity of the third world in recent years has baffled the US and EU trade negotiators. Trade diplomats have conceded that it is a completely different ball game from the one played out during the previous Uruguay Round. Issues that could have easily been pushed on to to the table and squeezed into the final pact are now simply unacceptable to the developing economies.

Credit for this unity goes largely to the troika of India, Brazil and South Africa, which has been holding regular consultations for the last few years before any ministerial or mini-ministerial to ensure that the common concerns of the developing world are not ignored at the negotiating table.

India in particular has played a stellar role in forming groups with special interests that will act in concert to thwart the designs of developed countries. Former commerce minister Arun Jaitley was instrumental in creating the Group of 20 developing countries - which has since expanded - to resist the proposals on agriculture formulated by the developed world.

This was followed by the setting up of several other groups to focus on specific interest areas like the Group of 33. Minister Kamal Nath has also used his considerable organisational skills to ensure that these groups continued to operate in consultation during all negotiations.

The convergence of the developed world has come too late to prevent the rich nations from putting issues like intellectual property rights on to the trade agenda. The Trade Related Intellectual Property Rights (Trips) agreement that was concluded in the Uruguay Round forced developing countries like India to switch to process patents from the earlier product patent system.

Under the latter regime, it was possible for India's fledgling pharma companies to re-engineer existing drugs and produce them at much cheaper rates than in the first world. As a result, drug prices in India have been among the lowest in the world. This situation, however, may not last long, given the change in the patent regime.

But it is on agriculture that developing nations have simply drawn the line - thus far and no farther. Both India and China have pointedly stated that there can be no discussion on livelihood issues that affect hundreds of millions of farmers in these countries. Developed countries, on their part, feel this is merely a ploy to deny access to the large markets of these emerging economies.

But the failure of the mini-ministerial is not the end of the road for the Doha round of trade talks. It simply means that negotiations will be resumed after a while with the aim of finally reaching some sort of consensus. There is little hurry just now since the US presidential elections are being held at the end of the year.

The current administration has little flexibility right now to take any drastic decision. Once the new US administration is in place, the trade talks are likely to move forward once again. But developing countries have made their point. They will not be bulldozed into any kind of trade agreement. It will now have to be one that balances the interests of the rich and the poor globally. Otherwise, developing countries will continue to march to their own beat even if it means entering into difficult bilateral trade pacts.

The problem is that a multilateral trade agreement usually provides better terms and conditions than a bilateral one. Thus to some extent, rich countries are correct when they point out that the failure of the Doha round will adversely affect the smaller developing countries.

At the same time, an unequal multilateral agreement is worse as it means there is little recourse for these countries if the agreement does not take into account their essential livelihood concerns. The Trips agreement is a case in point. It has forced developing countries to raise prices of essential drugs, simply because the giant pharma companies based in the US and Europe need to protect their patents.

Thus, this time round developing countries have decided to be patient and wait for a favourable outcome to the Doha Round of trade negotiations. With large developing economies like India, China, Brazil and South Africa having taken the lead, it looks like their patience may be rewarded and the final pact may ultimately be a more equal one than any other in the past.