The Ministerial Conference is the highest decision-making body of the WTO. The founding charter of the WTO requires this body to meet at least once every two years. There must be gradual reduction and eventual elimination of such subsidies as Indian farmers cannot compete with the heavily subsidized products of the developed world.
The Cabinet Committee on WTO Affairs had, therefore, approved the Government’s decision to seek sharp cuts in agriculture subsidies from developed countries, at the forthcoming ministerial meeting of the WTO.
The issue of high subsidies and high tariffs on agriculture in developed countries was, therefore, brought to the center stage by developing countries. India, however was opposing a multilateral agreement on all these issues. Specially, two issues of investment and competition are the most sensitive for the country. Under investment policy, developed countries are pressing developing countries had to open up their markets and allow for greater investments.
The Cancun talks collapsed but the 5th Ministerial Conference successfully increased its membership to 148 nations by adding Nepal and Cambodia to its membership list.
The problem began with the circulation of a revised draft among the member countries. Developing countries expressed their reservation on steep reduction of tariff by them.
The draft text also committed all members of a “Sectorial Initiative” of bringing tariffs to zero through fast track time frames for seven sectors viz., (I) gems and jewelry; (ii) fish and fish products; (iii) leather garments; (iv) electronics and electrical goods; (v) automobile components; (vi) non-leather footwear; and (vii) textiles.
As these sectors are very important from the exports point of view to develop and least-developed countries, most of the member countries objected to this clause.
There were clearly five groups pushing their own set of demands, viz., (i) American Group; (ii) European Group (EU); (iii) Cairns Group of countries; (iv) G-22 – developing countries led by Brazil, China, India; and (v) African countries (poor countries).
The EU-US group wanted to push for high tariff cuts in products of interest to developing nations, they themselves wanted to continue with their high levels of subsidies. Developed countries are providing farm subsidies of $ 360 billion every year to their farmers. The EU-US group was also adamant in pushing Singapore issues.
India took a very strong view by saying that the average family farm size is 1.5 hectares in developing countries, while developed countries have corporate land-holdings of hundreds of hectares. How can farmers who earn one dollar a day, compare with those in developed countries receiving $ 1 billion a day as subsidy.
India, however, clarified that if tariff reduction commitment is inevitable, it is of the view that adequate protection should be ensured for all farm products, besides special safeguard mechanism for sensitive items. India also resisted attempts towards minimum access commitments, and in export subsidy, insisted on retaining the right to provide transport/marketing subsidies.
The World Bank also told that rich nations should alter farm subsidy device. In support of its advice, the World Bank, providing a simple scenario that showed how lower trade barriers in agriculture and smaller tariff peaks could promote growth and poverty reduction, said that rich nations to cut tariffs to 10% in agriculture and to 5% in manufacturing, with developing countries reciprocating with tariff cuts to 15% and 10% in agriculture and manufacturing respectively.
If the above said suggestions are implemented progressively over five years to 2010 and is accompanied by a realistic productivity response, developing countries would gain nearly $ 350 billion in additional income by 2015 and rich countries would benefit too, with gains of the order of $ 170 billion.
At the Cancun meets. The key issue for developing and least developed countries, obviously was Agriculture. It was clear from the beginning that though the commitment at Doha was to achieve substantial reductions in trade distorting domestic support. But the EU was not agreeing to substantial trade liberalization, especially in the matter of domestic support.
The failure of the talks means that the rich countries will continue to maintain huge subsidies and domestic support. There may not be any direct harm to developing countries including India, in the area of agriculture, because of the failure of Cancun talks, as the primary objective of these countries was to safeguard the interest of its farmers and not to give in to the pressures for considerable lowering of tariff.
Many countries today are preferring to form regional blocs with a view to facilitating foreign trade among themselves. Old regional blocs (NAFTA & MERCOSUR) are being widened and deepened and some new blocks are being created. The world may soon see a Free Trade Area of America, binding North and South America into a massive economic bloc. EU 15 may soon become EU 25.
The movement towards regional integration is being driven by geo-political factors. India, therefore, may also take a lead for forming a powerful regional bloc or it may become a member of one of the blocs (i.e. ASEAN, etc.) already in existence.
Under the above said circumstances, the question arises as to whether India can bypass the WTO process. The apt answer would be ‘No’, because India unfortunately is not a member of any significant regional economic bloc, where all kinds of concessions in foreign trade like preferential access and lower tariffs, etc. are being allowed.
Today, there are more than 250 preferential agreements among members of regional blocs in the world. India, as such, will have to continue to depend on multilateral trade agreements through the WTO.
Canun WTO meets creates a basic criterion for the establishment of a continuous process in trading in the world market which in the future creates a set of progression rules for business opportunities.
It is one of the principal decision making body where every decision perceived and taken have widespread positive and negative ramifications of the way world business is being treated.
Future of any trade organization depends upon variety of ways in which different policies provides various amounts of successes and the way all these implementation comes about in the future all these would show whether success of these initiatives would stay and provide welfare to all states irrespective of their finance power and poverty driven situations.