India Should Build Coalitions To Defend Consensus-Based Decision-Making at WTO: Interview

Chennai: The WTO’s 14th Ministerial Conference (MC14) held in Cameroon ended without agreement on key issues, including e-commerce moratorium and expiry of safeguards against non-violation complaints against intellectual property policies. MC14 was one of the most inconclusive ministerial conferences in recent years. Despite WTO remaining ineffective in mitigating trade uncertainties, India to build coalitions to defend consensus-based decision-making at WTO, which is under threat due to growing plurilateral pacts, finds Ajay Srivastava, founder of Global Trade Research Initiative.

Q) The WTO conference was held at a very crucial time for global trade. Can you tell me what were the major topics taken up during the conference?

Custom duties should not be levied on the electronic transmissions was of top interest to the United States of America. Second important was the Investment Facilitation and Development agreement. It was agreed by 120 countries, including China and it was waiting for its incorporation or adoption in the WTO. Other major topics were agriculture and fisheries subsidies, WTO reforms, TRIPS non-violatiMon complaints and three or four more topics were there. But what I listed there are the most important topics where most time was devoted.

Q) In agriculture India has been pressing for MSP-based procurement and public stock holding for food security and when it comes to fisheries, we were seeking protection for small scale fishermen. How did the discussions on these topics go and what were the outcomes?

Agriculture, our concerns are very unique and they go back to the incorrect formulas of agreement on agriculture. For example, the government announces the MSP of say rupees 20 per kg for rice and the market price is 18 rupees per kg for rice. So the subsidy should be ideally 20 minus 18, 2 rupees per kg, but no. The WTO AoA formula calculates subsidies based on the rise prices prevailing in 1986 to 1988. That inflates the subsidies seven to eight times. And because of that, we are found to be crossing the subsidy limit at the WTO. Right now, we have a temporary reprieve from the WTO that came out from the Bali Ministerial in 2013. We are seeking some permanent solution for that, but it's not coming. So this was India's concern, but nothing happened. No deeper discussions even took place.

What about fisheries in that case?

Currently, the WTO members are focusing on the second phase of the fisheries subsidy agreement. It's called subsidies leading to overfishing and overcapacity. Many of the big issues economies like the European Union or China, have industrial scale fishing vessels and they go out into different continents. So they don't want others to develop their fleet. The focus is on whoever has developed four or five nations. They should retain whatever security they are given, but others should not focus.

So India says no we are not in that space. Most of our fishermen are small fishermen, have artisanal fisheries and so we want 20 to 25 years transition time. But I think developed countries are sort of agreeing to give us time to 7 to 8 years but everything remains inconclusive and open so nothing is agreed on this also.

Q) India was the only country opposing the Investment Facilitation and Development Act. While IFD aims at improving ease of doing business, what was India's objection on this? And what was the outcome on the discussions?

India doesn't object to the contents of the IFD per se. India's opposition is to the fact that IFD is plurilateral. Plurilateral are the agreements which are agreed upon not between all, not among all the WTO members, but some of the members. So what happens is that if we allow IFD, then we have to allow many other plurilateral pacts. That means today that will be weakening the WTO structure. How?

Today discussions are initiated on a topic after the consensus from all its members. The moment we allow IFD to be incorporated, WTO will be a power game, where developed countries will be introducing the subjects of their own interest in the WTO and will be ignoring the subjects of interest of the developing countries.

So far it is not there, if we allow this it will be basically changing the basic structure of the WTO. WTO is for all members. WTO members, they cover 98 % of world trade, almost everything. So if some members feel something is in their interest, they can go to the WTO. Nothing stops them.

Q) I think this has been a new trend, a big change towards plurilateral agreements and is this actually changing the very foundation of WTO as a multilateral agency?

Let's understand how the negotiating agenda of the WTO or earlier GATT was made. Some subjects of the interest of these developed countries, some subjects of interest of developing countries, some subjects of interest of developed countries, they were all put on the agenda. And then negotiations were happening. Developing countries were agreeing to some of the demands of the developed countries and vice versa. We were also doing this because of consensus principles.

This was happening but because everybody had to accommodate others' interest the moment we give up we renounce these consensus principles and all these things will go. WTO becomes a playground only for developed countries.

Q) This moratorium on customs duties on electronic transactions. Now, that was brought in 1998 when the digital economy was in a nascent stage. Today, the digital economy has grown huge and it is like the US, China and EU account for almost 80 % of it. India was one of the countries seeking an end to the moratorium. How did the discussions on this topic go and what was the decision?

Since the beginning, all countries are agreeing that the moratorium should be extended for two years, which means no country will be charging any custom tariffs on electronic transmission for two years. And they kept on reviving it for 26, 27 years continuously from the date of beginning. This time, the USA is doing nothing. You make it permanent. That means for the future also, no country should charge the custom tariffs on electronic transmission.

Now seven of the US top tech firms say from Google to Meta to Microsoft to Amazon They corner the major chunk of electronic transmission across the world They are the pure gainers. In this time when the US is charging high tariffs above MFN tariffs on goods What's the need for waiving the tariffs on digital transmission? Today's digital economy is about 15 trillion dollars. It's going to become 50 trillion dollars as AI becomes dominant in the next one or one and a half decades. So most of the benefits will accrue not to hundreds of US firms but these seven, eight, nine, 10 of US firms. So why should we commit? Tomorrow the tariff from normal routes will be coming down and the government will need revenues and for that it has to resort to the digital. We are saying okay we agree for two years, four years but we cannot agree permanently.

Q) There have been some reports saying that developing economies are losing around $10 billion annually on this customs duties on digital transactions.

I think it's much more because I want to look at the future, not at the current. The way AI is pervading in all the areas of its spheres and economies generally are shifting toward digital. Then why do we block our future revenues?

Q) Even in e-commerce discussions, plurilateral agreements popped up where we saw 66 members entering into a separate e-commerce agreement, and they extended the moratorium for five years. So even in those crucial things we are seeing this kind of a divide in terms of coming into a consensus between the members.

If you recall how this US trade deal happened in the past 6-7 months European Union, Japan, South Korea they agreed to one sided deal totally in favor of US they surrendered so much in this digital also the only gainer is US not the Europe, not the South Korea, not Japan but everybody is supporting US because they are so scared of US they are not talking about their own gains or losses just because US is saying they have to say yes.

So we say, if you feel it's good for you, please go ahead, do it. Like right now you are done for investment facilitation, for this e-commerce also, you do an FTA, implement amongst yourself, but don't bring it into the WTO because everybody is not going to gain from it.

Q) In case of moratorium on e-commerce, what was the outcome of all the discussions that had happened?

Outcome was that the US initially said that they want permanent freedom from custom duties. Countries like India, reluctantly agreed from two years to four years stopping on charging of custom duties. But the US was pressing for 10 years. Then Brazil put the spanner. Brazil says permanent or 10 years is too much.

And So a lot of discussions yesterday. I think late night today, early morning, these discussions were continuing. And then we have some information that the Brazilian minister went back and then Brazil finally did not agree to these things. And it was not adopted.

Q) Even in another topic on non-violation complaints on intellectual property policies. Now that safeguard has also expired. For the viewers can briefly explain what the safeguard is and how it has been protecting our pharma and health sector. Has there been any decision being made on extending the safeguard?

WTO has an agreement called Trade-related intellectual property rights. Here, there is a provision for non-violation complaints. But non-violation complaints says even if you are not violating TRIPS provisions, there may be a case that it may be affecting our future profits.

So this again was introduced in 1995 at the time of formation of WTO and every country was extending that for two years. This time nothing has been extended.

So many companies, for example, in one case Novartis challenged, they introduced, without introducing a new molecule, they wanted to revive the existing patent. The case went to the Supreme Court, the Supreme Court did not agree with them. But now Novartis may again think of going to the WTO.

Q) Probably our generic pharma industry will face a big challenge, if the patents are being renewed for some reason or the other.

Yes, I agree with that. It's not only pharmaceuticals for agriculture also, for example, patented seeds are there. You can take action against that also.

Q) Overall, how to evaluate the goals achieved by the Ministerial Conference and how it is being taken forward?

Personally, I am happy because our expectations were very low from this ministerial conference. And because, so I'm happy, because we have not sacrificed our core principle by opposing IFD, number one. Number two, this e-commerce moratorium, we have not agreed because of Brazil's insistence on the permanent waiver of custom duties. So that's good. Other areas, discussion is there but no loss to India is there so discussions will keep on happening.

Q) Are these discussions going to be extended to Geneva?

DG WTO says they'll all be extended to Geneva starting from where it ended at the campground. And the date is not announced, but they'll be done soon.

Q) How optimistic are you about WTO members arriving at fair and just decisions on these topics? Because for the past one year we haven't been seeing the US imposing trade distorting tariffs on not just emerging nations but also the undeveloped economies. What should the WTO have done to restrict members from going ahead with such measures and what has it done so far?

I think there should be a debate where countries should renounce their country identities and everybody should sit quietly and discuss the objectives of WTO. WTO or its predecessor GATT have been very successful organizations. In 1950 global trade was $50 billion. Now it's $35 trillion - 600 times increase. Whereas global GDP in this time increased by 110 times only.

It has increased six times compared to the growth of GDP. A large part of it is attributed to the predictable trade rules set in motion by GATT or now the WTO. So WTO has contributed a lot but right now developed countries especially the US and supported by European Union they feel that WTO is not serving their interests anymore because they feel all the manufacturing has gone to China and developing countries have their trade have grown much they feel WTO in the current format is not going to help them and that's why they want to disturb the basic architecture of the WTO.

Q) Everybody is asking at this point of time what is the relevance of WTO at its current form where it can't do anything about the trade uncertainties that we are seeing around? What is the relevance of this particular multilateral agency?

So Sangeetha, WTO is highly relevant. 70 % of the world trade is happening at those tariffs which countries have committed to the WTO. Except for the US, everybody is doing trade following the WTO rules.

America had a role in making the WTO very effective. But now they are done with this. They feel that nobody should challenge them. WTO disputes settlement. Smaller island nations went to WTO against the US, and they obtained a verdict against the US. The US did not like this. So they have destroyed, almost destroyed, WTO's appellate body. So that means the WTO's decision-making tool is not active because the US and EU and others don't want consensus principles. They are introducing many new subjects which are not of interest to everybody else. Right now they are talking about destroying the basic structure of the WTO. Let's see what happens.

Q) What should India do in this kind of a situation where the WTO itself is becoming two separate blocks?

India has done well this time, even though India was a lone contender, lone defender for not allowing IFDs in corporations. India has done well. But India should not be seen as standing alone. When 166 members are there, India should invest in coalition building so that it can pursue to retain the core principles of the WTO.