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International Trade and Finance

Notes the criteria of food security, livelihood security and rural development needs, which would be eligible
for flexible treatment.
Lastly, a Special Safeguard Mechanism has been provided in the framework against disruptive imports,
the details of which are to be worked out. The developed countries have also accepted the adoption
of less-than-full reciprocity principle for developing countries.
Commerce Minister Kamal Nath recounting the achievements at Geneva in the new WTO framework
listed the following :
1. Zero-to-zero tariff approach will not be binding on all sectors. It implies that India can choose
the sectors and products whose zero-duty imports will be allowed. This will enable India check
a flood of imports in areas where we are not competitive. This will help to safeguard the interests
of domestic industries.
2. On the agricultural front, the biggest achievement seems to be the two windows open for
developing countries like India to place the products of their choice in Special Products and
Sensitive Products windows. Special product windows can be used by developing countries to
block flooding of imports of a particular product. The Commerce Minister believes that these
two windows will help India to effectively block US and EU access to our agricultural markets.
3. On the question of promoting cost-effective quality services, the framework gives a bigger push
to Mode-4 Services. However, the Government concedes that restrictive policy regime vis-a-vis
services may hinder their growth.
On balance, it may be stated that WTO Framework Agreement has made a break-through in world
trade negotiations. There are significant gains made, but the moot question is : Will the developed
countries permit the developing countries to realise these gains in the near future ? The critics are not
very sure because as has been argued by former Commerce Minister Arun Jaitley, C.P. Chandrasekhar
and Jayati Ghosh of JNU, Devinder Sharma and Rupa Chanda of IIM Bangalore : for, the devil is in
the details. Members have only agreed to a framework. The actual modalities need to be worked out.
It is argued that India has pinned down developed countries to reduce and eliminate export subsidies.
But no date has been specified. The time table for this will be negotiated in Hong Kong. So, at the
present moment, this can give us a notional satisfaction.
The subsidies take three forms : (a) Amber Subsidies are intended to encourage more production; (b)
Blue Box provide incentives to limit production; and (c) Green Box subsidies are provided in the name
of environment and livestock. The total subsidies provided by the developed countries are $ 320 billion
per year or nearly $ 1 billion per day. The most unfortunate part of the negotiations is that the Blue Box
subsidies have been legitimized. The declaration states : “Members recognised the role of the Blue Box
for promoting agricultural reforms.” Similarly, the declaration accepts that the Green Box subsidies
will not in future be subject to any reduction in subsidies. This implies that we have shut the doors so
far as reduction in Blue Box and Green Box subsidies is concerned. Arun Jaitley in a sharp comment
argues : “We have painted ourselves in a corner by legitimizing the existence of Green Box and the Blue
Box. We have not only hurt ourselves in the Doha round but accepted a principle that will continue to
haunt us in future rounds.... We can rejoice that there would be a capping on the expanded Blue Box
and an overall reduction.” The developed countries can feel relieved that the Green Box is wholly
outside any reduction commitment and jugglery of box shifting would effectively prevent any reduction
in the quantum. The colour of subsidies may change but will the quantum be substantially reduced ?”
(Hindustan Times, August 11, 2004). Critics, therefore, are of the opinion that the developed countries
have emerged as the winners in this game of negotiations and have been able to extract a framework
which would strengthen the bargaining position of US and EU in the future round of negotiations.
However, the inclusion in the ‘Sensitive’ or ‘Special Product Category’ will need the approval of the
WTO. This requires evidence to prove that inclusion in Special Category is based on the criteria of
food security, livelihood security and rural development needs or is based against disruptive imports.
For instance, India produces about 250 crops whereas Europe does not grow more than 25 crops.
Devinder Sharma is right when he argues : “For Europe, getting a score of crops protected under
‘sensitive’ and ‘special products’ will be justified. But to expect WTO to accord ‘special product’
status to over 200 crops from India would be asking for impossible.” (Business Line, August 5, 2005)

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