Economy and Business

Sellout at Nairobi

The outcome of the ministerial meeting of WTO in Nairobi has been negative for us. This becomes clear when we assess the "Nairobi Ministerial" in the context of the larger issues of world economy, specifically trade, Intellectual Property Rights (IPR), investments and movement of natural persons.

Jan 8, 2016
By Bharat Jhunjhunwala
The outcome of the ministerial meeting of WTO in Nairobi has been negative for us. This becomes clear when we assess the "Nairobi Ministerial" in the context of the larger issues of world economy, specifically trade, Intellectual Property Rights (IPR), investments and movement of natural persons.
The first issue concerns free trade. It must be accepted that WTO has made a seminal contribution in fostering global trade in manufactured goods. The sticky problem has been that of trade in agriculture. The developed countries had agreed at the time of signing the WTO Treaty to phase out all agricultural subsidies in 10 years. However, instead of actually removing the subsidies they have in the main shifted them to those forms of subsidies that are allowed under WTO rules. 
For example, the United States gives money to the farmers not to cultivate their fields. Such payments are not restricted under the WTO. Agriculture is of considerable interest to the developing countries because a large number of farmers stand to benefit from increased exports to the developed world.  Actually, however, our farmers have not benefited from the WTO. Rather they have been hit badly by surging imports of items such as apples and milk products from the developed countries.
The Nairobi Ministerial has initiated certain feeble attempts to provide protection to the farmers of developing countries from these negative results of trade in agriculture. A Special Safeguard Mechanism has been instituted under which developing countries are allowed to impose higher tariffs in case of a surge of imports.  There is an agreement on free access to cotton products. Developing countries have been allowed to stock large quantities of grain to meet their requirement in terms of food security. These gains are genuine but they are in the nature of helping us protect ourselves from the negative impact of the WTO. It is almost as if we are losing 50 points due to the WTO Treaty but retrieving 10 points by the measures mentioned. There would be no need for these measures that were agreed at Nairobi if the WTO had had a positive impact.
The second issue is that of Intellectual Property Rights. These have been integrated with the trade mechanism under the WTO Treaty and are responsible for large-scale draining of our income to the developed countries through royalty payments. To an extent, the IPRs were diluted at the Doha Development Agenda agreed at the Doha Ministerial. It was decided that Governments could override the patents in case of public health requirement. Members of the WTO had unanimously agreed to take this further in subsequent negotiations. The Nairobi Ministerial has jettisoned this clause. It has now been recorded that many countries do not agree with the Doha Development Agenda. Thus, the unanimous decision in favour of loosening the patents regime has now been replaced by a division. This means there will be no progress on this issue in future.
The third issue was the so-called "Singapore Issues" of investment protection, government procurement and competition policy. These were new issues that are of great interest to the developed countries. They had managed to make the IPRs an integrated part of the WTO in 1995. This led to their extracting a substantial amount of money from the developing countries. At the Singapore Ministerial, they tried to have these included in the WTO but failed. These issues, which were ruled out of the WTO at previous ministerial meetings, were brought back and placed on the negotiating table in Nairobi. The victory attained by the developing countries previously has been washed out.
The fourth issue is that of movement of natural persons. The idea of free trade is that people will produce goods in their home countries. Their labour power will be exported to other countries, showcased by packaging. The gains for the global economy can be enhanced if the workers were themselves allowed to migrate to the targeted markets. The labour power of an Indian worker can be packed into a car and the car can be exported. Alternatively, the worker himself can be exported. The latter option is more efficient because the cost of transporting the car can be saved. The car will be manufactured in Europe by Indian workers instead of being manufactured in India and exported. Studies have shown that the gains from free trade can also be secured by free movement of natural persons. This issue has never been raised in the WTO meetings, not even in Nairobi.
The outcome of the Nairobi Ministerial has been negative. The so-called gains in the area of agricultural trade are actually in the nature of firefighting the negative impact of that trade. The loosening of the IPRs unanimously agreed to in Doha has been reversed. The issues of investments and government procurement that had previously been ruled out of the WTO have been brought back. The issue of movement of natural persons has not been raised. The Government should reflect on where it is leading the country to. A knowledgeable person told me that the personal equations of Prime Minister Narendra Modi are behind this sellout by India.
The Statesman, January 8, 2016

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