India at WTO: Valuing sustainability over niche trade
• Protecting human lives must take precedence over negotiating new and complex commitments especially during pandemic at the WTO.
• India said that there are several poorer countries who do not have the platforms and resources to participate in digital meetings during the pandemic. Therefore, negotiating and taking key decisions relating to global trade policy will be unfair practice for these countries.
• It is definitely unfair to forcefully levy tariff cut, as many developing economies and LDCs will lose their manufacturing competitiveness due to relatively infant industries.
• India has instead advocated a collaborative approach to push trade during pandemic.
Recently, India took couple of bold steps at WTO’s discussion forum to protect the interest of developing nations and LDCs during and post the pandemic phase. India has taken an official stand at the World Trade Organisation in favour of procrastinating all negotiations, including the talks on curbing fisheries subsidies and slashing tariffs on certain set of products till the COVID-19 pandemic is controlled.
This stand by India is being supported by many developing countries and Least Developed Countries (LDCs). India said that there are several poorer countries who do not have the platforms and resources to participate in digital meetings during the pandemic. Therefore, negotiating and taking key decisions relating to global trade policy will be an unfair practice for these countries. Apart from this, there might be many economies that are facing livelihood challenges, who may wish to change their negotiating positions or stand, which would ideally get reflected only when the crisis seems to get over.
India has logically and cogently explained that the economic hardship and threat to food security and livelihood may lead several WTO members to re-examine their negotiating positions across different areas of the WTO’s work. Thus, active and aggressive negotiations seem fruitless.
Another stand which India took at the discussion forum of WTO against developed nations is the opposing of the push for permanent tariff cuts. Some developed countries like New Zealand, Australia, Switzerland, Canada and Singapore have proposed that permanent tariff cuts can be levied by WTO member countries unanimously to ease out trade flows in current crisis.
India clearly stated that permanent tariff cuts on products of floriculture, processed food and other essential products may hurt the domestic industries of developing nations and LDCs. Forcing or binding trade policies during pandemic phase limits the policy options to respond to the crisis and possibility to fight against similar pandemic in future. Otherwise also, tariffs and restricting exports are permitted trade polices by WTO. It is definitely unfair to forcefully levy the tariff cut, as many developing economies and LDCs will lose their competitiveness in manufacturing due to relatively infant industries. In fact, the protection of nascent manufacturing and industrial sectors may be more suitable by allowing such countries to escalate tariff rates, which is also legal during a calamity.
Confirmed COVID-19 cases by country, territory or area, May 15-21
Source: WHO COVID Situation Report-122
Since a majority of the economies are observing huge job losses, especially in the core manufacturing sector, impetus should be given to save the domestic outlook and not to proliferate the pace of global trade straightaway. Recently India’s finance ministry has announced initiatives to boost industrial activities, supply chain, infrastructure, champion sector performance and value addition. Similarly, other developing economies and LDCs are interested in making their domestic industry competitive, which needs a tariff protection. Henceforth, these countries are supporting India’s stand.
Suggestive WTO Compliant Approach
The general focus during any crisis would always be to look at the domestic market of various countries. The first step should be to build capability, fix the supply chain logistics etc. and then look at what can be exported to attract mega business, rather than simply slashing tariff rates.
Let’s present a simple case to understand this. Till recently, China remained a major global trade hub, with its exports at well over US$ 2 trillion, and COVID-19 related disruptions in the country are affecting supply chains across the globe. Provided that India develops its manufacturing and export capabilities respectively over the next year, it could well fetch a major chunk of this Chinese share. For other countries also, an aggressive export-led strategy may not be an easy option as it was pre-COVID period. But an inward turn, already evident before the crisis for some economies, will surely ensure some growth.
India has advocated the collaborative approach to push trade during pandemic. It is quite clear that majority of the countries are individually researching on the vaccine of novel coronavirus using intellectual capability and human capital. The Doha declaration of WTO clarifies the scope of TRIPS, stating for example that TRIPS (Trade-Related Aspects of Intellectual Property Rights) can and should be interpreted in light of the goal to promote access to medicines for all.
Using the same agreement which is WTO compliant, India at WTO forum has said that if WTO members are serious about trade-related measures aimed at combating COVID-19, then a useful starting point would be to enable the use of TRIPs flexibilities to ensure access to essential medicines, treatments and vaccines at affordable prices
Also, economies should be ready to do some modifications in the agreement if required to fight against COVID-19, making it the utmost important agenda of the WTO’s discussion. The next point, which needs be addressed at the discussion forum is the weak situation in LDCS wrt broadband infrastructure and digital literacy.
Medicare or complex negotiations?
According to Global Trade Alert data, several of the developing countries most affected by COVID-19 have started implementing import reforms in the past days. For instance, Pakistan introduced tax and import duty exemption for medical and testing equipment, while Brazil eliminated tariffs on medical and hospital products. Many of these reforms are on a temporary basis, protection is suspended rather than eliminated.
While this is a step in the right direction, exporters might be reluctant to enter markets if they perceive policy changes to be temporary. Locking-in tariff reductions and other policy changes in WTO commitments would be a more effective trade policy reform to address the COVID-19 health crisis for medical products.
To address the crisis, key medical supplies and other crucial COVID-19 products should flow freely from producers to where they are needed. Export restrictions and import protection are collectively inefficient. For developing countries, as they see the number of COVID-19 cases rise, trade protectionism will cost lives. Trade policy cooperation should first aim at preserving open markets in this difficult time. But, for other products (other than essential medicinal products), permanent tariff cut will be highly unfair for developed nations and LDCs as discussed above.