How Sitharaman Served Up India Instead of Using WTO High Table to Block US Agenda

For those from a generation unfamiliar with the political cult classic, The Ugly American, the conduct of the United States Trade Representative, Michael Froman at the World Trade Organisation Nairobi Ministerial, would have served as a good introduction.

Doha? Fuggedaboutit: Michael Froman, USTR. Credit: WTO

Even before he had boarded the plane to Nairobi, Froman had most negotiators from the developing countries, gathered for the talks in the Kenyatta Convention Centre, seething with anger with his op-ed in the Financial Times, ‘Time to be honest, we are at the end of the line on Doha’.

Arguing that “…Doha was designed in a different era, for a different era, and much has changed since”, Froman called for a different architecture at the WTO and an end to the Doha round, with clear indications that the US would block any re-affirmation of the Doha Round in the ministerial declaration. Doha negotiations, in Froman’s words, “remain deadlocked. After 14 years, including the past two years of intensified engagement, there is no light at the end of the tunnel”.

What Froman omitted from his op-ed, and his subsequent statement along similar lines to the ministerial plenary, is that the US and the EU have been the principal reason for this deadlock for the past 14 years, as they have not conceded to a wide range of proposals put forth by developing countries. On the contrary, the US has aggressively blocked various proposals, even in the last two years of intensified engagement, when it gave short shrift to the proposal of the G-33 on the public stockholding issue or on the Special Safeguard Mechanisms.

As Chakravarthi Raghavan, the wise old wizard of trade negotiations who has been covering them since 1949, put it to me, the US/EU arguments to abandon Doha because of the deadlock reminded him of the story of a son convicted for murdering his parents to get at their property who asks the court for leniency on the grounds that he was an orphan!

The reference price farce

To get a sense of how outrageous Froman’s claims are, one only has to look at the manner the US has dealt with the public stockholding issue. The external reference price to calculate food subsidies was set back in 1986-88 and has remain unchanged since then, even though food prices have gone up almost 500% since then. The implication of this is simple. The subsidy calculations for India and other developing countries get hugely inflated because the base year is so low, even though in reality they are much smaller.

If the same calculation was used to estimate US subsidies for maize farmers for 2014, the $6 billion subsidy will show up as $32 billion. As it happens, the US and EU – like many other developed countries – are exempt from having to make these calculations and much of their subsidies get protected under the Green Box. This is unlike the subsidies of most of developing countries who did not notify them when the Agreement on Agriculture was negotiated in 1995, and are therefore happy to continue with this hypocrisy. A simple updating of the external reference price from 1986-88 to current prices, as demanded by developing countries led by India has been blocked in Geneva for the last two years. So much for the times having changed.

The proposals for giving developing countries the same benefits of raising tariffs to protect domestic producers which all developed countries enjoy, under the Special Safeguard Mechanism, has met with a similar intransigence on part of the developed countries.

Sitharaman’s crocodile tears

Nirmala Sitharaman, Indian minister for commerce at the 10th WTO Ministerial Conference, Nairobi, 16 December 2015.Credit: WTO

If Froman left Nairobi after giving chutzpah a bad name, India’s commerce minister, Nirmala Sitharaman gave the world a good illustration of crocodile tears, with her closing plenary statement expressing “disappointment” at the DDA not being re-affirmed in the ministerial declaration.

She was at the centre of the negotiations and walked away with little more than assurances of pious intent, after conceding to the core US demand to drop the re-affirmation of the Doha Development Agenda (DDA) from the ministerial declaration.

As it reads now, the declaration reaffirms the Doha issues, which are central to the concerns of developing countries, but with no mention of the DDA. This was a clear red line for India as Doha was not merely a set of issues but more of a set of negotiating principles and a framework for taking the issues forward. The absence of the DDA framework will make it harder for the Indian negotiators in Geneva to drive a hard bargain on export competition, market access, public stockholding or the Special Safeguard Mechanism.

The US managed to breach yet another red line of the Indian negotiators with an explicit mention of “new issues” in the ministerial declaration. These are issues that could have been taken up only after all the issues in the DDA had been satisfactorily resolved, but can now be taken up anytime if agreed to by all members. Since decision-making in the WTO is consensus based, India and other developing countries can still block those issues from being taken up, but it’s easy to see that the US/EU have a new bargaining chip, and that progress on the Doha issues is likely to get pegged to the advance in negotiations on the “new issues”. Most of the new issues benefit developed countries and multinational corporations.

India and the developing countries did well to not allow a clear victory to the rich countries or their corporations in the language of the ministerial text by leaving the door open to the blocking of “new issues”. But it will be an uphill battle hereon.

No gains for India, only likely losses

All told, the truth is that there is little that India could extract by way of concessions, the spirited defence in Parliament of its commerce minister notwithstanding. There is just a commitment to “engage constructively to make all concerted efforts to agree to adopt a permanent solution on the issue of public stockholding for food security purposes”. In plainspeak, India will keep pushing the issue in Geneva, as it has for the past two years, and the US/EU and other developed countries are likely to continue blocking it. Since India already enjoys a peace clause – the subsidised purchases of food it makes for its PDS/Right to Food programme will not be challenged by other countries provided they avoid distorting global trade or affecting the food security of others – this is just a clarion call for business as usual.

Similarly on the SSM, we got more pious intent, “to pursue negotiations on an SSM for developing country members in dedicated sessions of the Committee on Agriculture in Special Session (“CoA SS”)”. In other words, it’s a concrete commitment to have meetings to decide on more meetings with every constructive proposal of the developing world likely to be rejected by the rich countries in those meetings. Business as usual again.

The only major gain that India made in Nairobi was perhaps to keep the US/EU from denying what it calls “emerging economies” (read: BRICS) the benefits of special and differentiated treatment that is now available to all developing countries. It was a specious argument on the part of the US in any case because by any objective standards, India cannot be shown to have graduated out of these benefits as a country that fares worse than 11 Least Developed Countries (LDCs) in the multidimensional poverty index, and worse than 22 LDCs in the number of people on the edge of poverty. India, with 195 million undernourished people (as compared to 186 million in all the 47 LDCs put together), ranks worse than 14 LDCs in the Global hunger Index. Even so, it was a small but significant victory.

As for India, it lost the plot on the penultimate day, when it broke ranks with the G-90 and the rest of the developing countries for a seat at the table with the US, EU, China and Brazil (the G-5), to negotiate the final texts. Despite having the finest negotiators at the WTO in Geneva that any country could hope for, India fell short when the time came for a political call to be taken. And in doing so, also lost many allies who had stood by it through this period. Despite the weak assertions of the commerce minister on her “disappointment” at the declaration not reaffirming the DDA, truth be told, she lost the nerve to block the declaration. Having got a place on the high table, Nirmala Sitharaman ended up putting India on the menu instead.

The “constructive ambiguity” of the text that has emerged from Nairobi will ensure that the legal wrangling on its interpretations will continue in Geneva long after the ink on the declaration has dried out.

And for now, The Ugly American, seems to have prevailed.

Biraj Patnaik is the Principal Adviser in the Office of the Supreme Court commissioners on the Right to Food. The views expressed in this article are personal.