Fork in the Road: India at the World Trade Organisation’s Twelfth Ministerial Conference*
Even as India’s FTA negotiation priorities have seen a noteworthy course correction to match her domestic priorities, we are yet to see a similar convergence in relation to negotiation strategies adopted at the multilateral level.
Such correction gains particular significance due to the World Trade Organisation’s 12th Ministerial Conference (MC12) taking place after almost five years, and amidst massive geopolitical turmoil. Even as Members adjust to ramifications from the pandemic and ongoing security crises, there is considerable pressure to see progress on an extensive list of issues - some of which have evaded consensus for decades.
For India, this is the first Ministerial Conference since the introduction of numerous important changes in her defence, foreign and economic priorities. It is therefore a worthwhile exercise to gauge how several of our negotiating stances are in considerable deviation from such objectives.
India must pre-empt, and not merely course correct
India is generally perceived as an obstructionist at the WTO – notably, our hardened positions led to the collapse of negotiations in MCs in 2008 and 2013. However, it must be understood that such resistance has generally emanated from misjudging the impact of liberalisation. Consequently, stances have often been reversed, albeit with considerable lags. For instance, after initially resisting the inclusion of services as well as trade facilitation in the multilateral negotiating agenda, India embraced both with much aplomb.
Unfortunately, this time around, we are ignoring past lessons in this regard. At the MC12, India will be noticeable by its absence in outcomes/work programmes of key plurilateral negotiations on electronic commerce; domestic regulation in services; and investment facilitation. This, despite India being among the largest recipients of FDI and possessing one of the most productive e-commerce and service sectors. Of course, we can acquiesce to the outcome of these initiatives at a later stage, but by that time, we would have foregone the opportunity to highlight our concerns and direct the negotiations towards a fairer outcome.
Opposition to these Joint Initiatives is the result of at least two factors. First, India believes that the WTO cannot sustain momentum on plurilateral issues without fragmenting the multilateral trading system (MTS). Second, India is not willing to acquiesce to negotiations on issues such as investment and e-commerce, that are conventionally prioritised by developed countries over the Doha Development Agenda.
How can we navigate this fork in the road? It must first be internalised that the WTO will not remain untouched from churns in geopolitics and geoeconomics. Consequently, the MTS that has thus far enabled freer trade and mutual prosperity will probably be replaced by separate ecosystems operating on the notion of ‘shared-values’ and cautious inter-dependency.
Perhaps India’s enthusiastic efforts towards strengthening bilateral and regional trade relations through FTAs and initiatives such as the Indo-Pacific Economic Framework for Prosperity (IPEF) shows an understanding of the shift in the winds. Regardless, we haven’t quite aligned our sails properly - yet. Such initiatives covering issues like sustainability, supply chains and data governance will benefit from complementary negotiations at the WTO and India mustn’t forego the opportunity.
Another reason for not participating in plurilateral negotiations could be the result of our tendency to adopt a rather dichotomous attitude on issues at the WTO. Entire areas of negotiation have been cordoned off and opposed on the basis of certain interpretations being problematic. For instance, India equates the linkage of Trade and Sustainable Development (TSD) at the WTO to the opening of a pandora’s box on trade protectionism. However, as we have written before, India herself has very ambitious domestic and international commitments on environment issues, and we can benefit from negotiating on TSD issues for not only achieving these objectives, but also safeguarding market access from protectionism and buffering the inevitable short-term losses incurred during the period of adjustment.
Further, an entirely rigid classification of issues into developed or developing prevents us from appreciating the positive spillovers that have happened over time. Historically, the Uruguay round of the WTO involved a grand bargain wherein developing countries and LDCs acquiesced to new rules in areas like customs valuation, services, and intellectual property in exchange for greater market access for textiles and agriculture. Decades later, it is apparent that developing countries and LDCs have benefitted to some degree from both – even if rules on non-tariff areas came at a cost that SDT provisions tried to set off.
Similar trade-offs and spillovers are of relevance now as well. For instance, in relation to e-commerce, acquiescing to a framework with over 71 countries will allow an opportunity to increase India’s share in the global market. This could make up for revenue losses emanating from the moratorium on custom duties on electronic transmission (another issue up for consideration at the MC12).
In essence, we should not be saying no to propositions, the discussions on which at least deserve our participation or a tentative maybe.
Pick battles wisely
India’s style of bargaining in coalitions is a good strategy only when domestic objectives converge with the interests of the coalition. This seems obvious, but it has been the case that despite rising as an economic power, India’s default negotiating position at WTO continues to remain quite conservative and tied to those of other developing countries despite divergence.
Let’s look at the TRIPS Waiver. The draft quad outcome agreed between India, South Africa, the EU and US is limited in nature because it noticeably leaves the issue of trade secrets unaddressed (that cover a significant portion of vaccine manufacturing process). Consequently, in comparison to more concrete and pragmatic solutions, it remains a sub-optimal strategy for building manufacturing capacity for vaccines in developing countries and LDCs. Even as a signal, the proposal goes against domestic priorities of creating ecosystems for encouraging investment and innovation.
Moreover, India has been one of the biggest beneficiaries of voluntary IP licensing leading to Indian manufacturers developing or manufacturing multiple types of COVID-19 vaccines – including through the much-coveted mRNA platform. This means that a greater impact could have been made by India voluntarily sharing IP where possible (such as with multilateral platforms like WHO’s C-TAP) and incentivising Indian manufacturers to scale and fulfil the needs of vaccine deficient nations. Neither calls for an IP waiver.
Importantly, for India, hardening her stance on a technically inconsequential yet politically expensive deal may just lead to reduced leverage in negotiating and shaping outcomes on other more important issues like public stockholding and fisheries subsidies.
Perhaps obvious, it is essential that India tackle deficiencies in her international posturing by building capacity for evaluating trade-offs of such negotiating positions in the short- and long-term. Further, the importance of institutional memory as well as specialisation cannot be emphasised enough. The recent move by the Ministry of Commerce and Industry to separate the multilateral and bilateral wings for trade negotiation into smaller, more agile teams is an excellent step. With adequate emphasis upon ensuring coherence between the wings and convergence with domestic priorities, we could be looking at a very different approach to negotiations at the WTO in the coming decade. Let’s not forget that if we wish to become a $10tn economy by 2030, we need to be seen as a responsible big player in the MTS and not like an argumentative Indian.
*First published in The Economic Times on 12 June 2022.