Negotiation Dynamics of the WTO

It is not for nothing that the Uruguay Round is called “The Mother of all Rounds”. There were after all trade rounds before in the General Agreement on Tariffs and Trade (GATT). But the Uruguay Round was of a completely different scale. Not only was its scope vast with “new” subjects such as Intellectual Property Rights and Services, but also when it concluded successfully, it resulted in the creation of a brand new organization called WTO, i.e. The World Trade Organization with a rigorous dispute settlement mechanism. It is vitally important to understand how the Uruguay Round was conceived, negotiated and implemented by the developed countries led by the US. This is necessary for a thorough understanding not just of the negotiation dynamics prevalent then, but equally to understand what is going on in the WTO today. One of the central points of the book is that the way in which the Uruguay Round was carried out at the behest of the more powerful countries led to “negotiation resentment” on the part of some key developing countries such as India. This has left an indelible imprint on the subsequent negotiation dynamics of the WTO. The intricacies of multilateral trade negotiations are explained, along with factors such as realpolitik, aggressive unilateralism and divide and rule playing their full part. For developing countries, it was a whole new ball game since it was the first time they were undertaking negotiations on the basis of give and take. Was the negotiating outcome fair and balanced, from the standpoint of the developing countries such as India? The answer would have to be in the negative. Some observers have, therefore, called this the “Bum Deal”. The reasons for this unbalanced outcome in the Uruguay Round are also the subject of literature available in plenty. On the other hand, there were also some limited gains for developing countries from the Uruguay. Over time, this led to what the author describes as “negotiation resentment” among certain developing countries. “Negotiation Resentment” is the result of: All of the above applied to a group of developing countries, particularly, India. This “Negotiation Resentment” was too obvious to ignore. The onus was, therefore, on the developed countries and the WTO to take measures to alleviate this.

If Marrakesh in 1994 was the zenith of the multilateral trading system, then Seattle in 1999 proved to be its nadir! The WTO Ministerial Conference in Seattle was doomed from the beginning. Preparations were totally inadequate and there was no meeting ground even between the US and the EU, much less between the developed countries and the developing countries. Developing countries were still smarting from the outcome of the Uruguay Round and were struggling with issues related to “Implementation” of their obligations. Least Developed Countries felt excluded from the new WTO and felt no stake in the multilateral trading system. As against this, the EU (with tacit support from the US) was still hell-bent on enlarging the scope of negotiations by including the so-called Singapore Issues: Investment, Competition Policy, Transparency in Government Procurement and Trade Facilitation. This really raised the hackles of the developing and the least developed countries who were simply not ready to contemplate a new round of trade negotiations. As if all this was not enough, the organization of the conference at the venue itself left a lot to be desired. Things were done at the very last minute. And then, by a combination of circumstances, a large number of NGOs descended on Seattle on the eve of the conference creating chaos. With the Seattle police battling the protesters with tear gas, negotiators inside the conference venue battled to find consensus where none existed. Ministers from Least Developed Countries, particularly from the ACP group then left the conference venue somewhat prematurely saying they had no clue what was going on and were not kept informed. This raised serious questions about transparency and negotiating mechanisms within the WTO. The last straw was the continued insistence of both the US and the EU to include Core Labour Standards into the agenda of the WTO. President Clinton’s interview acted as a red rag to many delegations in this regard. In the end, the WTO Ministerial Conference in Seattle simply collapsed under the weight of its contradictions. In unprecedented fashion, the Conference ended with not even a statement from Ministers much less a formal declaration. Not WTO’s finest hour, to put it mildly.

The failure of the Ministerial Conference in Seattle led to a lot of hand-wringing and soul-searching at the World Trade Organization (WTO). In particular, questions were raised about internal and external transparency about meetings at the WTO. There were also issues relating to the effective participation of all countries, especially least developed countries (LDCs), in the negotiations. The WTO General Council which considered this issue in detail came to the conclusion that while the member-driven nature of WTO should not be changed in any way, attempts must be made to ensure that all countries, especially LDCs, are involved in the decision-making. Attempts were also made to rope in the LDCs by tempting them with technical assistance and by holding out hope of market access. But there still remained the issue of how developing countries can be got on board to a new round of negotiations. This did not prove to be easy, since this group of countries was quite insistent that “Implementation Issues” must be resolved first, something the developed countries were not willing to concede. It was against this backdrop that the idea of a “development round” was thought of by proponents of a new round. The idea was to suggest that development will be mainstreamed in future negotiations and, therefore, try and make it more palatable to the developing countries opposed to the very idea of a new round. This Chapter explains in detail how things came together in Doha in such a way that a round was launched. The one issue that really unblocked the impasse at Doha was the agreement on Intellectual Property Rights (TRIPs) and Public Health which was crucial for a host of developing countries led by India, Brazil and the African Group. Following this breakthrough, everything else gradually fell into place for a round to be launched in Doha. Attempts by the EU to launch a comprehensive round with Investment being the subject of negotiations ran into predictable opposition from India which momentarily held up a consensus in Doha. It required assurance by the WTO membership that no new negotiations would be launched without “explicit consensus”, for India finally to agree to the launching of a new round in Doha. At the end of the day, Doha succeeded because every WTO member could take away something from the round. Indeed, the Doha Ministerial Declaration said for the first time that the needs and interests of the developing countries will be placed at the heart of the future negotiations. It must also be said that the New York 9/11 terror attacks also provided a justification for all WTO Members to come together and agree to the launch of a new round in Doha.

India’s negotiating stance at WTO has been a subject of research, amusement and speculation among knowledgeable observers. There is first the impression that India is often “isolated” in multilateral trade negotiations. Second, there is some amusement at the company we keep: for example, the famous Like-Minded Group in which India shared the negotiating stage with the likes of Cuba, Venezuela, Dominican Republic and Pakistan. Last, how could India which received a large amount of Foreign Direct Investment (FDI) possibly object to negotiations in this area at the WTO?The Chapter broadly explains the justification of India’s negotiating stance. For starters, a large part of the population (estimated by some at 300 million) lives in extreme poverty. Any move that would affect them adversely is political suicide for the government in a country like India. The second consideration lies in the area of Agriculture and things like rural distress, farmer suicides etc. are hugely sensitive subjects. Last but not least, the quintessential obsession of India for retaining “policy space”.The mechanics of decision-making in trade policy is covered in some detail. While the Commerce Minister may seem as the ultimate arbiter, it is nevertheless true that the Prime Minister (and his office) has the last word when it comes to final negotiating decisions on sensitive subjects. In the previous coalition era, the Government used the “Group of Ministers” as a mechanism to decide the negotiating stance. With the assumption of office of the new Government led by Prime Minister Modi in 2014, the main vehicle is Cabinet Committee on Economic Affairs whose composition is given in the Annexure.The Permanent Mission of India to the WTO, led by an Ambassador, has only a handful of trade diplomats to service the WTO negotiations. The Trade Policy Division in the Ministry of Commerce is not too big either. But many smaller developing countries do not even have as many negotiators as India does. Developing countries and least developed countries are therefore at a disadvantage vis-a-vis their developed counterparts.The system of consulting with domestic stakeholders has gotten better in India. Chambers of Commerce, Think Tanks and other Non-Governmental Organizations now play a more active role with the Government in the formulation of trade policy.The Chapter makes the point that for a variety of reasons, therefore, India and its negotiating stance may best be described as “sui generis”.

This Chapter raises the question “Whither WTO?” and attempts at providing an answer. Obviously, the Doha Round is in dire straits and one would have to be an inveterate optimist to believe it can be concluded in the near future. But the more serious problem is the crisis facing the famed dispute settlement mechanism of the WTO which could grind to a halt if US objections are not dealt with adequately without further delay. It is the author’s belief that India is well placed to play the role of an honest broker in this matter. India has a systemic interest in the dispute settlement mechanism and must deploy its negotiating efforts to find a compromise to this vexed issue before it is too late. As for the future of WTO, it is too important to allow it to wither away even for countries like India. So this Chapter ends with some ideas to revive the WTO. One idea worth exploring is to link future negotiations in the WTO with the universally agreed Sustainable Development Goals (SDGs) so that any trade agreement should at a minimum, not impede the achievement of SDGs and ideally, enable the achievement of those goals by governments. This would not only provide comfort to the vast majority of developing and least developed countries but also justify the rationale of WTO—that free trade can actually benefit all countries rather than just a few.