The World Trade Organisation (WTO)’s tenth Ministerial Conference was held in Nairobi, Kenya, from 15 to 19 December 2015. It was chaired by Kenya’s Cabinet Secretary for Foreign Affairs and International Trade, Amina Mohamed. India was represented by the Commerce Minister Nirmala Sitharaman.
The meeting, as was expected sparked much debate between the developed and developing countries over the issues of abolishing agricultural export subsidies and progress on the Doha Development Agenda.
The Nairobi meeting comes two years after ministers from WTO member countries reached a landmark deal in Bali on overhauling global customs procedures in the form of Trade Facilitation Agreement (TFA).
Let us first understand the structure and functioning of WTO before proceeding to understand the details of the tenth Ministerial Conference.
Purpose of Establishment
WTO is an organization, which was established to deals with regulation of trade between participating countries by providing a framework for negotiating and formalizing trade agreements and a dispute resolution process aimed at enforcing participant’s adherence to WTO agreements.
Most of the issues that the WTO focuses are derived from previous trade negotiations, especially from the Uruguay Round (1986–1994).
General Agreement on Trade and Tariff (GATT)
GATT, which was the predecessor of WTO was formed to facilitate post World War reconstruction and rehabilitation and promotion of economic development in the new states.
GATT continued as a semi-institutionalised multilateral international trade governing body from 1946 to 01 January 1995, when it was replaced by an institutionalised body, called the World Trade Organisation (WTO).
Seven rounds of negotiations occurred under GATT. The prominent decisions taken during these negotiations include:
In mid sixties during the Kennedy Round an agreement was made on firm Anti-dumping policy.
In seventies during the Tokyo Round efforts were made for the first time to tackle trade barriers and a series of agreements on non tariff barriers were adopted.
The biggest mandate on trade ever agreed upon was during the Uruguay Round launched in September 1986. In this Round a lot of big ticket trade reforms were introduced, to name a few:
Extending the trading system into many new areas, notably, service sector and intellectual property.
Reform trade in sensitive sectors of Agriculture and Textiles. It was proposed that Public procurement of Agro-products must not exceed 10% of its total production value. This is considered as an anti-farmer proposal and hurts agrarian economies like India, Brazil, etc.
All original GATT Articles came up for review.
The GATT members also concluded during this Round that the structural deficiencies of GATT was straining to keep up with the Globalisation of the world economies, and required a major improvements in its provisions and design.
Final act of concluding the Uruguay Round and establishing the WTO regime was ushered in formally by signing of the Marrakesh Agreement on 15 April 1994.
GATT still exists as WTO’s umbrella treaty for trade in goods and the agreements arrived at in GATT 1947, duly amended from time to time latter, and are still the heart of GATT 1994.
Member Countries and Headquarter A total of 162 members and 24 observers; EU is also a member. The location of the General Council of WTO is at Geneva, Switzerland.
This year Afghanistan has won the formal approval to join the World Trade Organisation, in a move to help lift its war-shattered economy and create jobs in one of the world’s poorest countries.
The highest decision making body of WTO is the ‘Ministerial Conference’. The General Council of WTO is headed by a Director General; the present incumbent is Mr Roberto Azevedo of Brazil.
The General Council has the following subsidiary bodies (which have further internal committees for better functioning):
Council for Trade in Goods. It has 11 committees under the jurisdiction of Trade Council, each with a specific task.
Council for Trade Related to Aspects of Intellectual Property Rights To collect, collate and record information pertaining to intellectual property.
Council for Trade and Services This council oversee the functioning of General Agreement on Trade and Services (GATS).
Trade Negotiation Committee This committee deals with the negotiations of the current Trade Round. It was tasked in June 2012 for working on negotiations of the Doha Round.
Dispute Settlement Body (DSB). Dispute Settlement Panel is the Appellate body for dispute settlement. The process includes the participation of WTO Secretariat, arbitrators, independent experts and specialised institutions.
Principles of Trading at WTO
WTO works on five principles for trading, which are:
Non Discrimination. WTO follows the following two rules of non discrimination:
Most Favoured Nation (MFN). This rule requires that a WTO member must apply the same policy of trading with all member nations without discriminating against any member.
National Treatment Policy (NTP).This rule compels the member nations not to discriminate against imported goods vis-a-vis their domestic goods.
It needs to be understood here, that the NTP rule is detrimental to the interests of emerging economies like India, as the quality and cost of products manufactured/raised in India are not competitive to imported products. This unfair competition hurts the domestic market.
Reciprocity. This principle is a safeguard against the MFN rule so that some nations may look for unilateral gains only from their transactions. Hence, this rule mandates that the gains from transactions must be reciprocal.
Binding and Enforceable Commitment. The commitments made by member nations during multi-lateral trade agreements are enforceable by and any infringement will have to be compensated to make up for loss of trade.
Transparency. WTO members are required to publish their trade regulations, so that other member states can review their administrative decisions affecting trade. To ensure internal transparency, country specific trade reviews are published by Trade Policy Review Mechanism (TPRM).
Safety Valve. In special circumstances governments can restrict trade, without breaking the ‘Commitment Principle’, enunciated above, in case the matter involves, public health, environmental issues, like, plant/animal health.
The Ministerial Conference of WTO happens once in two years. The inaugural conference took place in Singapore in 1996. Since, then regular meets have been held and one of the most prominent ones was the fourth Ministerial Conference held in Doha, Qatar in 2001, called the Doha Development Round.
Doha Development Round was an ambitious effort to make globalization more inclusive and help the world’s poor, particularly by slashing barriers and subsidies in farming.
The initial agenda comprised both further trade liberalization and commitments to strengthen substantial assistance to developing countries.
The negotiations reached a deadlock, and continues to do so till date, between exporter countries of agricultural bulk commodities (Developed countries) and countries with large numbers of subsistence farmers, like India, China and Brazil, on the precise terms of a ‘special safeguard measure’ to protect farmers from imports of cheaper and better quality agro products from the developed countries.
The developed countries feel that developing economies are trying to be protectionist, while emerging economies, like India wish to safe guard the domestic interests of its agrarian society.
During the Ninth Ministerial Conference held at Bali in December 2013 consensus was reached on the Trade Facilitation Treaty for greater transparency and simplification of custom procedures. The same was also endorsed by India. The high points of the Treaty include:
Easy and comprehensible norms in terms of publication of laws, regulations and procedures, including Internet publication for speedy dissemination.
Provision for advance rulings to cut down on red tapism and early knowledge of rulings being passed.
Discipline and parity on fees / charges and on penalties.
Pre-arrival processing of goods to speed up delivery.
Use of electronic payment to cut down transaction time.
Guarantees to allow rapid release of goods to gain trader’s trust.
Use of “authorized operators” schemes to prevent frauds and impose a regulatory mechanism.
Procedures for expedite shipments for faster delivery of goods.
Faster release of perishable goods to reduce wastage and ensure health safety norms.
Reduce documentation and formalities with common customs standards to prevent confusion.
Promotion of the use of a single window clearance to prevent harassment and red tapism.
Uniformity in border procedures to facilitate transit.
Temporary admission of goods in case of procedural delays.
Simplified transit procedures to encourage traders.
Provisions for customs cooperation and coordination to bring about standardisation in their procedures.
Trade Negotiation Committee (25 – 31 July 2014)
On 25 July 2014 at the World Economic Forum, India made a statement in the WTO General Council conveying that the adoption of the Trade Facilitation (TF) protocol must be postponed till a permanent solution on public stockholding for food security is found.
As per WTO rules negotiated in the Uruguay Round, Government procurement from farmers for public stock holding must be kept within a limit of 10 per cent of the value of total production of the product in question. This cap can constrain procurement and food aid programmes in developing countries like India.
Finally, due to intense lobbying by India and other developing countries, reaffirmation to the decisions taken earlier at WTO on the issue of public stockholding has been granted during the Nairobi meet.
Tenth Ministerial Conference – Nairobi (15 to 19 December 2015)
Highlights of the Declaration
The five-page declaration at the Nairobi meeting reaffirmed the principles and objectives set out in the Marrakesh Agreement Establishing the WTO.
Developed Members shall immediately eliminate their remaining scheduled export subsidy entitlements as of the date of adoption of this Decision. Developing country Members shall eliminate their export subsidy entitlements by the end of 2018.
The members of the global trade body agreed on a commitment for giving the developing nations a right to take recourse to Special Safeguard Mechanism to protect their farmers, which was a long-standing demand of India.
Phase out export subsidies on cotton; for developed nations immediately, while it has been marked for developing countries not later January 1, 2017.
The Bali and the General Council’s November 2014 decision on public stockholding which gives protection to farmers has been reaffirmed.
The Tenth Ministerial Conference in Nairobi saw a clash of Interests between developed and developing Countries. The contentions of both sides are given below:
Contention of the Developing Countries
India, China and Indonesia on behalf of 47 developing countries, demanded comprehensive and balanced outcomes, particularly deliverables that would help resource-poor farmers in all the three core negotiating areas, viz., agriculture, non-agricultural market access and services.
In this regard, an LDC (Least Developed Countries) package, has been agreed upon by all the members during the Nairobi meet, which would include duty-free, quota-free market access for LDCs, the LDC services waiver (to ensure preferences to LDCs in services trade) and preferential rules of origin.
India has expressed disappointment over non-reaffirmation of the long-stalled Doha Round, agreement on removal of cotton subsidy altogether by 01 January 2017, and a few other provisions related to phasing out of export subsidies.
Contention of Developed Countries
The US and its supporters want a finite number of deliverables in which they themselves do not have to undertake any fresh commitments, including “export competition (in agriculture)”, some limited concessions for the poorest countries and transparency-related commitments.
The US and EU wants to launch new negotiations while pursuing unresolved issues in agriculture and other areas outside the Doha architecture. But a majority of WTO members want to continue with the Doha negotiations.
The biggest demand of the developed countries is to abolish agricultural export subsidies, so as to allow developing countries to better integrate themselves into the global market.
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