'Implementation issues need to be resolved expeditiously'

With the WTO Cancun Ministerial Conference round the corner, India’s Union Minister of commerce and industry, Arun Jaitley, who will head the Indian delegation at the meet, speaks to Clifford Polycarp on matters of concern to India

CP: What will be the key issues for India at the Cancun ministerial conference?

AJ: Whenever we enter into negotiations of a multilateral character, one of our prime concerns — besides the larger global picture — are domestic interests. Among the principles on which global bodies like the World Trade Organization (wto) function is the principle that promotes equality in treatment among various countries. Now, once we are in that forum, one of our principal concerns is to be able to adequately voice what our domestic concerns are.

First, let me start with the Trade Related Aspects of Intellectual Property Rights (trips) issue. There is this debate regarding public health considerations on the one hand, and the need to protect the patent holder to encourage research on the other. The trips negotiations seek to find a middle path. But there are several poor nations which can neither manufacture patented medicines, nor carry out research. Therefore, a facility has been carved out to enable them to issue compulsory licences in favour of countries which have a manufacturing ability. Now permits would obviously be given to those nations that can supply drugs at the cheapest cost. There is no commercial consideration in this matter because it is a public health issue.

CP: If commercial interest is indeed not involved, would you agree to the terms that the us is laying down such as the “not-for-profit” condition?

AJ: When medicines are supplied to poorer countries, they will cost some amount. So there is bound to be a commercial transaction. When I say there is no commercial interest, the allusion is to the objective not being to breach somebody’s intellectual property rights or supplying the drugs to countries that do not require them. In effect, there would be a commercial angle in terms of commercial considerations for supply. After all, the cost and returns on these medicines would have to be factored in. The principal consideration, however, is not the commerce of it, but public health.

Modalities for this have to be settled at Cancun and they are currently under discussion. Our thrust and approach is:

a)            primacy being accorded to public health considerations of poorer countries

b)            in the process of finalising the modalities, we must not in any way dilute what the existing commitments are

c)             the purpose of the modalities is to see that medicines manufactured for poorer countries, which are experiencing public health emergencies, don’t get diverted to other markets.

That seems to be the balanced concern. The third is a concern of the Americans. The first two are concerns of developing and poorer countries. Now somewhere we have to find a solution to this.

CP: What are the other issues?

AJ: The second issue would relate to negotiations on agriculture. Here, we very strongly believe that domestic support subsidies and export subsidies given by developed countries have distorted and subverted the global market. The surplus that they produce is available at cheaper prices. As a result of this, prices in economies such as ours get depressed. This, in fact, is one of the key reasons why our farm sector and farmer find themselves in difficulties.

The proposals put forth by the eu and the us do not have even a reasonable level of ambition so far as the reduction of subsidies is concerned. As a result of their offer to cut subsidies only marginally, the proposals are not going to end the distortions of trade. Under such circumstances, it would be grossly unfair to expect developing countries to lower tariffs and allow their non-subsidised farmers to compete with their highly subsidised counterparts form developed nations. And this is the position to which India can never atone. We have one of the largest farm sector populations in the world — almost 650 million people. They are resource-poor farmers and we are not in a position to subsidise them. Consequently, we have a very proactive role in the negotiations.

In the first instance, we will strive to have the subsidies phased out eventually. And developed countries must start with a reasonably high level of ambition in this regard. Secondly, because of this inequity that exists in the global farm economy, we will advocate the following safeguards for developing countries: a reasonable level of tariff protection, classification of some goods as sensitive products which are vital for our economy and a special mechanism to check any potential surge into the domestic market. These are what we regard as essentials to the farm negotiations.

India, China, Brazil and Mexico are all part of a new group that we have formed on agriculture. The points mentioned above comprise some of the objectives of the group. We are working in this direction and I hope that we are able to represent a viewpoint of a very large sector of the global population. These countries represent more than 50 per cent of the global population and more than 60 per cent of the world’s farm population. So, this is a significant alliance that we have built up.

CP: How strong is this unusual alliance that has come together only on agriculture? And do you think it will be able to hold through?

AJ: When two regions like the us and the eu with diametrically opposite interests can enter into an alliance, why can’t countries with similar interests do the same? Alliances on issues or relating to a particular set of negotiations normally do take place. This, however, does not necessarily mean that the group agrees on every issue. This is an issue-based alliance as far as agricultural negotiations are concerned. It should be seen only in that light. After all, the interests of China and India in agriculture are very similar. Most of the countries from the Cairns Group, which are developing nations, are also fighting for the reduction of subsidies. And they are surplus-producing countries looking for markets in the developed world. They have, therefore, agreed to a certain level of tariff protection for developing countries and higher reduction of subsidies with regard to developed countries.

CP: What is India’s position on the Singapore issues (investment, competition, transparency in government procurement and trade facilitation), which it has been strongly opposing?

AJ: On these issues, the Doha mandate was that negotiations could commence for modalities only with the explicit consensus of all members at Cancun. And we don’t feel that there is unanimity on these matters.

Issues such as transparency in public procurement and trade facilitation are highly desirable. These are desirable for autonomous reforms, enabling countries to carry on with them. We in India would be the first to say that we have the most transparent public procurement system. There is no procurement in India possible through private negotiations. All such transactions take place through tenders and bids. In that sense, we already have a transparent public procurement system.

Similarly, as a developing and fast-growing economy, we see the virtues of trade facilitation inasmuch as wanting to eliminate the costs incurred due to delays. For instance, we have created one of the most modern mechanisms on our port systems in India. We are improving the capacity and efficiency of our ports, and would like all our trade to be free from such roadblocks. But we fail to understand how these two issues can be part of a multilateral agreement, and how disputes concerning them can be resolved by a multilateral forum.

There doesn’t seem to be consensus on the issue of competition policy either. The impact of the proposed non-discriminatory provisions on development policy objectives of developing countries is not clear. Non-discrimination among unequal nations amounts to discrimination. While hardcore cartels are proposed to be addressed, certain major trading countries want to exclude export cartels.

CP: But what about the proposed multilateral framework on investment? That is the most contentious of the four issues.

AJ: There are two tiers of arguments I have on this. One, I feel several parts of the investment policy of a country should be within the sovereign policy domain. We, therefore, do not see Indian political and public opinion reconciling to a situation where this sovereign policy domain can really be cut short or diluted in any way. There are some countries that support our viewpoint. What are the areas you want to open for investment? How do you treat investment before it comes in and after it comes in? Disputes related to such investment. These are policies we must decide ourselves. Which sectors we want to open up is also for us to decide.

Secondly, what constitutes investment? Does it comprise only foreign direct investment (fdi)? Does investment include ipr? Should all assets be included in investment? Is it pre-establishment investment (investment before the investor enters the country) or post-establishment investment? Not enough discussions have taken place on these issues. There is no clarity on the second component. Seventy-eight countries as a bloc — India being one of them — have put up a viewpoint that this is not an occasion where modalities can really commence.

CP: Where do India’s interests lie in negotiations on market access for non-agricultural products?

AJ: On our trade, we are trying to become extremely competitive and have been autonomously bringing down tariffs. The last three budgets bear testimony to this trend. We see that cutting down tariffs also, at times, helps us in terms of intermediate products with input costs going down. At the same time, tariffs are also a source of revenue for developing countries till they are able to find alternative sources of income. We also have sensitive sectors like the small-scale industry (they are the largest employers in India), which require some element of protection.

Our stance on non-agricultural market access is guided by these considerations. In a country of India’s size — which has one-sixth of the world’s population, and high levels of poverty and unemployment as well — there are several sectors in whose case the timing of tariff reductions has to be suited to the dynamics of our own politics. We don’t want units to be closed down one after the other and people to be left on the roads. We have to keep these issues in mind.

CP: A few months ago India was quite vocal about the implementation issues and special and differential treatment. Why has so little progress been made on them?

AJ: These are all issues we have been concerned about. The reason is that on development issues, which include implementation issues and special and differential treatment, the movement has been somewhat slow. And not much interest has been evinced by some countries. But there has been a corresponding pace that has been added to the new issues (Singapore issues) that are being brought in. We have been highlighting this incongruity at every meeting. We need to expeditiously clear the tables as far as the implementation issues are concerned, and are going to voice this very strongly at Cancun. The ministerial is an important occasion to raise the issue with regards to its tardy pace.