India must push for reforms in WTO
reform measures being proposed is to allow plurilateral agreements under the WTO, effectively abandoning the Single Undertaking principle as an overarching one. We should acknowledge that this is likely to come about and consider instead how India could use it to its advantage.
The reforms being proposed by the US, EU and Japan target the market distorting effects of industrial subsidies and the unfair advantage bestowed on state owned enterprises through access to lower priced inputs, concessional bank loans and government support. These are clearly directed towards China but there may be some collateral damage to India because we do have some limited subsidies and incentives for industry. However, on bal- ance, the removal of a whole range of State sponsored support which gives unfair competitive advantage to Chinese products, may be in India’s interest as well, improving our relative competitiveness. This needs to be carefully researched and a then a negotiating position arrived at. In an official statement in the beginning of November, India and China decided to carry out a joint study in order to arrive at a coordinated position at the WTO. This should be avoided as our economic profiles are now very different compared to a decade and more ago. Besides, China’s negotiating position at the WTO is stronger than ours, given its status as the world’s largest trading country. It may well reach a deal with other major trading powers and abandon positions it may have taken jointly with us.
The proposed reforms lay considerable stress on transparency, proposing punitive measures if commitments under the WTO to notify subsidies and other trade related actions are violated. This is mainly directed against China. There is no reason for us to oppose this since we are a transparent regime, obligated by our Constitution.
The one issue on which we may have to take a stand is related to the dilution of special and differentiated treatment of developing countries. At our current state of development, this provision is important and should be retained. Here again, there is no reason why we should oppose a revision of China’s status as a developing country since there is now a big gap between our two economies. After all, the Chinese never tire of reminding India that they now have five times the GDP of India’s and, therefore, we are not in the same league.
Shyam Saran is a former foreign secretary and is currently senior fellow, CPR. The views expressed are personal