Wednesday, 20 February 2013

The latest WTO trade dispute: Can the US stop India?

By Musab Younis

Barack Obama’s visit to India on a trade mission in November 2010 was thought to mark the start of a newly revitalised bilateral relationship. In fact, almost precisely the opposite has taken place. At the beginning of this month, a new front was opened in the two-year battle between the two countries at the World Trade Organization (WTO):

Trade policy and the Rising Powers
There is more to these cases than tit-for-tat litigation or worsening bilateral relations. If we take the most recent sixteen formal dispute cases at the WTO, the vast majority are between an OECD member (US, Japan, EU) and a BRICS (Brazil, Russia, India, China and South Africa) country or regional power (Indonesia and Mexico). The only exceptions are two cases against Argentina by Mexico and Panama, and a case against Australia by the Dominican Republic.

A key concern of the BRICS has been international trade rules, especially in relation to agriculture. A useful paper by Braz Baracuhy (2011) examines WTO Doha Round negotiations over the course of a decade – between 2001 and 2011 – and argues that the impasse ‘captures the new geopolitics of multilateralism’. Baracuhy notes that a set of draft modalities, agreed in December 2008 as a basis for negotiations, were disregarded by the US in the wake of the financial crisis.

Another recent paper by Lars Brink, David Orden and Giselle Datz (2013) found that while a new Doha agreement looks remote, the negotiated provisions tell us a lot about the future policy space the BRICS sought to maintain.

Brazil, China, and India (BIC) are members of the G20 group of developing countries (not to be confused with the other G20, comprised of major economies) which argued in the Doha negotiations for substantial cuts to agricultural protection in developed countries. But while the BIC have often been united in seeking concessions, they have been less united when it comes to initiatives that affect their individual trade interests, the paper notes.

A resolution?
This month’s solar panel case at the WTO shows that divisions run across more issues than agricultural protection. Developing countries have long criticised the WTO for inhibiting the type of industrial policy many of them argue is necessary for their industrial development. Members of the BRICS, including South Africa, have recently adopted large-scale industrial policy plans.

At the same time, the economic crisis has increased calls for protection within rich countries, especially the US. Indian-American relations are unlikely to improve while anti-outsourcing policy in the US continues to damage India’s software industry. And of course, China has been the main target of Obama’s trade protection measures (though some have argued vigorously for a policy change.)

The results of the latest WTO case could go either way. But it seems unlikely, going into the future, that the WTO as a forum will be able to resolve a growing divergence in policy perspectives. In the meantime, as the Financial Times reports, “far away from the emerging trade dispute, Indian companies and their partners are powering ahead with innovative solar schemes.”

Musab Younis is the Research Officer for the Rising Powers in International Development Programme at the Institute of Development Studies. He will be posting here regularly on the programme and related issues. 


Agrim Kaushal said...

The recent dispute between the USA and India on agricultural products (poultry) and steel pipes can be seen as signs of deepening global recession. Further the US government restricting number of working VISAs in case of Indians, thereby acting tough on Indian IT companies stems from the political commitment made by Obama during his re-election campaign not to outsource US jobs to overseas companies. However cost cutting become even more important for fledgling businesses during the time of recession. This may force US business to continue outsourcing to low cost overseas destinations like India. The Dispute Settlement Mechanism (DSM) of WTO has a reputation of acting freely and fairly and deciding upon a case in light of the factual position. DSM has the history of ruling against any violating country irrespective of it’s status or position in international polity. Therefore only time will tell who stops who where and when.

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