Emerging Powers in Global Trade Governance The Role of India

Emerging Powers in Global Trade Governance The Role of India By Pradeep S Mehta and Pranav Kumar 1 I. Introduction The multilateral trading system has come a long way since its inception in the form of GATT in 1947. From 23 contracting parties under GATT 1947, its membership has now mushroomed to 151 in its new incarnation the World Trade Organisation (WTO). Not only in membership, there has been a huge expansion in the agenda of rule making. The Tokyo Round in 1979 was the first attempt to set up disciplines on the use of non-tariff barriers and trade remedial measures, while reduction in tariff barriers remains the common negotiating goal in all the trade rounds including the present one (Doha). The other areas where the multilateral trading system has made significant progress include strengthening of the dispute settlement system, abolition of Multi-Fibre Arrangement (MFA) 2, special measures to help least developed countries (LDCs) integrate into the global economy etc. Most of the developing countries had an ambivalent attitude to the GATT, and their approach toward integrating with the global trading system has evolved from one of hostility to active promotion (Srinivasan, 1998). India too had followed more or less a similar path until the launch of the Uruguay round of trade negotiations in 1986. However, the Uruguay Round (1986-1994) and the implementation phase of WTO agreements (1995-2004) were associated with some striking changes in the global economic landscape. These agreements have led to a greater recognition of the role of trade as an engine of economic growth. This period has also witnessed more support to openness from developing countries as compared to rich industrialised countries who 1 The authors are associated with CUTS International and can be reached at psm@cuts.org and pk@cuts.org 2 The Multi Fibre Arrangement (MFA) governed the world trade in textiles and garments from 1974 through 2004, imposing quotas on the amount developing countries could export to developed countries. It expired on 1 January 2005. 1

have traditionally championed the cause of the multilateral trading system. The growing influence of developing countries in the WTO is trying to counter the mercantilist agenda of industrialised countries with a development agenda. The purpose of this paper is not simply to assess or compare the WTO agreements with its predecessor GATT, but to address the much broader issue of global trade governance and the role of large developing countries such as India. Global trade governance, which includes the participation of developing countries in the decision making process of the WTO, transparency in trade negotiations, ensuring proper implementation of trade agreements etc, has become an extremely pertinent issue in today s trade architecture. The current Doha round of trade negotiations has made some significant headway on these fronts. Undoubtedly, the participation level of developing countries is much higher than what we have witnessed during the Uruguay round. The emergence of India and Brazil has strengthened the voice of the South in the WTO negotiations. The greater participation of developing countries is already yielding results in agenda setting. Now the challenge remains in influencing the outcomes of trade negotiations. II. Emergence of Large Developing Countries in World Trading Landscape Large developing countries such as Brazil, China, India and South Africa are fast emerging as dominant economic and trading power on global economic map. The GDP growth achieved by China in recent years and up to some extent India made many feel envious. According to the World Bank s World Development Indicators in 2006 the combined share of these four countries in world s GDP was 18.11 percent. Similarly, in 2006, their combined share in world merchandise export was 10.9 percent, in which China alone have 8.2 percent share. In commercial services exports also China and India are among the world s top ten exporters. India has had a remarkable growth in services export as its share in world commercial services export increased from 0.6 percent in mid-1990s to 2.7 percent in 2006, improving its world ranking from 25 th in 1995 to 10 th in 2006. 2

Table 1: Share of Emerging Developing Countries in World s GDP, Export and FDI Share in World Share in world Share in World Merchandise Countries GDP (%)* FDI (%)** Export (% in 2006)*** Brazil 2.80 1.76 1.2 China 10.07 6.22 8.2 India 4.53 0.56 1.0 S.A 0.71 0.74 0.5 Total 18.11 9.27 10.9 * Based on World Development Indicators database, World Bank, 11 April 2008 ** Based on CIA Fact book, 2008. *** International Trade Statistics 2007, WTO II.1 Emergence of India From a 2.2 percent share in world merchandise exports in 1948 India s share had plummeted to a minuscule 0.5 percent in the 1970s where it remained stagnant for several years. It is worth emphasising here that in 1948 India s share was higher than China s 0.9 percent and Japan s 0.4 percent. While both China and Japan have today become global trading powerhouses with 8.2 and 5.5 percent share in world merchandise exports respectively in 2006, India just managed to touch 1 percent mark after toiling hard ever since the 1991 external sector liberalisation (See Table 2). Many pro-trade economists attribute this fall in India s share in world merchandise exports to its import-substituting strategy of growth, practiced till the late 1980s. Srinivasan and Tendulkar (2003) find that India s inward orientation has had significant economic costs in terms of lower overall growth and stagnating living standards. In the case of both Japan and China rapid export growth was associated with very high GDP growth. China, for instance, achieved an average annual growth rate of more than 10 percent during the period 1980-2000. India s GDP growth rate, in contrast, averaged 3.75 percent a year from 1950 to 1980. By virtue of this Reynolds (1985) puts India in the category of a low-income, slow-growing economy and listed it among 41 Third World countries. 3

Table 2: A Comparison of India s Share in World Merchandise Exports with China and Japan Country 1948 1953 1963 1973 1983 1993 2003 2006 China 0.9 1.2 1.3 1.0 1.2 2.5 5.9 8.2 Japan 0.4 1.5 3.5 6.4 8.0 9.9 6.4 5.5 India 2.2 1.3 1.0 0.5 0.5 0.6 0.8 1.0 Source: International Trade Statistics 2007, WTO The external sector liberalisation initiated since the early 1990s has brought significant changes in trade flows. India's share in world exports, which had declined from above 2 percent at Independence to 0.5 percent in the mid-1980s, bounced back to 0.8 per cent in 2003 and reached 1 percent in 2006. Since the mid-1980s, India s exports have grown faster than world exports. Between 1990 and 2000 world merchandise exports have grown annually at the rate of 6 percent 3 as against 9.3 percent achieved by India. Table 3 presents an overview of the evolution of India s external sector during the 1980s and 1990s. The table clearly indicates impact of the significant liberalisation of the 1990s. Table 3: Exports and Imports (Merchandise) of India (US$ Billion and Percentage) Exports and Imports (in US$bn) Annual Growth Rate (%) 1980 1990 2000 1980-90 1990-00 Total Exports (fob) 8.5 18.5 44.9 8.1 9.3 Total Imports (cif) 15.9 27.9 59.3 5.8 7.8 Source: World Development Indicators, 2002, The World Bank A more visible transformation was realised in the new millennium as merchandise exports from India have grown at a rate of more than 20 percent per annum after 2002-03 (See Table 3). The merchandise exports in value terms have almost trebled, from US$44.7bn in 2001-02 to US$128bn in 2006-07. Exports as share of GDP have also increased from 9.4 percent in 2001-02 to 14 percent in 2006-07. Imports too have grown, even faster than exports, which resulted in rise in trade deficit. Imports in value terms 3 See International Trade Statistics 2001, WTO 4

have increased from US$56.2bn in 2001-02 to US$191.2bn in 2006-07. As a percentage of GDP too Imports have registered higher increase from 11.8 percent to 20.9 percent of GDP between 2001-02 and 2006-07. This high growth was experienced in spite of the fact that the Doha round of trade negotiations did not result in significant trade liberalisation at the multilateral level. Table 4: India s Exports & Imports (2001-02 to 2004-05) (% Growth Per Annum) 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Exports -1.6 20.3 23.3 28.5 23.4 21.8 Imports -2.8 14.5 24.1 48.5 32.1 21.8 Source: Economic Survey 2007-08, Government of India (Based on RBI data) India s emergence as one of the fastest growing economies in the world has much to do with the growth of its service sector, which has acted as an engine of growth for the country. The boom in the Indian services sector has not only been confined to the domestic market but is also attributable to international trade. India s share in global trade in commercial services has increased from 1 percent in 1999 to 2.7 percent in 2006. While India s share and ranking in world merchandise exports were 1 percent and 28 respectively in 1999, its share and ranking in world commercial services exports improved to 2.7 percent and 10 in 2006. Table 5: Commercial Services Exports (in US$bn) of Selected Countries Country 1998 2000 2001 2002 2003 2004 2005 2006 USA 240.0 274.6 (19.1) 263.4 (18.1) 272.6 (17.4) 287.7 (16.0) 318.3 (15.0) 354.0 (14.7) 388.8 (14.1) UK 100.5 99.9 (7.0) 108.4 (7.4) 123.1 (7.8) 143.4 (8.0) 171.8 (8.1) 188.7 (8.7) 227.5 (8.3) China 24.1 30.1 (2.1) 32.9 (2.3) 39.4 (2.5) 46.4 (2.6) 62.1 (2.9) 73.9 (3.1) 91.4 (3.3) Singapore 18.2 26.6 (1.9) 26.4 (1.8) 26.9 (1.7) 30.4 (1.7) 36.5 (1.7) 45.1 (1.9) 57.3 (2.1) 5

India 11.1 17.6 (1.2) 20.4 (1.4) 23.5 (1.5) 25.0 (1.4) 39.6 (1.9) 56.1 (2.3) Note: Figures in parentheses are percentage share in world services exports. Source: International Trade Statistics (Various Issues), World Trade Organisation 73.8 (2.7) From Table 5 it is clear that India is fast emerging as one of the largest exporters of commercial services and there has been a significant acceleration in the growth of service exports. Among developing countries only China is ahead of India in the export of commercial services. Another positive development is that India now has a significant trade surplus in commercial services. India had a trade surplus of US$10.1bn in 2006, which is remarkable as it has been achieved in a very short time duration (See Table 5). Table 6: Exports, Imports and Trade Balance in Commercial Services (in US$bn) Year Export Import Trade Balance 1998 11.1 14.2-3.1 1999 13.9 17.2-3.3 2000 17.6 19.9-2.3 2001 20.4 23.4-3 2002 23.5 21.8 1.7 2003 25 21.6 3.4 2004 36.6 40.9-4.3 2005 56.1 52.2 3.9 2006 73.8 63.7 10.1 Source: International Trade Statistics, Various Issues, World Trade Organisation III. India and Multilateral Trading System: GATT 1947 to Uruguay Round India is one of the few countries of the world who has been member of the multilateral trading system since its inception in 1948. However, until the launch of the Uruguay round of trade negotiations in 1986, like many other developing countries India was a reluctant participant. This stance of India was in very much in line with its own inward looking economic growth strategy. India did participate actively in the Uruguay Round negotiations but it started making real substantive contributions from the Seattle 6

Ministerial Conference in 1999. India s importance has further increased in the course of the Doha round of trade negotiations. India has traditionally opposed trade liberalization and opening its economy to outsiders. India was always a large country with a sizeable domestic market. This was the main incentive for policymakers to create its own diversified production base. However, at the same time India despite being a member of GATT for more than four decades, successfully resisted pressure and avoided its GATT commitments to open its economy. Domestic politics and the relationships among domestic producers and consumers were the driving forces behind India s growth strategy. When India finally made the decision in 1991 to open its economy, a balance of payments crisis rather than external pressure was the trigger for this significant turnaround. The question arises why India and other developing countries unlike developed countries did not take advantage of GATT. The GATT regime appears to have contributed significantly to the growth of world trade. Eight successive rounds of trade negotiations on reducing barriers to trade have been concluded under the GATT s auspices. The volume of world trade grew at an unprecedented average rate of 8 percent a year between the founding of GATT in 1947 and the first oil shock in 1973. During the entire period of GATT s regime - 1950-94 the volume of merchandise trade grew to nearly 15 times its level in 1950, while output grew to six times its level in 1950 (Srinivasan and Tendulkar, 2003). In the original Charter of GATT, the economic development chapter consisting of Articles XIII and XV made several provisions by which underdeveloped countries may obtain waiver from commitments assumed under trade agreements and Charter with respect to domestic commercial policy. However, this was considered inadequate by the then developing country members of GATT including India. Later on in 1950s two important initiatives concerning the developing countries followed. First, in the review session of 1954-55 a new article (Article XVIII) was introduced to take care of the right of developing countries to resort to restrictive measures to protect their infant industries 7

and to safeguard balance of payments. What was more important that Article XVIII.B refrained from setting a time limit on the use of import restrictions, thus making this Article the most effective, widely conceived and legally enforceable right of developing countries to safeguard their policy-making autonomy (Shukla, 2000). Thus, India really did not violate commitments. India made good use of this clause by adopting an import-substitution growth strategy and at the same time not violated any GATT disciplines/obligations. It is also need to be mentioned that in the mid-1950s India embarked upon a massive industrialisation programme through its second five year plan (1956-61). The industrial sector was almost completely protected from any foreign competition either through import or foreign investment as an important element of this industrialisation strategy. This was done under the guise of newly enacted GATT Article XVIII, which allowed developing country members to protect their infant industries. In 1957 GATT commissioned an expert study under the chairmanship of Mr. Haberler on developing country trade problems, such as low export growth, fluctuating commodity prices and protectionist policies of the industrial countries on agriculture. In 1958, the panel submitted its report, popularly known as the Haberler Report. The Report which holds trade policies of developing countries largely responsible for the predicament of underdeveloped countries caused turmoil at GATT. This resulted in developing countries uniting against the inequitable treatment meted out to them, thus calling for the reform of the system. The Report in a way laid the foundation of linking trade and development issues in the United Nations forum. Subsequently, in May 1964 the United Nations Conference on Trade and Development (UNCTAD) was established. The same year marked the emergence of Group 77, a common front of the developing countries to improve their bargaining power through collective action. These developments also influenced GATT where discussions on reform were initiated in May 1963. The process culminated in the addition of Part IV entitled Trade and Development in February 1965. The most 8

significant provision in Part IV was related to the interpretation of the reciprocity concept in the context of developed-developing country trade relationship. In 1970s a major initiative was taken by GATT to give preferential treatment to developing countries. First, in 1971 Generalised System of Preferences (GSP) was introduced, which enabled industrialised countries to extend preferences to developing countries. The GSP was granted a waiver from the GATT, which initially remained valid for ten years. This later became part of the 1979 Enabling Clause 4, which effectively made GSP permanent and further extended discriminatory preferences on an additional basis to so-called LDCs. 5 This waiver also covered if developing countries exchange preferences amongst themselves. The Global System of Trade Preferences among Developing countries (GSTP) 6 was fallout of this. India has been a beneficiary of GSP and also a signatory to GSTP. As per the 2008 UNCTAD s data India was enjoying the preference under GSP from 10 countries of the world (See Table 7). The US and the EU happen to be the two largest export destinations of India. In case of US, out of the total import of US$18807mn from India in 2005, US$4179mn entered duty-free under GSP, which is approximately 22 percent of total import (Cooper, 2006). Contrary to this the percentage is much less in the EU market as only 11.8 percent of EU s import from India entered through GSP in 2005. India s export to EU under GSP has come down after its expansion. 4 At the end of the GATT Tokyo Round in 1979, developing countries secured adoption of the Enabling Clause, a permanent deviation from MFN by joint decision of GATT Contracting Parties. The Clause states that notwithstanding GATT Article I, contracting parties may accord differential and more favourable treatment to developing countries, without according such treatment to other contracting parties and applies this exception to: (1) preferential tariff treatment in accordance with the GSP; (2) multilateral Non-tariff preferences negotiated under GATT auspices; (3) multilateral arrangements among less developed countries; and (4) special treatment f the least-developed countries in the context of any general or specific measures in favour of developing countries. 5 The Future of the WTO: Addressing Institutional Challenges in the New Millennium, Report by the Consultative Board to the Director-General Supachai Panitchpakdi, 2004, WTO 6 The Agreement on the Global System of Trade Preferences Among Developing Countries (GSTP) was established in 1988 as a framework for the exchange of trade preferences among developing countries in order to promote intra-developing country trade. The idea received its first political expression at the 1976 ministerial meeting of the Group of 77 (G-77) in Mexico City and was further developed at G-77 ministerial meetings in Arusha (1979) and Caracas (1981). UNCTAD services the Committee of participants and provided technical and administrative assistance in setting up the GSTP. 9

Table 7: Benefits under GSP to India, 2006 EU Preference-Giving Countries US Australia Belarus Canada GSP GSP-LDCs EBA ACP Japan New Zealand Norway Russian Fd i Turkey India X X X X X X X X X X Switzerland GSP AGOA Source: Generalised System of Preferences, List of Beneficiaries, UNCTAD, 2008 Srinivasan and Tendulkar (2003) sum up the experiences of developing countries in their association with GATT until the launch of the Uruguay Round of trade negotiations in 1986 by presenting two diametrically opposite interpretations. According to the first interpretation, there is no denying the fact that except for a few waivers in the form of GSP and domestic policy making autonomy, the market access concerns of developing countries were never looked at in a holistic manner. Tariffs and other barriers in industrialised countries on products of export interest to them were reduced to a smaller extent than those on exports of industrialised countries in successive rounds of multilateral trade negotiations. Products in which they had a comparative advantage, such as textiles & clothing, were taken out of GATT s disciplines altogether. Textiles & clothing are also important export item for India. Agriculture, a sector of great interest to most of the developing countries, largely remained outside the GATT framework. The other interpretation is that most of the developing countries including India, in their relentless but misguided pursuit of the import-substitution strategy of development, in effect opted out of the GATT. If they had participated fully, vigorously, and on equal terms with industrialised countries in the GATT negotiations and unilaterally adopted an outward-oriented development strategy, they could have achieved more and better growth than what they have got by demanding and receiving crumbs such as the GSP and a permanent status of inferiority under the special & differential treatment clause from 10

the rich man s table. Given India s early start in industrialisation, it certainly would have grown faster had there been a timely shift towards an outward-oriented policy regime. By the time the Uruguay Round of multilateral trade negotiations were launched, India and some other countries like Brazil had slowly started realising the importance of a liberal world trading order. This change in attitude was significant as India already began the process of piecemeal reforms in the mid-1980s, which finally resulted in the adoption of a full-fledged economic reforms programme in the early 1990s. The new trade round was a timely opportunity for India to push its agenda of trade liberalisation at the multilateral forum. The inclusion of agriculture, phasing out of Multi-Fibre Arrangement and a major revamping and strengthening of the Dispute Settlement Mechanism (DSM) increased the interest and enthusiasm of India and many other developing countries in the new round. However, India had a serious reservation on the inclusion of IPRs and was a bit apprehensive about inclusion of services in the negotiating agenda. Both these issues were aggressively pushed by US MNCs, who were market leaders in services and hightech sectors. IV. Governance in Multilateral Trading System Just as negotiation on trade liberalisation in agriculture, non-agricultural market access, and services is crucial, so too is the governance of the multilateral trading system to advance the growing legitimate interests and aspirations of developing countries. Contrary to the expectations of developing country members of the WTO who formed the majority of its membership the multilateral trading system established after the successful conclusion of Uruguay Round further perpetuated the inequity. The ongoing Doha round of trade negotiations too is not giving enough reasons to developing countries to feel optimistic about getting a pro-development deal. However, one significant achievement of the ongoing Doha round is that developing countries have been successful in increasing their participation in the WTO negotiations. Now, the challenge is how to translate it into effective participation. The second important governance issue is to strengthen the rule-enforcement processes of the WTO. 11

IV.1 Global Trade Governance: India s Strategic and Important Role For a very long period under GATT/WTO, multilateral trade negotiations were overwhelmingly dominated by North America and Europe. The bilateral agreements between the United States and the European Union the Blair House agreements became the basis for concluding the Uruguay Round of GATT. Along with these two trading giants, Japan and Canada formed the core negotiating group during the Uruguay Round of trade negotiations. The group was termed as Quad. This practice of exclusion of developing country members from the core negotiating group resulted in trade agreements that were openly favourable to the rich countries. The inequalities set into the WTO agreements reflected the overwhelming power of the rich countries. However, developing countries quickly learnt that in order to redress the unfairness in the trade agreements they need to adopt a new negotiating posture. They also realized the importance of alliance building in WTO negotiations. If a fair deal had to be achieved, the US and the EU were to be prevented from imposing their agreements on other members. This could be possible only when developing countries build solid alliances focused on specific negotiating proposals. The indication of this new posture started emerging from events which led to the collapse of the Seattle Ministerial Conference in 1999 and the way developing countries approached the negotiations prior to the launch of a new round of trade negotiations at Doha in 2001. However, this new posture acquired firm shape in Cancun, when developing countries cemented their alliance by leaving aside the minor differences. Resisting yet another attempt by the two big economic forces to impose an unfair agreement, Brazil, India, South Africa and China headed the creation of the G20. It was founded to push the USA, EU and Japan to dismantle barriers to agricultural trade. Another group which had been set up earlier was the G33, led by Indonesia which focused on proposals for special and differential treatment and special products. Finally, the least developed countries (LDCs) joined other countries from Africa, the Caribbean and Pacific during the Cancun conference to form the G90. These new groups have 12

prevented the joint proposal of the United States and EU from becoming the basis for agricultural negotiations. IV.2 India in Doha Round Negotiations The vicissitudes of the Doha Round had been a great revelation in many ways. Developing countries for the first time in the history of multilateral trade negotiations realised their collective bargaining strength. Unlike in the Uruguay Round, where only a few developed country members formed part of the core negotiating group, the Doha Round witnessed the inclusion of India and Brazil in a core group. Whether it is G-6 7, FIPs 8 (Five Interested Parties) or New-Quad 9 ; India and Brazil have become the flag bearers of developing countries. This indicates an emasculation of rich country members traditional role in driving and deciding the agenda of multilateral trade negotiations. In the course of Doha Round of negotiations, India played a pivotal role in alliance building, although it was a bit skeptical at the time of the launch of a new round. During the Uruguay Round, only one formidable grouping in the form of the Cairns Group 10 could be formed and that too was not purely a developing country alliance as it included Australia, Canada and New Zealand. In contrast to this, in the Doha Round developing country members worked with better coherence and coordination, which resulted in the formation of some very strong alliances such as G-20, G-33 and G-90 11. While G-20 is a group of agricultural exporting countries formed at the WTO s Fifth Ministerial Meeting at 7 G-6 comprises of Australia, Brazil, EU, India, Japan and USA. 8 The FIPs are the US, European Union, Brazil, Australia and India. 9 An informal grouping, includes the EU, US, Brazil and India. It played a decisive role in setting the agenda and the direction of the negotiations. 10 The Cairns Group is a coalition of 18 agricultural exporting countries. A diverse coalition bringing together developed and developing countries from Latin America, Africa and the Asia-Pacific region, the Cairns Group has been an influential voice in the agricultural reform debate since its formation in 1986. 11 The G90, otherwise known as the Group of 90, is an alliance between the poorest and smallest developing countries that are part of the World Trade Organization (WTO). The G90 emerged as a strong grouping at the WTO s Ministerial conference at Cancun in September of 2003, taking common positions representing the largest number of countries, with 64 of the 90 countries in the G90 being members of the WTO. It is the largest trading body in the WTO, and it was formed as an umbrella body including the African, Caribbean and Pacific Group (ACP), the African Union, and the group of Least-Developed Countries (LDC). 13

Cancun, the G-33 12 came into existence just prior to the Cancun Ministerial and its main concern is agriculture. India is a member of the G-20 and G-33 as it has both defensive and offensive interests in agriculture. India has very carefully blended her political diplomacy with trade diplomacy. India and Brazil together strengthened the voices of the South, a very diverse and large group, at the multilateral trade negotiations. At the same time on some issues India joined hands with developed countries. For instance, India and the US made a joint submission on trade facilitation. On service trade liberalisation, the Indian industry group worked closely with the US coalition of service industries. India and Brazil also utilised their greater understanding of the WTO negotiations to launch a tri-lateral forum called IBSA (India, Brazil and South Africa a new axis of emerging markets). In its effort to emerge as a leader of a larger group of developing countries, one remarkable point is that India always got the support of its neighbour Pakistan (as against a dynamically prevailing situation, which hinders bilateral trade between these two countries). Pakistan never contested India from taking a lead role in G-20 or negotiating on behalf of developing country members in the elite G-6 at the WTO platform. Geopolitically, India has been very successful in leaving her imprint on the Doha negotiations. A pro-development outcome of the Doha Round would have further enhanced India s important role in influencing international negotiations. The increasing assertiveness of developing countries like India and Brazil not only strengthened the voice of South in multilateral trade negotiations but also influenced its agenda. It is because of India s tough stance that the issues of competition, investment and government procurement, popularly known as Singapore issues, were shown the door from Doha Development Agenda. These issues made their entry into the WTO, though not a part of the negotiating agenda, by way of formation of individual Working Groups. Following the collapse of the Ministerial at Cancun in 2003, in July 2004 it was finally decided to keep 12 G-33 seeks stronger safeguards for developing countries to cushion them against market volatility and sudden surges of agricultural imports, as well as the right to designate special products exempt from tariff reductions. 14

these three issues out of the Doha agenda and by way of compromise trade facilitation, another Singapore issue, was added into the Doha trade negotiating agenda. Another significant contribution made by India in the WTO discussions is the multilateral trade body s role in dealing with social issues such as labour standards and human rights. It is worth recalling that the dramatic collapse of the Seattle Ministerial Conference in 1999 was partly attributed to the US insistence on forming a Working Group on labour standards in the WTO to explore the possibility of its inclusion in the future negotiating agenda. India along with many other third world countries vehemently opposed the inclusion of labour issues, citing reasons that rich countries would exploit this to impose trade sanctions on poor countries. Furthermore, India argued that it is the ILO and not the WTO which is the most appropriate forum to deal with poor labour standards of its member countries. Today, the labour issue is out of the WTO for which much of the credit would definitely go to India. V. Role and Responsibilities of India in Governance of a Post-Doha Round WTO India is delicately placed in today s global trading landscape. India needs to do a fine balancing act between its economic interests and political diplomacy. For furthering its economic interests India cannot adopt a confrontational stance with the North. At the same time it has to try to tap the huge potential benefits of deeper economic and trade cooperation with the larger South. One important feature of India s high export growth is that it has been realised primarily through an increase in its export to traditional trading partners, USA and the EU and a huge expansion in its trade with China. With Indian service sector hugely dependent on Northern markets for its export, India s cooperation with North is equally important. So far India has successfully led developing countries in furthering their trade agenda at the multilateral forum. The post-doha round period would be crucial for sustaining this South-South solidarity. The collective strength of developing countries would be extremely important to ensure the effective implementation of Doha round agreements. Developing countries need to be doubly careful after having seen the poor implementation record of the Uruguay round of trade agreements. India did try to raise this issue at the Seattle Ministerial Conference in 1999 and after that at Doha in 2001 but 15

the issue lost its prominence because of lack of interests shown by developing countries themselves. It is because of the sole efforts of India that a separate text on implementation was formulated and included as part of the Doha Development Agenda. India s recent announcement of providing duty free quota free market access to all LDCs is a good gesture, which would definitely help in further cementing its alliance with poor developing countries. With the growing importance of technical assistance, India needs to emphasise the usefulness of trilateral development cooperation. The WTO Task Force on Aid for Trade, constituted to make recommendation for its effective operationalisation, too endorsed this mode of delivery of technical assistance to poor countries. VI. Conclusions Since the collapse of the WTO s Seattle Ministerial Conference in 1999, host of issues concerning the operation and governance of WTO system got unprecedented attention. It got further impetus in the course of the Doha round of trade negotiations. Developing countries are no more passive onlooker to the entire process of negotiations in the WTO. After Seattle another WTO Ministerial Conference collapsed at Cancun in 2003. However, in more than one ways Cancun proved to be a turning point in the history of multilateral trading system. It further reestablished the fact that developing countries cannot be taken for granted as happened in the previous rounds. The ongoing Doha round of trade negotiations is not only about dismantling agriculture trade barriers, agreeing on coefficients in NAMA but perhaps more importantly on redefining the role and functions of multilateral trading system. Developing countries in earlier decades had cooperated only politically as we have witnessed the formation of G- 77, NAM etc. Now they have realised the importance of greater degree of economic and trade integration among themselves. The IBSA (India, Brazil and South Africa) initiative by the three larger developing countries encompassing the three continents is a case in point. There have been further deepening and widening of South-South FTAs such as 16

AFTA (ASEAN Free Trade Agreement), Mercosur the two relatively most successful FTAs of the South. This new found strength of Southern countries is not only because of their sheer numerical strength but their growing economic importance in world economy. The rise of China in manufacturing, emergence of India in Services and strength of Brazil in agriculture have made international community realise that it is the larger South which provides new opportunities for trade and investment. What is more important that developing countries have now started realising their collective strengths and bargaining power. It is this very hard fact which has helped them to influence the agenda of multilateral trade negotiations. In agriculture, for instance, unlike USA and EU in the past, in the current Doha round G-20 is setting the agenda of negotiations. References Cooper, W. H. (2006), Generalised System of Preferences, CRS Report for Congress, USA. Shukla, S. P. (2000), From GATT to WTO and Beyond, Working Paper No. 195, The WIDER, United Nations University, Helsinki Srinivasan, T. N. (1998), Developing Countries and the Multilateral Trading System: From the GATT to the Uruguay Round and the Future, Oxford University Press, Delhi. Srinivasan, T. N. and S Tendulkar (2003), Reintegrating India with the World Economy, Institute for International Economics, Washington D C. 17