India and plurilateral deals at WTO

In its 27 years, the WTO has had sparse results by way of multilateral agreements on liberalisation or rulemaking in trade. One reason is the convention of decision-making by consensus—even on beginning negotiations in any area—inherited by the WTO from GATT 1947. In an organisation with a highly diversified membership, achieving consensus is a problem.

The good news is that there is a momentum for change. An increasing number of members appear ready to sidestep the problem. At the 11th Ministerial Conference, large groups of members sponsored the Joint Statement Initiatives (JSIs) to begin plurilateral negotiations  on domestic regulation of services, e-commerce, investment facilitation for development, and increasing the opportunities in trade for MSMEs.

On domestic regulation of services, negotiations are over and a text finalised. On e-commerce, there are some issues, such as data privacy and cross-border flow of data, on which the principal players hold divergent views. Even so, the participants have agreed on online consumer protection, electronic signatures, unsolicited commercial electronic messages, access to open government data, electronic contracts, transparency, paperless trading and open internet access. On investment facilitation, considerable progress has been made on text-based negotiations. The proponents steered clear of the controversial aspects of market access, investment protection and investor-state dispute settlement and the talks have progressed well. In the fourth JSI, an informal Working Group with 88 members has finalised a package of six recommendations to help MSMEs increase participation in global trade.

The number of members sponsoring the JSIs was already large at the outset, and support has grown further. By the end of 2021, as many as 67 were participating in the talks on domestic regulation of services, 86 on e-commerce, 112 on investment facilitation and 88 on MSMEs. The EU, Japan and Canada were among the sponsors of all four. The US initially backed the initiative only on e-commerce, but it later joined the negotiations on domestic regulation of services as well. Among the G20, China, Brazil, Korea, Mexico, the Russian Federation, Saudi Arabia and Turkey are participating in most of the groups. But India has not only stood aside but has argued vehemently against the approach. It has taken the view that such negotiations are not consistent with the obligations of the WTO Agreement. On e-commerce, it wants to first focus on building its digital infrastructure and ecosystem before locking itself into binding international rules. It has the formal backing of South Africa and Namibia, and the informal support of a number of other African countries.

No doubt, multilateralism prevailed in the days of GATT 1947, but when the situation demanded, the contracting parties were not averse to plurilateral agreements (PAs). The earliest example was an agreement among 14 developed countries in 1960 to prohibit export subsidies on non-primary products. They did not consider it necessary to wait for developing countries to be ready to undertake obligations on this important trade policy measure. A few years later, in the Kennedy Round (1964-67), the Anti-Dumping Code was negotiated and accepted only by the developed countries, as only these countries were taking anti-dumping measures at that time. The Tokyo Round (1973- 79) yielded two types of non-multilateral agreements. There were exclusive PAs, such as those on government procurement and civil aircraft, in which benefits were restricted to the parties. And there were open PAs, at that time known as Codes, such as those on five non-tariff measures (technical barriers to trade, subsidies and countervailing measures, anti-dumping, customs valuation, and import licensing), in which the parties extended the benefits to all contracting parties to GATT, irrespective of whether they became parties to the plurilateral agreement. Developed countries and a few developing countries such as India and Brazil became parties even as other developing countries resisted. Fifteen years later, the Codes were assimilated into the WTO Agreement and accepted by all WTO members. Thus, open PAs facilitated the conclusion of multilateral trade agreements.

The WTO Agreement tightened the rules for exclusive PAs but left room for open PAs in both goods and services. The Agreement provides for new tariff commitments in goods and new specific commitments on market access and national treatment in services to be inscribed in the Schedules annexed to the GATT 1994 or GATS Schedules respectively through a simple process. In fact, the GATS provides scope to WTO members to undertake commitments on regulatory disciplines as well. Soon after the conclusion of the Uruguay Round, the desire for quick results on additional multilateral liberalisation led trading nations to wrap up three open PAs. The Information Technology Agreement agreed to in 1997 was followed by two others in the area of trade in services (basic telecom in 1998 and financial services in 1999). In order to minimise free riding, each agreement entered into force only after a critical mass of members (generally with a share 90% of world trade) became parties.

India must review its antagonism to open PAs, asking itself five questions. In the past, have leading nations not entered into such agreements when the situation demanded it? Have these agreements eventually proved to be building blocks for multilateral trade agreements? When consensus is difficult, should the WTO members not take this avenue? By shunning international dialogue, is India not denying itself participation in the evolution of rules in a globalised world? Is there any basis for believing that participation in negotiations will imply compulsion to accept the outcome in e-commerce, for instance, even if its concerns are not accommodated?

The writer is honorary professor, ICRIER.