Bridges Weekly Trade News Digest • Volume 12 • Number 32 • 2nd October 2008

Indian Minister Says SSM Not to Blame for Stalled Talks

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Indian trade minister Kamal Nath sent a letter last week to WTO Director-General Pascal Lamy, summarising his views of the stalled Doha Round of trade talks.

In the letter, Nath defended India’s firm stance on the agricultural special safeguard mechanism, or SSM, a controversial trade tool that would allow countries to protect domestic producers from sudden import surges or price declines by temporarily raising tariffs. The SSM has been credited with triggering the collapse of the most recent round of world trade talks, held in Geneva in July, when trade ministers from some three dozen nations met for nine days in an attempt to make progress toward a deal to conclude the seven-year-old Doha Round.

But Nath argued that attributing the breakdown of the July ‘mini-ministerial’ talks to the SSM “unfairly framed the status of the negotiations in a manner where it appeared that India was holding up the SSM whereas the reality is that it was the US which could not agree to an appropriate SSM.”

Nath further maintained that the SSM could not rightfully be blamed for the more recent failure to strike a deal in the intensive negotiations among a smaller group of capital-based officials from seven economic powerhouses - Australia, Brazil, China, the EU, India, Japan and the US, collectively known as the ‘G-7′ (see BRIDGES Weekly, 24 September 2008, http://ictsd.net/i/news/bridgesweekly/29789/).

“While the G-7 meeting had been convened to discuss other equally important unresolved issues concurrently, there was absolutely no movement on any of them,” Nath said.

In addition to the SSM, the G-7 talks, which took place in Geneva in mid-September, also covered cotton, tariff simplification, sensitive products, new tariff rate quota’s (TRQs), blue box head room and the green box of non-trade distorting subsidies.

Yet a large part of the G-7 meeting revolved around the SSM, Nath said. He claimed most contentious question proved to be whether ‘natural growth’ in trade - calculated as a moving average over a set time period - should be accounted for in the SSM trigger. The major agricultural exporters fought for a provision to ensure that such growth would not trigger the SSM’s protective tariffs, but India was firm in its opposition to such a measure.

Nath wrote that the G-7 also considered a proposal put forward by the EU that left out a requirement for a price cross-check, a measure that would require price drops for the agricultural goods in question before the SSM remedies could be applied. The EU offer would also require that the remedies be restricted to a calendar or market year, with a prohibition on SSM usage in the year that follows, a so-called ‘holiday provision’. Australia, Brazil and the EU termed this proposal a ‘take it or leave it’ package.

But, according to the Indian minister’s account, many of the G-7 hesitated to endorse this approach, and discussion on the matter was ultimately inconclusive. India and China both indicated reservations to the price cross-check and the holiday provision, with China also objecting to the size of the remedies suggested. Moreover, the Indian delegation stated that it would require authorisation to negotiate on this new SSM architecture and that it should be discussed first with the G-33 group of developing countries, whose members have consistently have expressed reservations against both of these SSM concepts.

But Nath maintained that, like the SSM discussions, agreement on other contentious subjects - including the blue box headroom and sensitive products - was just as elusive. Regarding tariff simplification, he said, the EU took the firm stance that it would only agree to allow 80 percent of its tariffs to be converted to ad valorem equivalents the day a trade deal took effect - even if the matter proved a deal breaker for other Members. On the subject of new TRQ creation - a trade policy tool that combines quotas and imports to protect domestically produced commodity or product from competitive imports - discussions proved unproductive, although Brazil indicated it may look closer at it, contingent on the provision of substantial quotas in ethanol from the EU and US.

Cotton, while on the agenda, was not even touched upon, Nath pointed out. While critics of the invitation-only negotiations have drawn attention to the absence of the four cotton-producing African nations (Benin, Burkina Faso, Chad and Mali) that represent the primary players along with the US in negotiations on potential cuts in US cotton subsidies from the talks, Nath argued that “India is the second largest exporter of cotton and there are millions of cotton farmers in India…and no solution on cotton can be devised which does not conform fully to our expectations.”

Nath signed off on a more positive note, stating that India “is committed to an early and successful conclusion of the Doha Round. We shall spare no efforts in trying to conclude modalities, as soon as possible, preferably within the year.”

ICTSD reporting.