The World Trade Organisation ministerial conference in Cancun will set the course the Indian economy has to pursue in the coming years.
The three unresolved issues -- which include the four-point Singapore issues (trade facilitation, transparency in government procurement, competition policy and investment), patents and compulsory licensing by countries without domestic manufacturing capacity and agriculture -- do not include manufacturing as such, but will have a far-reaching impact on a country's manufacturing sector.
Our negotiators, therefore, must not allow any elbowroom to Supachai Panitchpakdi, WTO director general and chairman of the negotiating group on market access.
The key element of the negotiations should be transparency. Practices such as too many meetings, delay in circulating documents, exchanging views in small groups and circulating papers without members approving the draft may lead to confusion.
Regarding market access in the non-farm sector, the developed countries are not likely to be affected by tariff reduction. The average basic duty for non-agricultural goods in the developed world is below 3 to 4 per cent.
But the developing countries must have the imperatives of protecting certain sectors such as small-scale industries.
The developed countries use safeguard measures such as anti-dumping to compensate their industry many times more than what is lost due to low tariff. The US did suggest at some stage to do away with all tariffs in industrial goods by 2015. For the industries in the developing countries, lacking in the resources and infrastructure, tariff remains the single-most important instrument.
On the issue of applying zero-duty on seven items, the point to note is that the developed countries have the major share in these items and will benefit the most. For the developing nations, the cut should be made voluntary. One cannot apply the same yardstick on countries at different levels of the economic spectrum.
Another crucial factor in the negotiations will be the benchmark to be used for the reduction in tariff. The impact will be varied depending on whether the reduction is benchmarked against the bound rate or the applied rate.
In India, the applied rate is much lower than the bound rate. This gives the economy a flexibility to come to the aid of domestic industry. It is now time to insist on a linear cut on the bound rate instead of going in for some fancy formula.
As regards to Indian steel industry, it is caught between the proposed OECD (Organisation for Economic Co-operation and Development) steel subsidies agreement on one side and the use of trade remedies by our partners on the other. Critical markets like China and EU are regulated through tariff rate quotas.
Indian industry has somewhat recovered from the worst days ever seen in the last 10 years. A reduction in the bound rate on steel products now will hit the industry hard even before it completely recovers from the shock of the late 1990s.
There should not be any further cut from the current bound rates for Indian steel sector at least for 5 years. This will give the industry time to fully recover from the worst-ever recession.
The most fundamental concern for industry in the developing countries is how the proposed market access negotiations will address the trade distorting practices, especially in the steel sector.
The negotiators from India and developing countries should agree to further concessions only when other members of the WTO agree on reducing non-tariff barriers and tightening the misuse of trade remedies like anti-dumping.
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