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Carnegie Endowment President Jessica Mathews opened and moderated the event. She welcomed Mr. Jaitley, who was in Washington to talk with U.S. officials about the current round of multilateral trade negotiations, which will come to the forefront of global attention at the September 2003 World Trade Organization (WTO) Ministerial in Cancun, Mexico. Travelling with a delegation of Indian business leaders organized by CII and the Federation of Indian Chambers of Commerce and Industry, Mr. Jaitley also sought to improve relations with U.S. industry and business groups.
Mathews noted that in the same spirit, the Carnegie Endowment had partnered with the Confederation of Indian Industry and the U.S.-India Business Council to organize an India-U.S. track II dialogue on trade policy. Recognizing that the U.S. and India are key players in global trade negotiations, the dialogue works with an array of stakeholders to clarify positions and to search for common ground between the two countries.
Gautam Thapar, Chairman of CII's Northern region and Vice-chairman and Managing Director of Ballarpur Industries Ltd. agreed that the track II dialogue was a strong and mutually beneficial partnership. He expressed CII's belief that trade and trade policy also can be used to further mutual U.S.-India objectives in the areas of peace, human rights, and democracy. This background supported an excellent discussion that morning between Minister Jaitley and U.S. Trade Representative Robert B. Zoellick, he said.
Minister Arun Jaitley observed that the United States and India have a strong political relationship and growing bilateral trade. The United States is the world's largest economy and a key player at the WTO; similarly, India has developed into an important voice of the developing world. In their approach to multilateral issues, the two nations are working to understand each other, and to discover areas of agreement and possible accommodation, Jaitley said.
To support this work, Minister Jaitley stressed the importance of certain ground rules leading up to the WTO Cancun Ministerial. First, he asserted that the pace and areas of negotiation must reflect the political and economic realities of developing countries.
Minister Jaitley identified agriculture as the principal area for negotiation
in Cancun. In India, he explained, 650 million people - or 65 percent of the
population - depend on agriculture, while the average land holding is about
1.5 acres and most farmers are poor. In contrast, he noted that there are between
2 and 3 million U.S. farmers; moreover, industrialized countries can afford
agricultural subsidies, which have depressed prices in the developing world.
India further views itself as gradually becoming a surplus economy in agriculture,
he said. Noting these circumstances, Minister Jaitley expressed India's hope
that adequate windows of exception are created for economies which are highly
dependent on agriculture. Specifically, he argued:
- Domestic and export subsidies for agriculture should be reduced, given their adverse impacts on the developing world.
- Though the U.S. is pushing strongly for increased market access, India also must consider the social and economic consequences of opening its farmers to competition against highly subsidized economies.
- Classification of certain products as sensitive products must allow for an adequate amount of protection.
- The creation of a special safeguard mechanism is needed to enable a country to check a surge of imports in sensitive product areas.
Similarly, Minister Jaitley emphasized that in the area of industrial goods, the Doha mandate envisaged the reduction of tariffs between the developed and developing countries on a basis of less than full reciprocity. While in recent years India has been lowering tariffs autonomously by about 5 percent each year, it has some constraints, including its dependence upon tariffs for a significant portion of government revenue. Certain sensitive segments of the economy, like the small-scale sector, will also need some continued protection, he said.
Turning to services, Mr. Jaitley asserted that India intended to play a proactive role in this sector, where it had shown its expertise and competitiveness. In particular, India is making proposals on Mode I (electronic communications) and Mode IV (the movement of natural persons).
Minister Jaitley argued that for the success of the Ministerial, TRIPS and public health is an issue which should be resolved before Cancun. As a knowledge economy, India supports the protection of intellectual property rights (IPR's), he said. In much of the developing world, however, constraints exist in terms of IPR's and public health. Therefore, he called for a solution consistent with the development spirit of paragraph 6 of the Doha Declaration on TRIPS.
Regarding the four "Singapore Issues" suggested by the European Union in 1996, Mr. Jaitley stressed that no consensus could be reached on these issues at Doha; rather, the Doha meeting decided that modalities would be worked out after explicit consensus was reached at the next meeting, in Cancun. However, Mr. Jaitley stressed that these issues - i.e., Investment, Competition Policy, Transparency in Government Procurement, and Trade Facilitation - will require a lot more discussion before explicit or implied consensus is reached. He noted that developing countries have constraints in many of these areas, and questioned how they would be adjudicated in a multilateral forum.
In addition, Jaitley asserted that before adding new issues to the WTO agenda, members must resolve the implementation of prior commitments, including issues of importance to developing countries such as special and differential treatment. Moreover, the entire discussion process must build in transparency, with draft text negotiated and circulated well in advance to allow for domestic consultations, he said.
In conclusion, Minister Jaitley emphasized that in discussions between India and the United States, there are areas of agreement and areas in which the nations have diverse interests; but overall, both countries have been able to appreciate the other's viewpoints. He asked listeners to remember that developing country governments face much harsher questions from their citizens on the benefits of engagement in the multilateral system, especially when industrialized countries block market access for poor countries and producers. Therefore, he argued that such difficult issues must be tackled in the developed world, where public opinion is easier to manage, and in the spirit of development.
Summary prepared by Vanessa Ulmer, Junior Fellow, Carnegie Endowment for International Peace