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India welcomes Nath back from WTO with open arms

Updated:2008-08-02 09:25:44

NEW DELHI - To some, India's Commerce Minister Kamal Nath emerged this week as the chief spoiler of seven years of intricate WTO negotiations. But to Indians, farmers and industrialists alike, he is if not quite a hero then at least a source of national pride.

On Friday he was feted with a large bouquet of roses by the Federation of Indian Chambers of Commerce and Industry (FICCI), which says it represents over 250,000 businesses across the country.

"He did it. Took the courage to stick it out," said FICCI Secretary General Amit Mitra, as flash bulbs popped and applause rippled around an auditorium packed with diplomats, Indian politicians, business leaders, and journalists.

Sticking it out meant walking away Tuesday from a deal whose advocates say could have helped ensure that millions in the developing world share the wealth-creating benefits of freer trade.

World Trade Organization talks in Geneva foundered after India, China and the United States failed to agree on terms that would allow poor countries to boost tariffs to protect domestic farmers in the event of surging farm imports.

Nath insisted Friday that India nevertheless remains committed to free trade. India has struck bilateral deals with China and Pakistan during his tenure, the country has opened to more foreign direct investment and imports from the U.S. and Europe have soared.

"India is engaging with the global economy as never before," Nath said.

That doesn't mean, however, that India is willing to cede control over its most sensitive sectors, including automobiles, auto components, textiles, and agriculture.

Nath, a short, forceful man who represents Chhindwara, a largely poor and rural district in central India's Madhya Pradesh state, maintains that India and other developing nations have far more to lose in the agricultural sector than the U.S. and Europe do.

Differences in size and commercialization, as well as trade-distorting tariffs handed down by the developed world create an uneven playing field, he said. Two percent of the population in developed countries engage in mostly commercialized agriculture, while about two-thirds of India's 1.1 billion people are farmers, many of whom struggle at subsistence levels, he said.

"I wonder why a European hen can lay a cheaper egg than an Indian hen?" he said. "It's the subsidies."

Nath said he once took a train from Paris to Brussels, to see for himself what European agriculture was all about. What he found, he said, were fat cows, fed with subsidized food.

Nath insists that in asking for reasonable safeguards, India is demanding no more than the developed world already enjoys. The U.S. has invoked tariffs in textiles 28 times in recent years, he said.

Shekhar Bhandari, who runs a logistics company and a hydropower company, said Nath had no choice but to walk away.

"We can't afford free trade," Bhandari said. "Otherwise you'd have domestic unrest," he added.

The Bharatiya Kisan Union, which says it represents over 100 million farmers, threatened to launch a protest Aug. 4 if the government had signed the WTO agreement.

"The government did right by not buckling under the pressure of the U.S.," said BKU spokesman Dharmendra Malik.

Chaudhy Sukhinder Singh, president of Bharatiya Kisan Morcha, another farmers' union, said he felt the U.S. hoped to use Doha to create a dumping ground for its farm produce. "The agreement was just aimed to achieve this target," he said.

But the spokesman for the U.S. Trade Representative blamed India for scuttling the deal, saying it was resistant to compromise.

"There was a package on the table two Friday nights ago that six out of the seven countries all agreed, while not perfect, was the basis for moving forward. India subsequently tried to renegotiate the negotiated document," said Sean Spicer. "Unless you're willing to renegotiate the interests that India wants, then no deal. If you want to talk about other interests within the package that pertain to things the United States has a concern about, they refuse to discuss those."

World Bank lead economist Aaditya Mattoo said one of the ironies of the collapse of talks is that the deal, if passed, would actually have cost Indian farmers very little.

"India would have been required to make virtually no cuts in average applied agricultural tariffs," he said by phone from Washington.

"The heart of the round was about legally locking in liberalization that has already happened. The effects on actual policy were limited. The big benefit was reducing uncertainty by preventing big reversals of policy," he said.

Multilateral talks aside, India has not flinched in opening itself to foreign competition, Mattoo said. For example, under the WTO, India is allowed a 34 percent tariff on industrial goods; in practice the average applied tariff is 13 percent, he said.

Nath insisted Friday that India is ready to resume talks and blamed U.S. Trade Representative Susan Schwab for the breakdown.

He said negotiations in Geneva fell apart after Schwab refused to accept a compromise brokered by the European Union on farm safeguards.

"I pleaded with her," he said, but the two realized their differences were irreconcilable on this issue and ended the talks.

The U.S.-India relationship, he insisted, remains strong.

"She said, 'I love you,' and I said, 'You're lovely yourself,'" he joked.

Nath said India had agreed to a mechanism to police emergency tariff implementation, neutralizing U.S. concerns that the measure could be abused.

"I'm willing to subject ourselves to any safeguard against misuse or abuse," he said. India, he said, agreed to a proposal that would allow an independent committee to strike down tariffs applied in nonemergency situations within 60 days of their implementation.

The U.S. Embassy in New Delhi referred questions to Schwab's Washington office, which could not be reached immediately for comment.


Associated Press writers Biswajeet Banerjee in Lucknow, India, and Foster Klug in Washington contributed to this report.

Source:http://www.forbes.com

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