Capitulation all the way

Print edition : February 05, 2000
SUKUMAR MURALIDHARAN

RATHER quietly and with deliberate intent to avoid public exposure, India concluded an agreement with the U.S. at the end of December, in order to phase out rapidly the quantitative restrictions (QRs) it maintains on imports of a range of commodities. Th e formal announcement of the understanding came from the office of the U.S. Trade Representative in Washington. With the nation's attention fixed on the hijacked aircraft at Kandahar, initially the deal failed to attract much public notice.

Invoking a specific exemption available under World Trade Organisation (WTO) rules, India had been restricting the imports of a range of commodities in accordance with certain defined quantitative quotas. This was an exception to WTO norms, which prescri be that import controls should not go beyond the accepted price mechanisms available through tariffs.

U.S. Treasury Secretary Lawrence Summers with Finance Minister Yashwant Sinha in New Delhi.-AJIT KUMAR/AP

Of course, this was not a recourse that was likely to go unchallenged, partly because of India's own schizoid attitude. The only circumstances in which QRs are justified under WTO rules are compelling difficulties on the balance of payments front. And wh ile India often took the position in global councils that it faced precisely this kind of situation, its own policy documents for domestic consumption were more often suffused with optimistic prognoses as far as the balance of payments position was conce rned.

The matter went before the dispute settlement body (DSB) of the WTO following a complaint from the European Union, Australia and Switzerland, among others. India negotiated a six-year timetable for the elimination of QRs with these complainants. Since WT O rules insist on equal treatment of all member-states, this effectively meant that the same regime of QRs removal would apply to the U.S.

Not satisfied with this, the U.S. took up the matter again with the DSB. In its ruling of April 1999, the DSB panel ruled that the six-year period sought by India was inordinately long and that an objective evaluation of the country's balance of payments position showed that the plea was unjustified. A subsequent ruling by the appellate body of the WTO upheld this official conclusion. Both these findings were adopted by the DSB in September 1999, obliging India to conclude a deal with the U.S. for a mut ually agreeable schedule for lifting QRs.

It now transpires that the negotiations were conducted through correspondence between two officials - N.N. Khanna, Additional Secretary in the Ministry of Commerce, and Susan Esserman, his counterpart in the U.S. Department of Commerce. This exchange of letters did not evidently waste any time in protracted deliberation over what is an issue of great complexity.

On December 16, Esserman proposed that the schedule on QRs phaseout that she was proposing, together with Khanna's acknowledgment in reply, be given the status of an agreement between the two governments, to be effective from December 28. And that, in de fiance of all processes of democratic decision-making, is how the matter came to be announced on December 29.

Under the bilateral agreement, which would now have general applicability, QRs on 714 of a total of 2,714 items, will be removed by April 1, 2000. Another 715 items will be unfettered a year later. Generally speaking, the items covered are primary produc ts, such as fish, milk, coconut, coffee, tea, ragi, animal carcasses, and various kinds of grain.

For this reason, the first to protest was the All India Kisan Sabha (AIKS), which described the deal as an act of "capitulation". At a time when various primary products were prone to violent and destabilising price fluctuations, this agreement would bit e deeply into the subsistence needs of the Indian peasantry, warned the AIKS.

It later came to light, through an intervention by P. Chidambaram, who was Finance Minister in the United Front government, that the U.S. had been persuaded to accept a six-year schedule for the elimination of QRs as far back as 1997.

This happened in the course of then Prime Minister I.K. Gujral's visit to the U.S. in September 1997.

Within three days of Gujral's meeting with U.S. President Bill Clinton, Chidambaram recalls, the Indian Ambassador to the WTO was informed by the U.S. Trade Representative that a six-year schedule was acceptable, though the specific details of which comm odities would feature in each phase of QR elimination still needed to be negotiated. The implications of Chidambaram's intervention are clear - that the BJP-led government failed to capitalise on this negotiating opportunity and instead went into a needl essly pliant posture in relation to the U.S.

Murasoli Maran, Union Minister for Commerce and Industry, has contested Chidambaram's interpretation. The devil lay in the details of the deal Gujral and Chidambaram struck, he implies. Though the U.S. was willing to accept a six-year schedule for phasin g out QRs, it insisted on a "front-loaded" programme - that is, on unfettering the imports of a large number of commodities of extreme sensitivity from the Indian viewpoint, in the early part of the six-year period. This gave the Indian government no alt ernative but to pursue its case through the WTO's dispute settlement mechanism. And an adverse ruling from that forum obliged India to resume the negotiations with the U.S. on an entirely new basis.

What Maran failed to address adequately is India's failure to announce a policy decision that had serious implications for its agricultural sector and its small-scale industry. The delay of a fortnight in issuing an official announcement must be consider ed unusual by any standards. And already by January 12, the Government seemed aware that it had much to be defensive about.

The official announcement chose to cast the bilateral agreement with the U.S. in the same mould as the trade liberalisation measures that have been initiated over the last decade. There was, in this reading, no serious departure from accepted practice.

Yet it is difficult to reconcile this claim with various other facts. To begin with, an export-import policy announcement is imminent and this periodic exercise of Commerce Ministry has been - even over the last decade of liberalisation - the context for the announcement of major decisions. From India's point of view nothing would have been lost by delaying the decision on the elimination of QRs till the exim policy was formulated in all its details.

Ironically, the official announcement of the deal with the U.S., in its self-justificatory zeal, drew attention to this precise anomaly. "India has been autonomously removing QRs on imports progressively in successive annual exim policies," it declared, without quite stating the reasons for the unseemly haste displayed this time around when an exim policy announcement is just around the corner.

On his recent visit to India, U.S. Treasury Secretary Lawrence Summers met everybody who mattered, though he spoke little about the agenda of his visit. When asked pointedly about the ethics of maintaining economic sanctions when the U.S. President was c ontemplating a visit to India, he indicated that the lifting of sanctions was premised upon a satisfactory outcome to the security dialogue.

From all indications, the U.S. only conceives of one possible outcome to the security dialogue - India's unconditional accession to the CTBT and the subsequent domestication of the Indian nuclear programme through the medium of the Nuclear Non-Proliferat ion Treaty (NPT). The BJP-led government has, in a bid to fight off this radical abridgment of sovereignty, yielded ground on another front, showing a cavalier disregard for the security of livelihood of a vast section of the country. How much further it will be compelled to cede zealously guarded national autonomy in the policy realm remains a matter of conjecture.

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