12:34 PM Jul 2, 1997

"IT IS AN UNFAIR WORLD" YOU HAVE TO LIVE IN!

Geneva, 1 July (Chakravarthi Raghavan) -- The United States stand of insisting on disinvoking the BOP rights and a five-year phaseout of all the quantitative restrictions in India's import regime resulted in the failure of the consultations, trade officials said.

The resumed consultations ended Tuesday evening, and the major industrialized nations, led by the United States are expected to invoke the WTO's Dispute Settlement Processes to force India to remove all restrictions, given that it can no longer justify them on BOP considerations in the light of the IMF's assessment.

A US official said that when the case is taken up and India loses its case before a panel adjudication, the Indian government can tell its public that it did its best, but that the WTO ruling had to be obeyed and implemented.

The outcome would result in a strange anomaly of the major advocates of removal of BOP restrictions in a short-time span, themselves maintaining quota restrictions on textiles and clothing products till 2005, and very high tariffs on agriculture even beyond that date, under the most optimistic assumptions of a second round of agricultural trade liberalisation talks.

Even the most ardent of the "liberalizers" in the government, and some of their supporters in the media, would find themselves hard put to respond to the likely domestic public criticisms over this "unfairness" of the trading system.

But trade officials of the industrialized countries shrug this off, and say "this is an unfair world, and you have to live in it."

One trade official agreed that it was anomalous that as a result of this situation, India would have to import rice at zero duty from the very same developed countries who have external tariffs and tariff quotas in the range of 200-350 percent.

India at the time of the conclusion of the Uruguay Round should have fudged its figures to show a high tariff (for conversion of non-tariff barriers), is the argument of these officials.

They dismiss the view that all this could have political repercussions and further erode the support for the WTO system within India.

In fact, the US negotiators have been getting daily from India (by fax) press clippings of stories in the Indian press -- several of them highly speculative news reports -- and circulating them to other delegations, to argue that the Indian government is divided and the WTO should push for immediate full liberalization and strengthen the hands of the neo-liberal wings of the Indian government.

While India had initially started with a nine-year phase-out, in three three-year stages, at the time when the negotiations broke down, on the face of it the difference was only between the 5-year diktat of the US and the Indian request for 6-years, taking its domestic political considerations into account.

But the US negotiators, on instructions from Washington said no, and that was it, a trade official said.

Neither the Indian negotiators, nor other trade officials, were able to say what actually weighed with the US -- non-trade considerations, the China syndrome (that any concession to India would need to extended to China in the WTO talks) or something else.

But the net result is that, if India loses in a dispute settlement process, as is generally considered to be likely, it has to either accept the rulings and remove the restrictions (with a possible 15-18 month time-span after the adoption of the ruling) or face retaliations.

Trade officials said that privately, the EC and Japan suggested that they were willing to be flexible, but that in the BOP committee none of them spoke up to say that they would accept the Indian proposals - and thus isolate the US.

Several developing countries supported the Indian plea. But from the beginning of these consultations, early this year, and in the resumed consultations, the United States has been organizing the coalition of industrial countries and forcing them to press for quick actions by India.

The US negotiators have been bolstered by speculative reports in the Indian media about the "flexible" mandate to the negotiators -- even though in fact New Delhi had given the negotiators here (the Commerce Secretary of India and the Indian ambassador) very strict instructions.

An outcome of the exercise is that while the all the industrialized countries who took a rigid stand to call for end to the QRs -- the United States, the EC, Norway, Switzerland, Japan etc -- have very high "tariffs" on agricultural imports, in the range of 300-700 percent, and even two successive tariff cutting rounds would not reduce them appreciably, India with bound zero tariffs on some products, but with a protected market through BOP-justified QRs would find itself defenceless against the subsidised imports from these very same industrialized countries.

Also, while its own textiles and clothing exports would be facing quota restrictions till 2005 in markets of the US, EC and Norway (which prides itself elsewhere on its sustainable development approach, but is the most rabid advocate of neo-liberalism at the WTO), India would have to remove them by 2000 or so.

In several of these product lines though -- excepting for a few that were bound in the GATT at the initial stage, such as rice -- the Indian tariffs are not bound, though the applied tariffs have been cut over the last two or three years.

Domestic political pressures are now likely, and none of the governments would be able to resist, for raising the tariffs to high levels, and for use of the full panoply of trade defensive instruments in the same way the US, EC and Japan do.

It could also have some repercussions on the Indian positions in the negotiations on financial services, or the new issues, and the even newer issue announced Tuesday by President Clinton, to push through the WTO (most likely at the 1998 ministerial meeting) for free trade on internet by year 2000.