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US prods India to join 'win-win' WTO round

Our Correspondent in New Delhi

A day after granting duty-free access to 42 Indian products, the United States on Thursday did some tough talking with India on greater deregulation, faster privatisation and lower tariffs and warned that New Delhi would be left behind if it did not agree for a new round of multi-lateral trade negotiations.

The US prodded India to put aside its reservations about joining a new global round of market-opening trade negotiations, warning that its absence would only leave the field to others.

US Trade Representative Robert Zoellick warned New Delhi that if it continued to say no it would have no voice to make itself heard in a process from which the developing world has the most to gain.

"Active and constructive participation in a new trading round would provide India with the opportunity to amplify its voice and help shape the rules of globalisation. Withdrawal will leave the field to others," Zoellick told captains of Indian industry.

Adopting a firmer stance a day after announcing that Washington would allow duty-free imports from India valued at up to $540 million, Zoellick also chided New Delhi for maintaining high tariff and regulatory barriers.

But his central message at a meeting with business leaders in New Delhi was that India cannot afford to miss out on the benefits of a round he believes is likely to be launched at a World Trade Organisation meeting at Doha in November.

"The developing world has the most to gain from a new round, and the most to lose without one," he said.

"A new round would be a win-win for India. By helping to knock down domestic barriers to trade, the round would provide India's consumers with more choices and lower prices, while boosting the long-term competitiveness of the Indian economy."

Developing nations, which account for more than three-quarters of the WTO's 142-strong membership, believe they have still not benefited from the 1994 Uruguay Round trade pact.

This has made them suspicious about the promised gains of a new round, and many want something in return for their own liberalisation efforts, which have opened doors for rich-country investors and exporters to their markets.

India, a key player in determining the stance of developing nations at Doha, has said there should be no new round unless implementation concerns -- like the phase-out plan for textile quotas in the developed world -- are taken up.

There are many strident voices in India over trade liberalisation despite the coalition government's commitment to a "second generation" of the reform process begun a decade ago.

The Swadeshi Jagaran Manch (Forum for Nationalistic Awakening), a group allied to Prime Minister Atal Bihari Vajpayee's Bharatiya Janata Party, called on the government this week to withdraw from the WTO.

"The WTO agreement has flooded the country with foreign goods that are endangering the economic independence of the country," one of the groups leaders was quoted as saying at a protest on Wednesday, the first day of Zoellick's visit.

The trade representative said Washington was working with developed nations to address their implementation concerns, had already offered adjustments and would be willing to consider other concerns as part of a new negotiations.

"Yet Indians also need to honestly assess the very real benefits of the Uruguay Round for India and other developing nations," he said.

He noted that India's textile product exports to the United States had risen by 84 per cent because of Uruguay Round reductions in US barriers, and India's exports of farm goods to the United States had grown by 74 per cent.

The United States is India's largest trading partner, accounting for about 23 per cent of its exports and about nine percent of its imports.

As a step towards nurturing that trade partnership -- and a blossoming bilateral relationship -- Zoellick announced on Wednesday that Washington would grant duty-free treatment for 42 Indian products such as jewellery, leather goods and carpets.

However, he was critical of the steep tariff and regulatory trade barriers which India maintains.

"Although India's average tariff rate has fallen to about 30 per cent, that is still twice as high as China's average rate, and 10 times as high as the United States," he said.

The sooner India supports new negotiations, the more influential it will be. A new round would be a 'win-win' for India, he said at the joint forum organised by CII, Ficci and Assocham.

Zoellick said failure to launch a new round at Doha would not be good for US which commands 20-25 per cent of the world economy, but it would not be too badly affected either as it has regional and bilateral agreements including Free Trade Areas with other countries.

"But India will be a loser, so it needs more than ever to seize the opportunity in negotiating for a new round."

The USTR further pointed out that India's neighbouring country China which would be a WTO member by the end of the year, had actively supported the launch of a new global trade round.

Terming the perception among some in India that Uruguay round had not brought benefits to India as 'false' he said, "Indian need to honestly assess the very real benefits of the Uruguay round."

In the post-Uruguay round scenario, the total value of India's exports to the US has more than doubled and over half of the Indian imports enter the US duty-free, he said.

Spelling out the benefits for India in supporting a new round Zoellick said India and US share a number of objectives for a new round.

"We can promote more open trade in agriculture, reduced barriers for services and more manufacturing trade. We can work co-operatively to thwart efforts to employ labour and environmental concerns for protectionist purposes".

Commenting on the current state of the Indian economy, he said despite a decade of liberalisation, India's tariff and regulatory barriers relative to other countries remain higher.

Calling for greater deregulation, he said that India could reap major gains from further liberalisation of its agricultural market.

"India's real challenge is to lower import prices and embrace opportunities to export."

Zoellick said his visit to India was aimed at developing a better understanding and exploring areas of common interest to further Indo-US negotiations.

Additional inputs: Reuters, PTI

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