By M.K.Venu,Zee News Business Editor

Doha dilemma: Harp on old issues or agree to a new round

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In its interaction last week with the visiting United States Trade Representative, Robert Zoellick, the Indian government appeared to have stuck to its uncompromising position that it will not agree to discuss new issues at the WTO ministerial-level talks at Doha. India`s stand is that there are too many implementation problems in the existing WTO agreements, and therefore new issues like labour and environment standards need not be brought in now.
However, some unwritten and unstated understanding has been reached between India and United States over the way out for India in regard to new issues. The United States has subtly told India that it can actually avoid isolation by participating in a new round by simply endorsing some new issues on the agenda, but not all of them.
For instance some of the new issues being pushed by the developed countries are:

  • Further comprehensive cuts in industrial tariffs.

  • A new competition policy.

  • New cross-border investment norms.

  • Labour and Environment standards.

    • The United States wants India to endorse at least some of these new issues that may be beneficial to its interests in the medium term. For instance a comprehensive reduction in industrial tariffs is something finance minister Yashwant Sinha had also announced in his 2001-02 budget. He has committed to reducing peak customs tariff to 20 per cent and average tariff to ASEAN levels ie. 10 per cent, by 2004.
    So this is something India may endorse in the new round. India has serious problems with new labour and environment standards, given its current stage of development. On this, India`s sentiment is echoed by other developing countries like Malaysia, Africa, Latin America, Australia and so on.
    The US therefore may soft-peddle the issue of labour and environment if only to get India to agree to a comprehensive reduction in industrial traiffs. This is the compromise that India and US may strike on new issues to be brought on the expanded agenda in Doha.
    The European Union and Japan are more insistent on new labour and environment standards. This will be difficult to introduce as even China will oppose it tooth and nail. India and China therefore will have a lot in common in terms of their response to a comprehensive new round at Doha. Another trick in VSNL disinvestment hat
    There is a tricky issue that has cropped up in the VSNL privatisation that is scheduled for October. The VSNL Chairman recently said the government has proposed to grant some special concessions to the VSNL for giving up its monopoly on international voice traffic from April 2002.
    One key concession is that VSNL can get into long distance telephony and will not have to pay a hefty entry fee that other private operators will for getting an NLD license. Entry fee could normally runs into a few hundred crores. Another concession is that VSNL will not pay the normal revenue share of 15 per cent to the government for some years.
    The catch is that these concessions have been announced for the VSNL only. So what happens if a private company, say Reliance Infocom, buys out VSNL and puts a claim on these concessions that other private companies don`t get. That is tricky indeed. And the government is already worried about this eventuality. Recession takes economics for a spin
    Strange indeed are the ways of Indian companies. Everyone agrees that India is going through one of its worst recessions in a large number of industrial sectors. Industrial growth is down to 2 per cent in the first quarter and there is a demand slump in almost all key industries. A sense of gloom has gripped industry associations, which do not expect a recovery in the near future.
    Given this backdrop one would expect the prices of manufactured products to drop so as to generate more demand. But the opposite is happening. Recently Maruti Udyog Ltd actually hiked prices, even though car sales have generally slumped this year.
    Cement, another key commodity, has also witnessed an upward trend in prices. Cement companies are charging higher prices through cartelisation. This defies basic economics, to say the least. Classical economics tells us that prices firm up in response to higher consumer demand. Here exactly the opposite seems to be happening.