India and the WTO

1. India and the WTO March 18, 2014

2. Overview • India’s schizophrenic rise • From the margins of the GATT to the core of the WTO • The political economy of rising influence • Institution-specific explanations: learning to negotiate successfully • The burden of rising power

3. Why this case? • Concrete example of economic statecraft • Demonstrates how countries can act differently in different areas of FP • Role of international organizations in FP • FP in emerging states

4. Economic Statecraft: A review 4 main tools of economic statecraft: • Trade restrictions • Financial sanctions • Investment restrictions • Monetary sanctions

5. What is the WTO and why does it matter?

6. Context: The WTO • Established in 1995 as successor of GATT(General Agreement on Trade & Tariffs) • Result of series of negotiations from 1986-94 (Uruguay Round) • According to WTO its objective is to ensure trade flows smoothly, freely, fairly & predictably • 159 member countries accounting for 97% of world trade

7. The WTO: Functions • Administering WTO trade agreements • Forum for trade negotiations • Handling trade disputes • Monitoring national trade policies • Technical assistance and training for developing countries • Cooperation with other international organizations  

8. WTO: Controversies & Criticisms • Decision-making: consensus & clubs • Failure to secure major agreement • 20 years until Bali 2013 agreement • Perception of favouring big business over developing countries • Concerns over erosion of sovereignty • Lack of consideration of environmental and labour issues

9. India: A story in contrasts • Second largest population: 1.2 billion • Nuclear power • Rapidly growing economy • Almost 30% of the population below the poverty line • BRIC nation

10. In its role in the WTO, India: Acts as a leader of coalitions involving developing countries Makes concessions to smaller members Tolerates free-riding Fights for causes of global justice and fairness India’s schizophrenic rise

11. From the margins of the GATT to the core of the WTO Three sets of indicators point to India’s rising power in the WTO: 1. Participation in the negotiation processes 2. Effective use of the Dispute Settlement Mechanism (DSM) 3. Proven ability to block the negotiations until demands are met

12. The political economy of rising influence Three mainstream explanation for India’s influence in the WTO: Market size • Influence result of emerging market power • Problem – despite rapid growth share of world trade still relatively small

13. Mainstream explanations cont. The role of ideas • Idea that India is doing better because fully embraced liberalization • Problem- still takes very tough negotiating stance, and continued caution towards trade negotiation

14. Mainstream explanations cont. Domestic interest groups • Idea that growth of influence of business groups and industries has increased role • Problem- despite growth of these groups, compared to other countries, influence relatively low

15. Institution-specific explanations India’s rise as explained by its learning to negotiate better. Three main variable to consider in its approach: Coalitions • Keys to success: careful selection of members, coherent agenda built around issues important to all members and support for weakest members

16. Institution-specific explanations Bargaining strategies • Favour strict distributive strategy • High opening demands, refuse concessions and issue threats to opponents Framing • Tendency to frame issues in terms of fairness • Champion for other developing nations

17. The burden of rising power • The power to block does not translate into the power to achieve preferred outcomes: • Negotiations “suspended” in July 2006 • A strict distributive strategy in the first phase of negotiation can result in deadlock. • In 2008, it refused the Special Safeguard Mechanism in agricultural trade.

18. Lessons learned: • To achieve an agreement in one’s favour, the veto-player must use an integrative strategy in the second phase of the negotiation. • Effective leadership requires a willingness to make at least some compromise after having proven one’s credibility as a powerful force.

19. Lessons learned: • Use of a strict distributive strategy, when accompanied by strong coalitions and smart framing devices, can get developing countries a critical role in the process. • However, to use this position effectively to achieve outcomes, a strict distributive strategy must be accompanied by some integrative moves in the second stage.

20. Resistance through strong coalitions is crucial in establishing the credibility of the leadership of a country/ group of countries. • However, effective leadership requires a willingness to make at least some compromise after having proven one’s credibility as a powerful force.

21. For analytic purposes, the important to note is that India’s instrumentality has been very institution and regime-specific • India acts differently across regimes • Status-quo, conformer • revisionist power • challenger of the system

22. Conclusions • Negotiating through international institutions is complex • Can be easier to block outcomes you don’t want than get ones you do want • States can employ very different approaches to gaining power in different contexts • Coalitions can help emerging economies force concessions from stronger economies