By Bharat Jhunjhunwala

Developing countries constitute three-fourths of the members of the WTO. Yet that organisation promotes the interests of the rich countries. These countries weave a web of deception and our leaders start promoting the interests of the rich countries as their own.

WTO Director-General Pascal Lamy did precisely this when he persuaded Commerce Minister Kamal Nath to put dismantling of agricultural subsidies by the rich countries as the prime condition for the progress of the Doha Development Round in the WTO.

Lamy said in Delhi that the three groups need to make sacrifices to make WTO work. The United States should reduce domestic agricultural subsidies. Europe should reduce import tariffs on agricultural imports. And developing countries should reduce import tariffs on manufactured goods. This appears to be a just and fair assessment of the situation. But actually all three measures are more beneficial to the rich countries.

The American government will save huge budgetary resources by dismantling agricultural subsidies. That government is weighed down by agricultural subsidies just as ours is burdened with food subsidies. The American government will be able to lower its tax rates by the removal of these subsidies. That will be beneficial for its consumers.

Lowering of import tariffs on agricultural commodities would make cheap goods from developing countries available to European people. The problem for rich countries in implementing these measures is more political, though they gain economically. Farmers hold a special status in their politics. They are unable to move forward for this reason.

On the other hand, the developing countries will not be benefited much from these measures. The price of tomatoes in the market rises for a short period if the demand is high. But the next day supply increases and rates settle down at the earlier levels. The farmer makes the same low profits from the sale of tomatoes as earlier. Likewise, the price of agricultural commodities like wheat, coffee and bananas may rise for a short time if the rich countries dismantle their domestic subsidies. But soon the supply of these commodities in the world markets will increase and rates will settle down at the earlier low levels.

Many developing countries are waiting to enter the world markets. The farmers from the developing countries will, in the main, make the same low profits from the sale of these commodities as earlier. It has to be admitted, however, that our farmers will make some gains by these measures. If one crore Indian farmers are producing silk today, two crore farmers can make a living from this crop tomorrow. But their incomes will remain at low levels because the increase in price will be nominal.

The final impact of the two measures highlighted by Lamy will be hugely beneficial for the people of the rich countries and only marginally so for the farmers of the developing countries. On the other hand, the rich countries will be able to sell their manufactured goods in larger quantities in the developing countries due to the reduction of import tariffs on these items. Our consumer will get cheaper goods, but our industries will come under pressure.

It can be said that the final result is mutually beneficial and balanced. The farmers of the rich countries and industrialists of the developing countries stand to lose. But the people of both stand to gain. There is a fundamental difference between the character of agriculture and manufacturing. The share of agriculture in the world economy is fast shrinking. Farmers constitute less than 1 per cent of the population of the rich countries. The share of manufacturing and services in the world economy, on the other hand, is increasing.

India will benefit in the area that is shrinking, while rich countries will benefit in area that is expanding. Our benefit is like that of the setting sun, while that of the rich countries is like that of the rising sun. But Lamy is successful in misleading us and Nath is forcefully raising the demand of dismantling of agricultural subsidies by the rich countries as a condition for progress of talks in the WTO. Nath is touting the policies that will lead to more benefits for the rich countries as beneficial for India!

Lamy has cleverly not given importance to issues that are truly favourable for developing countries. First issue relates to the TRIPS agreement. It has become clear that patent laws are leading to much harm by enabling rich countries to charge exorbitant prices for their products like Windows software and life saving drugs.

The second issue is that of movement of labour. The daily wage of an unskilled Indian worker today is Rs 100 against Rs 4,000 of an American worker. Free movement of labour would enable the Indian worker to migrate to America. The level of wage in America will fall, the cost of production will be less and American consumers will get cheap goods. But rich countries are not willing to open migration of labour. Negotiations on this issue in the WTO are made on voluntary basis.

Every country is free to give and accept offers according to its convenience. There is no linkage between movement of labour and world trade; while there is linkage between patent laws and world trade, though both stand on equal footing. Measures that would provide most benefits to our people have been kept outside the mainstream WTO negotiations; and TRIPS, which is harmful to us, has been made an integral part of the same.

Lamy does not mention loosening of TRIPS or inclusion of movement of labour as the main points for progress of talks in the WTO. That is expected because he was previously Europe's representative to the WTO and seeks to promote the interests of rich countries. But why is Nath repeating his talk?

Why is he demanding dismantling of agricultural subsidies as the basic condition of progress instead of demanding loosening of TRIPS or opening of movement of labour?

The rich countries had threatened that they will not take the Uruguay Round further if developing countries refused to take TRIPS on board. Nath can similarly demand that developing countries will cooperate only if loosening of TRIPS and opening movement of labour are made central to the Doha Round. But wise men like Lamy have persuaded our leaders like Nath to project the interests of rich countries as their own.