India and the WTO March 18, 2014

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 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

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 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

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

What is the WTO and why does it matter?

Context: The WTO Established in 1995 as successor of GATT(General Agreement on Trade & Tariffs) Result of series of negotiations from (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 Established in 1995 as successor of GATT(General Agreement on Trade & Tariffs) Result of series of negotiations from (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

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 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

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 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

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 Second largest population: 1.2 billion Nuclear power Rapidly growing economy Almost 30% of the population below the poverty line BRIC nation

India’s schizophrenic rise 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

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 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

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 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

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 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

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 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 Mainstream explanations cont.

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 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

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 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

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. 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.

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. 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.

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. 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.

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.

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 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

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 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