Commerce Minister Murasoli Maran failed in his bid to prevent a new round of trade negotiations at the November meeting of the World Trade Organisation. A new round was launched at Doha. Yet Maran may have the last laugh, since the talks may be hobbled or killed by —of all countries —the US.
The Doha meeting agreed that labour standards would be kept out of the next trade round. Maran hailed this as a victory, since India has long opposed labour standards in WTO.
India’s own labour laws meet international standards, discouraging or banning child and slave labour. But India wants labour standards to be dealt with by the International Labour Organisation, and not taken up by the WTO, where they could be distorted into a protectionist device aimed at low-income countries.
Cut to Washington DC. President Bush has just assured the US Congress that labour and environmental standards will be at the centre of the Doha round. This is clearly contrary to the understanding at Doha.
Yet Bush gave this assurance in order to win fast-track authority from the House of Representatives for conducting trade negotiations in various forums. He will now seek similar approval from the Senate.
Unlike in other countries, the US administration has no authority to conclude trade agreements. That is the prerogative of US Congress, which can amend any deal negotiated by the US administration.
Now, other countries in trade talks do not want to play all their cards if these can later be trumped by US Congress. Why take the US Trade Representative seriously when he represents merely the administration and not the final US authority, which is Congress?
To establish credibility at international trade talks, the administration traditionally requests Congress for fast- track authority. This means Congress agrees in advance to give up its right to amend trade deals, in return for the administration accepting guidelines on the general direction of negotiations. The negotiated deal can be accepted or rejected in full by Congress, but not amended.
Ever since the Uruguay Round, Congress has been most reluctant to give fast-track authority. President Clinton asked for this authority to launch talks to expand NAFTA into a Free Trade Area of the Americas, embracing the whole of North and South America.
Congress refused. It also refused him authority to negotiate at the Seattle meeting of WTO. In recent trade deals with Jordan, and also with Caribbean and African countries, Congress insisted on having the final say.
In the case of the free trade agreement with Jordan, Congress insisted, against the urgings of the Administration, that labour standards must be included. That gives a sense of the high priority Congress attaches to labour standards.
Many US businessmen claim they are being unfairly beaten by developing countries with lax labour and environmental standards, and these businessmen have powerful friends in Congress.
So when Bush approached Congress for fast-track authority, he knew he had to claim that labour and environmental standards would be on the agenda of all future trade talks, whether for the expansion of NAFTA or WTO.
This definitely goes against the agreement at Doha to keep labour standards out. To finesse the contradiction, the administration used vague language about labour standards being at the center of the talks, rather than make a specific commitment.
This infuriated many Congressmen, and almost led to the rejection of fast track authority.
Ultimately the House of Representatives approved the measure by a single vote, 216 to 215. So narrow is the victory that some have doubts whether the Senate will give its approval.
Even if both Houses approve, does it really give the US Trade Representative any credibility? If he insists on trying to include labour standards in the WTO agenda, the Doha Round can sink. Developing countries can refuse to go ahead.
He may try to clinch a trade deal by resorting to fancy phrases but no commitment on labour standards. But in that event Congress may well decide that he has violated the guidelines in its fast track authorisation, and reject any negotiated deal.
After the vote in the House of Representatives, Thea Lee, international economist at the trade union AFL-CIO, said This is hardly a mandate for George Bush or any President to negotiate new free trade agreements. Any country that now enters into negotiations with the US will know that.
Let nobody think the US is in a free trade mood, or that declining industries in the country are resigned to fading away. Opposition to trade liberalisation in Congress is so fierce that the President had to promise special protection for textiles, oranges and protein milk to get some influential legislators on his side. Even so, he squeaked through by just one vote.
What are the lessons for India? First, insist on clear commitments from the US Trade Representative on labour standards at the next Ministerial meeting of WTO. Make it clear that the administration cannot take one position in WTO and another in Congress. Better have clarity before the negotiations than grief afterwards.
Second, negotiate on the assumption that any deal may be ultimately be scuppered by Congress. Given the political mood in the US, do not trust Congress to honour commitments it has made today.
Because the US is currently waging war against terrorism, many protectionist Congressmen have reluctantly backed fast track authorisation to strengthen the national position of the President. This mood may not last long, and the President will surely lose the strong moral authority he has right now.
Some people will accuse me of being naive. They will say that Congress always huffs and puffs, but ultimately agrees to what the administration proposes on trade.
I realise that I am going out on a limb, but that is an old habit of mine. I truly believe labour standards have become so important to Congress that it will scupper any Doha Round deal that sidelines the issue. This should delight Murasoli Maran.
