On July 22, 2008, the WTO talks in Geneva could have died if the non-confidence vote in India had not been defeated. Lucky for the WTO talks, this brush with a fatal delay to the process brushed by with a narrow margin. But, if the Indian Government had been defeated in the non-confidence vote, the Parliament would have been dissolved and Minister Nath would not have been able to return to Geneva to participate in the high level talks that are occurring this week.
On July 21, 2008, the EU representatives at the WTO talks agreed to increase their reductions in agricultural subsidies from 54% to 60%. However, this concession was delivered with the statement that emerging economies, such as India, China and Brazil, would have to reduce their tariffs on industrial goods, otherwise the Doha Round would not succeed. Hence, it is critically important for India to be at the table for current WTO negotiations to succeed.
If the India Government was dissolved and the WTO was forced to wait until after a new government was formed in India, they would be waiting for the new U.S. government to be formed also. It is far from clear that the presumptive presidential candidates would support the cuts to agricultural subsidies that are currently on the table or that must be improved this week.
This situation raises an important issue that will become headline news more regularly in the future (at least I will make the safe prediction). Domestic politics and power struggles can negatively impact on trade deals. The world is learning this lesson while watching the U.S. Congress' tactics in stopping the approval of the United States - Korea Free Trade Agreement, the United States - Panama Trade Promotion Agreement and the United States - Columbia Trade Promotion Agreement. We saw Costa Rica delay approval of the CAFTA-DR Agreement and the domestic problems associated with the approval of that free trade agreement. The United States - Korea Beef Agreement has led to consumer protests in the streets of Seoul. Politics at various levels are proving to be a tactical maneuver.
But, what we could have experienced today could have represented (and maybe still does represent) a dangerous step in a new direction. Political foes may, in a parliamentary system on other domestic constitutional structures, derail multilateral trade negotiations. Pro free trade political parties may be removed from office and replaced with protectionist political parties. If this should occur and important concessions tabled in the negotiations are reversed, multilateral trade negotiations may suffer serious negative consequences.
Yes - the WTO dodged a bullet today, but their will be something else tomorrow. The Doha Round is in a difficult place (even through Geneva is very secure). The governing party in India may return to the WTO negotiating tables wounded by serious credibility issues . They may feel as though they must take a cautious approach and it is possible that anything they agree to in terms of tariff reductions for industrial (non-agricultural) goods will be the subject of another non-confidence vote.
This would make from good drama if trade negotiations were more interesting.