Modi’s decision at WTO to act rather than just petition is a step towards meeting the challenges of 21st century
Mukul Sanwal | August 5, 2014
It is yet to be fully appreciated that the key difference with the past has been Prime Minister Narendra Modi’s willingness to act rather than just petition, request or react.
At Fortaleza, India agreed to the New Development Bank being located in Shanghai, recognizing the largely symbolic nature of that decision -- to secure an Indian head to shape the rules that really matter in disbursements. Similarly, in Geneva he stood firm in pointing out that his first concern was towards the nation’s poor, which a world stressing upon human rights cannot ignore. Reaching out to South Asia, as early as his swearing-in, was a clear signal of our pre-eminent position in the sub-continent. The active role that we are now playing is the essential backdrop for the diplomatic interest that the old and the new ‘super-powers’ are taking in wooing India following the election of Modi.
Taken together, these developments raise three questions for our foreign policy– what bargaining power we have, what should be our strategic objectives and how we should go about achieving them in a globalized and multi-polar world. The underlying issue is not a new-found intransigence on our part, but that the post-World War II international order is no longer able to effectively respond to the challenges of the 21st century.
According to an objective analysis of long-term economic trends by the OECD around 2030 Asia will be the world’s powerhouse just as it was prior to 1800. Currently, the OECD accounts for two-third of global output compared to one-fourth in China and India, and by 2060 these two countries will have a little less than half of world GDP with OECD’s share shrinking to a quarter. China is expected to surpass the US by 2016 to become the largest economy in the world, and India’s GDP is expected to exceed that of the US by 2060, increasing from 11% to 18% as a share of global GDP while China’s share will remain at 28% during this period, and the relative share of both the US and the Euro area will decline. We must, and have, begun to think in global and not just regional terms, and foreign analysts and the other powers will soon adjust to the new reality.
The unresolved issue is that we are yet to define our strategic objectives. The foreign policy of a re-emerging power with the potential of becoming the second largest economy in the world post-2050, as we have been since the dawn of civilization till the age of colonialism, needs more clarity through specificity so that the others know our priorities and we know who our friends and allies are.
As the Congress Manifesto pointed out, so far our key foreign policy goals have been to secure a seat in the UN Security Council, acting as “a critical bridge between developed and developing countries” and identifying India’s “unique position” in terms of the Non-Aligned Movement - almost as if we were reading a note prepared by Nehru 50 years ago. The BJP Manifesto has a bolder vision, seeking our “rightful place in the comity of nations and in international institutions” through “global strategic engagement in a new paradigm”, based on “principles of equality and mutuality”, and a “web of allies” – it reads more like contemporary statements from the US and China. That is why they want to partner with us, because the priorities we set will impact global politics in a multipolar world.
India has global and regional strategic interests and should partner with the country that will best enable us to achieve our long-term goals, and we no longer need to compromise with and rely on the G77, as the WTO negotiations have just shown, as long as we also speak for the world’s poor.
The first goal should be democratisation of multilateralism for sharing prosperity, and we have already initiated steps in this direction with our full support for the New Development Bank, the insistence in the WTO that food security and trade facilitation are of equal importance and we must begin to shape the agenda at the Climate Summit to be held in September.
After the Global Economic Crisis of 2008, the G20 had agreed to modify the voting power in the World Bank and International Monetary Fund to increase the influence of the emerging nations, and that understanding is currently stalled in the US Congress. The BRICS decided to act rather than just petition, leading to surprised reactions all around.
The BRICS, despite being a disparate set of nations, was able to effectively manage differences among its member nations. For example, China, despite its trillion dollar reserves has not retained the position of the head of the new bank or the supervisory bodies, recognizing the emergence of a multi-polar world order. This does not fit the current approaches of strategic analysis, as sharing power is very new in the current model of international relations.
It would be hasty to conclude that the Bank is an anti-West measure. According to recent analysis the infrastructure needs in the BRICS and in other developing countries, will run into trillions of US dollars and the World Bank is not in a position to meet this demand. A division of areas and sectors could well emerge between the New Development Bank and the World Bank. With an initial capitalization of $50bn and emergency reserve of $100bn, the real challenge for the BRICS will be to secure a portion of the $75 trillion held by pension funds, sovereign wealth funds, family offices, etc. by guaranteeing assured decent returns.
The new bank represents a new philosophy to replace the ‘Washington Consensus”, by prioritizing physical infrastructure over other areas such as education, healthcare and women's rights which the World Bank has emphasized. It is also likely that the New Development Bank will not require policy changes at the national level that the World Bank now insists on, and are considered by developing countries to be against their interest. While all these investments support wellbeing, nothing creates jobs and literally drives 'state-building' like infrastructure. Last year China’s loans, largely for infrastructure, to Africa exceeded those of the World Bank, and this trend is likely to be extended to South America. Infrastructure finance is as much a tool of geopolitics as alliances, and will make it more difficult for the West to gather international support for its positions in multilateral negotiations.
The ‘Fortaleza Declaration’ takes steps to frame an alternative intellectual framework appropriate for the 21st century recognizing the global ecological limits to human wellbeing, which would be as relevant and powerful as the stress on basic human rights was in the 20th century. Defining inclusive growth in terms of social and economic rather than political and humanitarian rights, and the decision to develop social indicators, is new. So far re-distribution has been kept out of the United Nations.
The number of working groups set up by the BRICS can be expected to fill the gap in global rules, for example, , and will need rules related to cyberspace, terrorism, technology, energy and food security, and should be considered ‘pro the-rest’ rather than ‘anti-West’, filling a global policy vacuum.
By 2060, in developing countries demand for food, water and energy is expected to double, and reshaping a global system that served the natural resource and human security needs of 20 per cent of the population to one that will share prosperity with all of humanity in an interdependent world will require a common definition of the collective sustainable future of countries. A shared vision of prosperity for four billion people who have yet to benefit from globalization will provide the legitimacy to reshape the global order. The shift will be more than just a continuation of the current system, because it will require new global rules based both on markets and social considerations, and our stand in the WTO must be seen in this context.
The dictionary meaning of ‘negotiations’ is “give and take”, and India correctly assessed that it has already made concessions in accepting the Trade Facilitation Agreement and will have to make further concessions when negotiations are taken up on its concerns over food subsidy. According to the Bali Agreement both issues were to be taken up together, as part of an “interim solution”. It has so happened that there have been very few meetings – three rounds – on food subsidy compared to twenty on the FTA. The negotiation process in effect de-linked the two issues, and India could not agree to this development without some common understanding on the political parameters, leaving the technical details to be worked out later, so that both issues remain part of a single undertaking.
This is not the first time that national positions in important negotiations change with changes in government. The United States did not ratify the Kyoto Protocol even after signing it and the European Union is not honoring its clear commitment enshrined in the Kyoto Protocol for a second commitment period, both insisting that developing countries also take on commitments. Neither are deadlines sacrosanct in complex negotiations in the WTO and the Doha Development Round were launched in 2001 with the “fundamental objective of improving the trading prospects of developing countries”. International pressure is also a regular feature of all negotiations to see who blinks first.
What is new is the implication of India’s stand in the WTO for other multilateral negotiations as it stresses democratization and that the interests of all members are to be given equal importance. The pattern so far has been developed countries, because of their greater resources, set the agenda – which, in multilateral negotiations, is half the outcome! Subsequently, the interests of developing countries are treated separately as part of ‘special treatment’ with limited transfer of financial resources, to deal with the political problems in the negotiations and not the problem itself. India has signaled that this arrangement will not work anymore, and all will have to ‘give and take’.
Similar pressure will soon emerge in the Climate negotiations when the world’s leaders meet on September 23 to shape the contours of a new global agreement. The Prime Minister has correctly observed that the environment versus development debate should not be seen through a western perspective but from an Indian point of view, and the BJP Manifesto rightly put sustainability at the centre of climate change.
Global climate policy currently focuses on the symptoms, emissions of carbon dioxide, rather than on the activities that generate this pollution. Aggregate emission pathways evolve with economic development. In the industrial stages of development an economy largely consumes energy to produce goods and develop infrastructure. With urbanization energy use becomes even more important in supporting electricity and transport based on lifestyles. In industrialized countries two-thirds of carbon dioxide emissions are now coming from the services, households and travel sectors, that is, urban consumption patterns. Up to now less than one billion people have accounted for three-quarters of global consumption; during the next four decades, new and expanded middle classes in the developing world could create as many as four billion additional consumers. Climate policy is really about modifying and shaping urban design and related lifestyles, making it central to the domestic agenda of all countries, and the developed countries have not so far agreed to national caps on emissions or recognising stages of development. These two elements must now be placed at the heart of the new climate regime, with emissions reduction as a way of monitoring national action.
These negotiations will clarify who are friends really are, as they will force others to make a choice whether to support or oppose us. These responses to our position will be important for us as we decide on the tilt we make. That decision will impact decisively on the relative roles of the United States and China in global affairs over the next twenty years, and possibly the next fifty years.
The question we have to ask about any partnership is - what is it in for us? We are the only country with both extensive endemic biodiversity and a world class endogenous biotechnology capacity and with global leadership in software led innovation, we should seek a global framework to leverage this comparative advantage, because in the 21st century states are gaining in influence not because of the size of their military but the strength of their economy.
We must also have demarcated borders and peace in South Asia to enable economic growth. We should expect China to agree to a demarcation on the lines of the suggestion made by Chou-en-Lai just as we expect the United States to agree to modify global trade rules on technology and consider fairness more strongly in the climate negotiations. China has agreed to sharing information on trans-boundary Rivers and is keen to invest in manufacturing and infrastructure development. The United States has yet to indicate the deliverables to support our economic development other than asking us to make policy changes to attract US companies; a move that benefits them more than it benefits us.
The current order responds to the interests of one-fifth of the world and a new global vision of ‘sharing prosperity’ will win the support of the rest. A strategic reordering of the post-World War II system is clearly in our long term national interest, and we should partner with the country that will enable us to reach our full potential.
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