India and the WTOIndia and the WTO

March 18, 2014March 18, 2014

OverviewOverview

• 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?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 reviewEconomic 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?

• What is the WTO and why does it matter?

Context: The WTOContext: The WTO• Established in 1995 as successor of

GATT(General Agreement on Trade & Tariffs)

• Result of series of negotiations from 1986-94 (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 1986-94 (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: FunctionsThe 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 & CriticismsWTO: 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 contrastsIndia: 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 riseIndia’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

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 WTOFrom 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 influenceThe 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.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.Mainstream explanations cont.

Institution-specific explanationsInstitution-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 explanationsInstitution-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 powerThe 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.

•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

ConclusionsConclusions• 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