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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
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
Economic Statecraft: A review
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
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: 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
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
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
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
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
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
Mainstream explanations cont.
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
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
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
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.
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.
•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
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