Negotiating the G20 Brisbane summit

The leaders’ summit which is the most high profile event in the G20 year, is set for November 14-15 in Brisbane, with Prime Minister Narendra Modi representing India. The Australian presidency of the G20 has witnessed a focus on the fundamentals: trade, tax issues, infrastructure, employment and banking.

On trade, India is likely to find itself cornered after it turned its back on a trade facilitation agreement that had been finalised during last year’s ‘Bali Ministerial’ on concerns over food subsidies.

This November, G20 members representing around 75 per cent of global trade, will be discussing measures to not only boost global trade but also weigh upon its contribution to economic growth.

Trade is regarded as a key instrument of job creation, and although world trade is expected to grow at 4.7 per cent this year, significantly higher than 2.1 per cent growth witnessed a year earlier, trade growth still remains below the pre-2008 levels of an average of 6 per cent per annum from 1980 to 2007.

But if the G20’s trade agenda is going to be seen as successful, negotiators are going to have to put their best foot forward. Measures to boost trade could range from traditional tariff reductions, addressing non-tariff barriers, logistical improvements, modernising custom procedures, beefing up trade-related infrastructure and so on.

To be sure, all these are essentially in India’s interests, but the official stand demands linking food security with trade facilitation. It is entirely possible that India’s demand for settling the food subsidy issue is met in the days to come, although it is hard to predict the outcomes of a multilateral summit.

However, so far there are no reports that India has garnered support from any part of the global South on its TFA stand.

The OECD estimates that actions to reduce global trade costs by 1 per cent could result in a worldwide income increase of $40 billion, with 65 per cent of the benefits accruing to developing countries.

At the G20 summit, the Indian side will be faced with not just this reality, but will essentially have to deal with 19 other member states who pretty much wanted the TFA passed and could not because of India. As a premier forum for international economic cooperation the G20 is in essence committed to the future of the multilateral trading system and accordingly, the role of the WTO.

And the G20 has said it in as many words earlier, including according priority to the WTO’s role. However, after India’s veto of the TFA, which was a hard-fought international agreement, the credibility of any G20 commitment has been put to serious doubt.

So, aside from all the challenges that it traditionally faces in times of economic slowdown, the G20 also has to salvage its somewhat beaten image through this summit, and actions taken thereafter.

From the Indian perspective too, a multilateral system is going to be much more germane to India’s interests than a fractured world of competing mega-FTAs.

One of the key outcomes of last year’s G20 summit in St Petersburg included extending the G20’s commitment to hold back any new instalments of trade or investment related protectionist measures until the end of 2016. This is also one of the reasons why the Modi government’s veto of the TFA has been perceived as an irresponsible U-turn in some quarters.

Since then the Government has found itself at pains to explain to the world that India’s stand was not so much intended to be market-unfriendly as pro-poor. That India is committed to curbing transaction costs in trade is manifest in its focus on beefing up port and railway infrastructure.

And given Narendra Modi’s technology friendliness, it is only a matter of time before the PM himself prioritises modernising custom procedures.

One of the agendas this time around with the G20 is to discuss measures to boost world GDP by 2 per cent in the next five years. However, much of this growth can potentially come from a rise in global trade.

While heightened funding for infrastructure is also one of the areas of focus and is indeed related to trade growth, this is one area where India has already got going at least domestically through budget provisions.

As for trade liberalisation, the TFA is likely to dominate the G20’s trade discussions, and Indian negotiators will have to navigate the tricky questions of food security side by side with the TFA, on which it stands globally marginalised.

Bhunia was with the Institute of Economic Growth. Nataraj is with the Observer Research Foundation