Debattartikel
The Hindu 3 september 2007
Sten Tolgfors, Handelsminister

India and the Doha Development Round

As a leading member of the G20, India has an extremely important role to play in the negotiations. Much is at stake and time is short.

Sweden has a long history of excellent relations with India. Despite the geographical distance between our countries, our trade relations date far back in time and have grown rapidly in recent years. Current figures show an all-time high in our two-way trade. But moving beyond our bilateral relations, I believe India and Sweden are very similar in the importance our countries accord to multilateralism in the international system.

Therein lies the importance of a successful completion of the negotiations in the ongoing WTO Doha Development Round which is probably the most critical question for the world economy right now. As a leading member of the G20, India is one of the key players in the Doha Round with an extremely important role to play. Much is at stake and time is short. Unless we get a breakthrough soon, the Doha Round risks being postponed for several years or, worse, failing altogether.

Political courage is needed among the leading members of the World Trade Organisation such as India and the European Union (EU) to take a stand. The business community has its part to play too; who better than entrepreneurs and businessmen and businesswomen to make sure politicians understand what is at stake. We risk losing an agreement that would benefit the global economy as a whole, not in the least, developing countries. Estimates show that a successful free trade agreement could lift millions of people out of poverty.

A failed deal would not only mean a missed chance to lift people out of poverty, it would also undermine the multilateral trade system as such. Economic actors need stability and predictability in the world trading system. A failed round could unleash waves of protectionism in many countries. But the response to globalisation cannot be protectionism, attempting to shield one's own companies behind tariff barriers and entry restrictions. As a free trader I am convinced that such actions only result in a lack of competitiveness and poor growth.

Enormous challenge

Free trade could play a deciding role in combating poverty, as well as being part of the solution to climate change and its consequences, the growing concern among the public and policymakers. Combating climate change is an enormous and truly global challenge, requiring local, national and international action. We must tackle it both effectively and urgently.

To further illustrate what I mean, let's take a real-time example: As the output of biofuels increases, policymakers must ensure that global supplies are allocated effectively and smoothly among countries that produce and consume them. Free and open conditions for international trade are the most efficient way to allocate global resources, fully exploiting individual countries' comparative advantages. This principle also holds true for the emerging biofuels market.

Today, however, trade in biofuels is limited. According to the U.N. Conference on Trade and Development, global trade in bioethanol accounted for less than 10 per cent of global production in 2004, suggesting the existence of a large untapped trade potential. Part of the explanation no doubt lies in the presence of significant trade barriers.

For example, high tariffs are often placed on biofuels and biofuel feedstock - in some cases as high as 55 per cent for bioethanol. At the same time, subsidies are widely used to encourage domestic production. Tax incentives are employed to stimulate use, as are mandatory blending requirements. In addition, different standards and certification requirements are applied.

Sweden's starting point is the conviction that a more liberal trade regime, coupled with global standards, is needed. Sweden argues for the elimination of all tariffs on ethanol as a first measure.

Several developing nations have a comparative advantage in producing ethanol - and other biofuels, for that matter. Trade policy should support, not undermine, these countries' ambitions.

Appropriate national policies, as well as strong international cooperation, will be necessary to minimise the possible economic, social, and ecological repercussions of a strong increase in demand for biofuels. Creating an efficient market to expand world trade in biofuels is a policy for the future, one that is good for the environment and good for development. Increased trade, protection of the environment, and poverty reduction can, and must, go hand in hand.

To summarise, international trade is a strong instrument for development. This is equally important when it comes to the ongoing WTO Doha Development Round. Sweden is working hard at the EU level to make the EU a constructive partner in the negotiations. We believe that all parties need to be committed to a flexible approach. There is simply too much at stake to fail now. Earlier this year, when the G4, the EU, the U.S., Brazil, and India met in New Delhi, agreement was reached that the Round should be concluded by the end of this year. I firmly believe that India will take on the challenge that comes with its key role in the negotiations. These negotiations can be brought to a successful conclusion.

(The writer is Sweden's Minister for Foreign Trade.)