The US Congress is slated to review India's most-favoured-nation (MFN) status in the wake of its nuclear tests. Most-favoured nation is in fact something of a misnomer: MFN status really means not less favoured than any other. Further simplified, that means that any trading concessions offered to one country will be offered to all other countries under MFN and that no discrimination will be made between them. The world-trade regime presided over by the World Trade Organisation makes it mandatory for all member countries to extend MFN status to one another. So what the US Congress may now be considering is to withdraw a status that is legally guaranteed by the WTO, of which both America and India are members.In fact, the whole idea militates against the letter as well as the spirit of the WTO agreement. Not only is it a sad example of the US propensity to invoke international law only when it suits it, and for the rest to merrily clobber the world with its domestic laws and ideas. For starters, theworld-trade regime does not allow for the application of trade sanctions to meet non-trade objectives and India's nuclear tests do not fit the definition of trade measures by any stretch of the imagination. And then there is the requirement for members to extend MFN status to one another.
Under the WTO regime, India could challenge such an action by the US in the WTO. If push comes to shove, it ought to do this. A victory in the WTO would entitle India to impose retaliatory sanctions, although it would be well within its rights to retaliate against an action not mandated by the word-trade regime in the first place. But prevention is better than cure.
Ideally, such a dire scenario ought not to materialise. The administration does not want to escalate the sanctions row with India. If India decided to retaliate American interests would be compromised too, though India would hurt a lot more. Already several Clinton aides have warned that sanctions ultimately squeeze American firms as much as their intendedtargets. Till now, for all the internal and external criticism of American sanctions, America has not violated any global rules in imposing sanctions against India. Withdraw MFN, however, and America itself violates an agreement to which it is party and loses standing.
Bill Clinton should know about the awkwardness of this. He had to spend a lot of his time recently trying to fight off the embarrassment caused by America's Helms-Burton law. This unilateral requirement to sanction foreign investors in Cubans' expropriated property so outraged the European Union that a nasty fight in the WTO very nearly followed. It was only averted at the last minute to save the overall bilateral relationship. India is right in the first instance to attempt persuasion from its own side, to which end it has hired several lobbying firms to advise Congress against the folly of withdrawing MFN. And yet, whatever the administration may want, the US is now by its own admission a sanctions-crazed country. As many as 73 countriesare currently under US sanctions for one reason or another.
That is nearly half the world! Here is hoping that good sense on sanctions will start with the MFN issue.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.