Yes, trade liberalization is a must for India

There is some evidence that the World Trade Organization (WTO) and its predecessor, the General Agreements on Tariffs and Trade (GATT), have done little to promote world trade. UC Berkeley’s Andrew Rose wrote a paper titled “Do We Really Know that the WTO Increases Trade?” After analyzing 50 years’ worth of trade data covering 175 countries, Rose’s conclusion was: “No.”

Nevertheless, the alternative to a multilateral forum like the WTO is the daunting proposition of bilateral negotiations with the U.S. or Japan or the European Union, which control huge trade empires, and which are guilty of massive protectionism, non-tariff barriers, and mercantilism.

Therefore, at best, India can claim a Pyrrhic victory in Cancun on behalf of the group of 21, which includes Brazil, China, Indonesia, Mexico, and Thailand. The result of inflexible positions taken by both the group of 21 and the rich countries was that Cancun was nullified; no progress was made, and the WTO itself is in danger of fading away.

India certainly has legitimate grievances: first and foremost, the West’s agricultural subsidies are insane, unethical, and deeply hurtful to free trade. But India also suffers from schizophrenia: on the one hand, it accounts for less than 1 percent of world trade. On the other hand, India, as recently as 1750, accounted for 25 percent of world trade. Given the phenomenal growth in areas as diverse as pharmaceuticals, IT services, business process outsourcing (BPO), and automobile components, the day is not far off when India will regain a significant share.

Therefore, it behooves India to think of itself not only as a supplicant small trader, but as an incipient major trader.

The current Doha Round (including Cancun) is supposed to negotiate away trade distortions such as farm subsidies, reduce tariffs on areas like textiles, facilitate trade in services, and set up new rules in the four “Singapore” issues: competition, investment, government procurement, and trade facilitation.

I would like to know which of these areas is not of critical importance to India.

Furthermore, India has filed, and won, a large number of cases under WTO arbitration. Thus, emasculating the WTO does not help India. Nor does Non-Aligned Movement (NAM) type of shrill rhetoric. India’s agenda should be oriented at reducing the fetters on its world-class service industries, and on energizing its emerging manufacturing sectors, not fighting about cotton subsidies to help, for instance, Pakistan. That sort of naïve NAM behavior is strictly passé in the real world. Within the WTO framework, India should focus on free movement of labor for its service industries, and on reducing rich country tariffs and non-tariff barriers to help its farms and factories.

Rajeev Srinivasan wrote this opinion from Chennai, India.

No, the West’s hypocrisy doomed the talks

A famous couplet by Hafez, the medieval Persian poet, discusses the difference in perceptions of a given sound. Open the door, and many would interpret it as the door closing.

The above helps to explain the different perceptions about the Cancun summit.

There is continuous talk in the Western media of a “powerful” group of 21 nations (including India) whose supposed obduracy precluded significant progress at the summit. Before discussing the alleged skullduggery, we need to ask ourselves about how these countries became “powerful” when they were mere “Third World countries” until yesterday.

How exactly did they conspire to bring everything to a grinding halt? Well, by asking for their just share—the right to export as opposed to being in a continuous import mode. India, for example, wanted to have the right to export pharmaceuticals to other countries in view of its competitive prices and good quality.

And the self-proclaimed champions of democracy reacted no differently from Mr. Bumble’s shock upon hearing Oliver Twist request more soup. Opening the market would deliver a self-inflicted defeat on the existing monopoly; lower-priced goods from developing countries have the potential of driving Western companies out of business. While such courage from Third World countries would have been crushed 20 years ago, political correctness prevents the Western angels from stating their feelings in so blunt a fashion today.

So, the Western countries muttered and murmured, hemmed and hawed about exports from one Third World country to another finding their way into Western countries in some unfathomable fashion and ruining things for everybody.

The continuous efforts to throw spanners into the works yielded a mixed bag of results—India for example, won the right to export pharmaceuticals, while the European nations successfully prevented their tightly protected markets from being swamped by cheap agricultural exports.

The limited changes made open the gates to a more equitable mix of exports and imports in the future, as opposed to the current model of some being exclusive importers and others exclusive exporters. The howls of protest from the exporters’ club mask their frustration at no longer being able to punch, but merely pinch “upstart” nations for challenging their hegemony.

It is this culture of duplicitous double standards that prevented the Cancun summit from achieving any significant progress. If challenging the might of the entrenched constitutes “failure,” we should plan to “fail” frequently.

S. Gopikrishna writes from Toronto on issues pertinent to India and Indians.

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