Swipe right for free trade

The Pak Banker - - OPINION - Vivek De­he­jia

ONE of the para­doxes of glob­al­iza­tion is that in a world which is more de­pen­dent than ever on free flows of trade and in­vest­ment, sup­port for the prin­ci­ple of free trade among the world's ma­jor economies ap­pears to be at a low ebb. One nat­u­ral ex­pla­na­tion is that, af­ter decades of trade lib­er­al­iza­tion, bar­ri­ers to trade and in­vest­ment flows among the ma­jor economies are rel­a­tively low. There is, there­fore, lit­tle ap­petite for th­ese economies to take up the cud­gels on be­half of fur­ther non-dis­crim­i­na­tory, rules-based, mul­ti­lat­eral lib­er­al­iza­tion.

How­ever, de­vel­op­ing and emerg­ing economies, in­clud­ing In­dia, still have much to gain by re­form­ing ex­ist­ing trade bar­ri­ers that re­main heav­ily dis­torted as mea­sured against global best prac­tice. The key ques­tion is how? Should the ap­proach be clas­si­cal uni­lat­eral lib­er­al­iza­tion, of the type fa­mously pur­sued by Great Bri­tain in the 19th cen­tury? Should one dou­ble down on the be­lea­guered World Trade Or­ga­ni­za­tion (WTO) and try to breathe new life into the all-but-mori­bund Doha De­vel­op­ment Agenda (DDA)? Or should one em­brace one or more of the pro­lif­er­at­ing "mega-re­gional" pref­er­en­tial trade deals cur­rently on of­fer, a ver­i­ta­ble al­pha­bet soup of new pos­si­bil­i­ties?

It is clear that the US, the cur­rent global hege­mon, al­beit a weak­en­ing one, has lit­tle ap­petite ei­ther for uni­lat­eral or mul­ti­lat­eral lib­er­al­iza­tion. In­deed, in the in­creas­ingly pro­tec­tion­ist cli­mate on view in the un­fold­ing pres­i­den­tial cam­paign in Amer­ica, it is not even clear if a pref­er­en­tial trade deal such as the Trans-Pa­cific Part­ner­ship (TPP), which has been rigged to favour US cor­po­rate in­ter- ests, will ever be rat­i­fied by the US Congress dur­ing the re­main­ing ten­ure of Pres­i­dent Barack Obama.

What is also ev­i­dent, at least judg­ing from cam­paign rhetoric, is that none of the ma­jor pres­i­den­tial con­tenders, from ei­ther ma­jor party, will rein­tro­duce TPP, should it fail on Obama's watch. And if the US fails to rat­ify TPP, the agree­ment is dead on ar­rival.

That leaves In­dia, in par­tic­u­lar, in a dif­fi­cult sit­u­a­tion. This colum­nist has ar­gued strongly against a pu­ta­tive In­dian em­brace of pref­er­en­tial deals such as TPP (Trade and na­tional in­ter­est, 12 Oc­to­ber). I have also lamented the ap­par­ent demise of the DDA (Mes­sage from Nairobi, 21 De­cem­ber) and de­fended the stance that In­dia took at the failed Nairobi min­is­te­rial con­fer­ence.

Ob­vi­ously, In­dia lacks the clout ei­ther to en­gi­neer a re­boot of DDA or to shape the struc­ture of emerg­ing al­ter­na­tives to TPP, in par­tic­u­lar, the Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship (RCEP), which is likely to be a Chi­nese-led (read: Chi­nese-cap­tured) agree­ment.

What to do? To para­phrase Sher­lock Holmes, when one elim­i­nates the im­pos­si­ble, what­ever re­mains, how­ever im­prob­a­ble, must be con­sid­ered a pos­si­ble pol­icy op­tion.

In the case of In­dia's trade pol­icy op­tions, that im­prob­a­ble, but pos­si­ble, op­tion is to pur­sue uni­lat­eral trade lib­er­al­iza­tion in sec­tors where it makes sense for the In­dian na­tional in­ter­est, while at the same time hold­ing out for the pos­si­bil­ity of a rein­vig­o­rated mul­ti­lat­eral process at some point in the fu­ture. The flip side is that In­dia must stand firm for gen­uine free trade and not be suck­ered or ca­joled into sign­ing up for TPP or, in­deed, for RCEP, if it turns out to be stacked in favour of China as TPP is for the US.

This will re­quire not only that In­dian trade ne­go­tia­tors con­tinue to demon­strate in­testi­nal for­ti­tude, but that In­dian pol­i­cy­mak­ers and com­men­ta­tors push back against the in­sid­i­ous Or­wellian newspeak which al­lows well­known folk shilling for the US to as­sert that In­dia, in par­tic­u­lar, is hung up on "old-fash­ioned" is­sues such as tar­iffs and con­ven­tional trade bar­ri­ers and is miss­ing the bus on tack­ling "be­yond the bor­der" trade-re­lated (read: non-trade-re­lated) pol­icy ar­eas such as do­mes­tic reg­u­la­tory stan­dards, the in­tel­lec­tual prop­erty regime, and so forth.

Con­cep­tu­ally, there is a hugely im­por­tant dif­fer­ence be­tween tar­iffs and other poli­cies which mimic the ef­fects of a tar­iff (such as taxes and sub­si­dies, as well as quan­ti­ta­tive re­stric­tions such as quo­tas), which are fair game for trade ne­go­ti­a­tions, and non-tradere­lated do­mes­tic poli­cies which may none­the­less have an in­di­rect im­pact on trade. The lat­ter were tra­di­tion­ally con­sid­ered off lim­its for in­ter­na­tional ne­go­ti­a­tion, in line with the West­phalian con­cep­tion of the na­tion-state.

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