India and the challenges of global trade
| 10 Feb 2021
By Chitra Subramaniam | 10 Feb 2021
India must talk trade, for its people by its people and with its people. What India needs today is not a paradigm shift, a new narrative nor a strategy but hard work, focus and commitment aimed at creating nearly 20 million jobs the economy will consume year on year.
If you think global trade negotiations are technical issues, think again. Nothing is more political and strategic – other than war – than trade talks between countries and economic groups that decide not just what you eat, wear and how you travel everyday, but also your country’s growth trajectory. Beyond language and posture, the real dimensions of the world’s largest democracy on the march has to be apparent to Indians and the world, in that order. A country that does not believe in itself cannot make the world believe in it. India does not think in English, no more than France or Germany, Brazil or Russia do.
There are two aspects to this. While one focuses on what is necessary for India to continue aiming at the seven plus per cent growth, the other looks at a robust extension of the first when New Delhi is trying to clear and secure an international conversation about itself and its people across sectors and routes in its neighbourhood and beyond. The two must grow in tandem. This means steady and undisturbed coordination between various ministries irrespective of whether the country faces a war or a famine. At the base of this are people of calibre and commitment. Underpinning all is this question – how does a country build a national dialogue?
India’s trade dye was cast at the turn of this century when rules for cross border trade in goods and services went from being a loose temporary agreement at the Geneva-based General Agreement on Tariffs and Trade (GATT) to being formalised under the World Trade Organisation (WTO) under the Uruguay Round of trade talks. Launched in 1986 the negotiations lasted for eight years. The world had a new free trade policeperson – one that could retaliate across sectors. Unlike GATT where cross sector retaliation was impossible, the new rules meant if you didn’t buy Harley Davidsons’ from the United States (US), Washington could pull trade advantages on India’s e-commerce exports.
The Uruguay Round was handy for Western economies because developed countries were still reeling under the recessionary years of the 1980s when numbers showed a slowdown, growth rates were insufficient to sustain high standards of living and there were political and institutional constraints.
Compulsions of the arms race, unwillingness to reduce consumption, rigidity of the wage structure and power of domestic lobbies prevented fresh solutions necessary to stir growth. The Uruguay Round was a perfect external stimulus. India was a target and New Delhi walked into it eyes wide open.
India had newly opened up to the world, seeking to put its licence raj behind. The 15 items on the Uruguay Round’s agenda were a mix of traditional and new issues. There were market access and systemic subjects that required refocus. But it was the new issues such as the trade-related intellectual property rights (TRIPS) and trade-related investment measures (TRIMS) that were aimed at India. The Uruguay Round would do to the 21st century what gunboat diplomacy and colonisers did to the 20th century. India‘s buckling under US pressure – aided by the European Union (EU) – has been called the Geneva surrender and commented upon widely. Famous words of a US trade representative that India’s markets would be opened by force if necessary led to much feigned alarm in New Delhi.
Final texts manifested themselves out of the blue, over and above what had been negotiated publicly. Tough Indian negotiators were shafted and replaced with pliant ones with limited knowledge of dossiers. A European negotiator told journalists the talks were basically a readjustment of priorities between the US, EU and Japan. The US and the EU exchanged friendly fire in Davos where the protestors were circumscribed to a policed spot and on the streets of Europe where bales of hay were burnt and traffic was stopped.
It was supposed to resembled May 1968 and Danny le Rouge. English speaking Indians from Delhi with their English speaking extensions in Bangalore were happy. Their negotiating pools worked through the Congress-led United Progressive Alliance (UPA) and the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) who formed cliques. Even the Europeans are unhappy, they said pointing to headlines and televisions – all countries have to make adjustments. Both were clueless. China was not yet in the picture – or so the heavy lifters and Indians thought. India’s interests fell between stools – part colonial, part ambitious and totally without conviction.
President Donald Trump’s recent decision to end favourable treatment to India under the Generalised System of Preferences (GSP) is a no brainer. Trade relations between the two countries have been difficult at best not just because of the imbalance but also because India’s trade gurus don’t have their feet on the ground. The US has a $27.3 billion trade deficit with India and Trump’s pet peeve is India’s high tariffs on Harley Davidson. New Delhi is also on a “Priority Watch List” of its Special 301 Report that routinely lists countries running foul of intellectual property protection. India’s recent decisions on e-commerce regulations and requirements that data be stored locally invite market-unfriendly operating costs. The Geneva surrender too occurred under threat of a priority watch list.
Since 1999 to 2019, today, has New Delhi picked itself up from the shambles of the Geneva surrender and entered the stadium? Unfortunately no. One reason is this. A country cannot have its pocket on the left and propose an economic trajectory on the right. Focus, domain knowledge and steady hands are the bedrock of economic policy. It takes years to build this log across ministries – in India’s case it would be trade and finance, foreign, environment, health and education with India’s defence interests profiled and pitched at every step accurately.
Most commentators and analysts weighing in on India’s priorities post the Pulwama attack have missed the forest for the trees. Pulling Pakistan’s Most Favoured Nation (MFN) status that is a WTO package may be headlines, but it does not speak to India’s economic power. If it did then why are people celebrating France’s freezing of Masood Azhar’s assets considering that according to the International Monetary Fund (IMF), the Indian economy is doing better than that of France and soon to replace Britain? The call to ban American companies that work in Pakistan or goods from China is facetious.
Washington and Beijing as well as the EU are major trading and military nations in a world where India accounts for just about two per cent of global trade. China is altogether on a different plane and India’s concentrating on Pakistan at the risk of ignoring the other border is unwise.
There are new patterns emerging. Europe and Asia are coming together on land, water and rail. Within Europe, there are conflicts and realignments including some who want a world before the fall of the Berlin wall in 1989 that united East and West Germany – the frontiers of the cold war – and those who do not. Peace is the EU’s strongest contribution and it was negotiated after years of negotiations and faith. Faith in people translates to conviction in institution building. Where does India stand?
New Delhi cannot be on a warpath with countries all the time. Diplomacy can have troughs and peaks but trade diplomacy must learn to weather all conditions. Their focus is to create jobs in the country, make the Indian economy strong and vibrant which in turn will make the country politically strong. The military calculation is elsewhere and must be left to people who know the job.
We have the calibre. We need the conviction. Beyond political parties and election slogans, the system has to respond to India.
The article first appeared in ORF