World Trade Opportunity

That he wouldn't read it, or at least pay any special attention to it, of course, was evident even then, when T.N. Srinivasan pointed out that, while it was all very well to assail the West for anti-competitive behaviour, India was the world's second-largest user of anti-dumping actions "" between January 1995 and the end of 2001, India used this tool 248 times, just marginally behind the US's 255, and higher than the EU's 246.

Jaitley's prompt response was, while several anti-dumping actions of other countries had been struck down by the dispute settlement panel, the proportion of India's actions that were upheld was a lot higher!

On the face of it, Jaitley's answer is as unassailable as his actions in Cancun "" after all, faced with the US and the EU's complete intransigence on the issue of cutting their $300 bn-plus farm subsidies that completely distort world farm prices, what else could he do but to block moves to get developing countries to cut tariffs unilaterally?

The gap between Jaitley's actions and what Srinivasan and Tendulkar are arguing, perhaps, is best bridged by a point made for former chief economic advisor Shankar Acharya. Acharya argues that in the early days of reforms, Manmohan Singh aggressively went about slashing India's import tariffs, while it was left to the Commerce Ministry to make its deals at the WTO.

In other words, it was believed, and rightly, that trade liberalisation was a good thing, so this is what Singh pursued, regardless of what the commerce ministry did or did not do at the WTO. This distinction, Acharya says, may be getting obliterated today, and the belief is that if you can't negotiate multilaterally about lowering trade barriers, don't do it unilaterally either.

A point reinforced by the fact, as Srinivasan and Tendulkar show, that India's import tariffs have actually begun to rise over the last few years "" the trade-weighted mean fell from 87 per cent in 1990-91 to 24.6 per cent in 1996-97, and has been creeping upwards ever since, to 30.2 in 1999-00, making India one of the world's most protected markets.

But the question uppermost on the minds of the WTO-sceptics, and there are a lot of them nowadays, rejoicing each time a Seattle and now a Cancun happen, is how does trade really help? Doesn't competition from cheaper imports just reduce employment and force local industries to close down?

The authors marshal official Indian statistics to show that in the post-1991 period, rather than falling, employment in the factory sector has actually gone up "" it fell by 52,000 in the 1980s, but actually rose by 1.1 million in the mid-90s.

In other words, whatever job loss took place due to factories closing down in the post-reform era (and import liberalisation was just one of the changes) was more than made up by new job opportunities.

In any case, you don't need the authors statistics to show this, just driving down to Gurgaon in Haryana, past the lunatic Qualis-drivers ferrying all those thousands of call-centre employees, and the jam-packed fancy new shopping malls, should make the extent of the new opportunities pretty obvious.

Similarly, the fact that Altos from Maruti, Santros from Hyundai, and even Indicas from Tata Motors are exported to Europe should prove that liberalisation has actually helped develop certain sectors in India to globally competitive levels "" to think that, in the 80s, the government was so scared foreign companies would swamp local manufacturers, there were conditions imposed on foreign manufacturers forcing them to use Indian suppliers!

So, the lesson is very clear: whatever may or may not happen at the WTO, liberalisation is good for the economy, and so needs to be followed, even if unilaterally. Maybe the entire political class, not just Jaitley, needs to read the book.

There are some statistics, of course, of particular importance for those who think 'doing a Maran' and opposing WTO talks are a sign of India's growing machismo.

One, the GATT which later morphed into the WTO, has played a very significant role in expanding global trade "" since the formation of this multilateral body, world trade grew 15 times in the period 1950-94 while global output grew just 6 times, a feat never exceeded in global history.

Second, just because WTO talks have reached a stalemate doesn't mean the world will sit still "" the US itself is in the process of hammering trade arrangements with 14 other countries on a bilateral basis.

In fact, as the authors point out, as of mid-2000, there were 114 regional trade pacts in effect. Since regional trade agreements (RTA), by their very nature, are driven by the more powerful countries, it's obvious the gains for countries like India (even if they do become part of an RTA) will be less than those from a WTO multilateral system.

REINTEGRATING INDIA WITH THE WORLD ECONOMY

T.N. Srinivasan and Suresh D Tendulkar

Oxford

Pages: 167

Price: Rs 395