Kamal Nath should stress a stronger WTO

EXIM MATTERS

New Commerce and Industry Minister Kamal Nath has tough challenges ahead. He has not only to negotiate at the World Trade Organisation (WTO) skillfully but communicate the strategies clearly to domestic constituencies.

He has to abolish export subsidies and at the same time show a buoyant export growth.

Kamal Nath's predecessors -- Murasoli Maran and Arun Jaitley -- articulated India's stance quite loudly. Maran stood alone at the Doha WTO meet and delayed the launch of a new round of negotiations.

Jaitley forged an alliance of like-minded countries (known as G-20) to checkmate the efforts of rich countries to push through a consensus declaration at the Cancun meet.

Both of them convinced the constituencies at home that they fought fiercely to protect national interests. With reasonable co-operation from the finance ministry, Maran and Jaitley gave export subsidies liberally and helped exports grow.

They pushed schemes for Special Economic Zone (SEZ) units and some, not yet very effective, framework agreements for free trade with countries in the neighborhood.

Kamal Nath can take a fresh look at our negotiating stance at the WTO, considering the fact that after the failure of trade talks at Cancun, rich countries are moving towards bilateral trade agreements.

India needs WTO and multilateralism more than others because it does not have meaningful bilateral trade agreements with many countries.

WTO is the principal forum where trade disciplines, which have a wider impact, can be negotiated. India's interests lie in a strong WTO.

Kamal Nath has to recognise this reality and persuade the constituencies back home about the benefits of multilateralism.

Nath should also try to convince the need to be generous to the poorer neighbours. For India, trade with neighbours accounts for very little.

The belated attempt of Jaitley to push through free trade agreements with countries in Asia may not amount to much by the time they come into full effect.

Kamal Nath has started on the right note by stressing the role of the manufacturing sector in the creation of jobs and exports and pointing out that we can not rely on the services sector alone to generate wealth.

The role of exports needs to be redefined too. The primary aim should be the generation of jobs, and not earning foreign exchange.

Surely, Nath will also know that the Rs 1,000 crore export of garments or engineering products from small and medium enterprises (SME) generate more employment than Rs 10,000 crore export of petroleum products or iron ore.

The export promotion schemes can be suitably tilted in favour of SMEs, whose finance needs -- both equity and loan --- need to be addressed better. Nath has the advantage of the Kelkar committee report that recommends duty drawback scheme as the principal export promotion scheme.

Nath should embark on preparing exporters to reconcile themselves to the possibility of the abolition of the Duty Entitlement Passbook (DEPB) scheme, the better. He also has to find innovative ways to boost the export of agriculture and processed food products.

Kamal Nath has stressed the need to reduce the transaction costs of exporters. He has promised to unshackle exporters from procedural chains. He needs to take a look at the SEZ scheme and try to put 100 per cent export oriented units on a par with SEZ units.

Kamal Nath has started off well. Hopefully, he will earn better reputation than his formidable predecessors.

email : tncr@sify.com