Modi at WEF: India hits hard at protectionism but is the blow enough?

Senior trade expert Biswajit Dhar points out the deeper issues Modi didn't talk about

Prime Minister Narendra Modi on Tuesday did not address concerns of income equality and growing systematic collapse of the rules-based trade mechanism itself while training his guns on detractors of globalisation at the World Economic Forums' ongoing annual conference in Davos, Switzerland.

"While the PM was right in pointing out the severe pressure under which globalisation is coming in, he should have pointed out how the current model is not an equitable one and even squeezes out smaller players from India itself." senior trade expert and academician Biswajit Dhar said. Conversing with Business Standard, he said that even if globalisation succeeds in rolling over these shocks, the ultimate result will disproportionately help richer economies.

Rich nations' ploy

An example of this clash is the ploy by richer economies to push for a set of proposed rules for E-commerce at the World Trade Organization (WTO). There are significant business interests involved with global e-commerce giants looking for an official route to tap the lucrative markets of the developing world, especially India.

"While India should accept technology as it comes, we need to know which segments it will hurt most. A disruptive move like this will see tech-driven commerce displacing a significant number of players in the traditional market, like small traders, as behemoths stand the chance of gobbling them up." Dhar said.

"In 2015, internet penetration in the least developed and low-income countries were about 12.6 per cent and 9.4 per cent, respectively. Even for low middle-income countries, the figure was well below the global average. These disparities in internet penetration should make it clear as to who would be the likely beneficiaries from e-commerce rules." he added.

The rot in the system

This is symptomatic of the creeping rot in the rules-based multilateral system itself which allows for so many Non-tariff barriers to be set up, Dhar argued. 

The overwhelming focus by nations today to play by the same rules which are in need of an overhaul is ironic. Adjusting to global trends through the institution of these barriers forsaking the aspect of competition is something that even India does and it cannot be ignored, he added. 

What will Trump think?

Modi's speech is not going to endear him to the Trump Administration who had till now remained close to India, albeit a bit shifty, he added. On major matters of global policy, the countries still agree but have clashed often in the realm of trade. Case in point, little love was lost between the two nations at the WTO meet in Buenos Aires, Argentina. 

The 11th Ministerial Conference of the World Trade Organisation - the largest global meet for multilateral trade talks held biennially - had come to an end without a significant outcome as nations dug into their divergent positions and the US played spoilsport for India's demands on agricultural issues.

"While the developing world led by India and China had thrown their weight behind a demand for an agreed solution on the issue of public stockholding of grain for food security, besides domestic subsidies to the agriculture sector, developed nations such as the United States and the European Union remained staunchly against it." Abhijit Das, head of the Centre for WTO studies said.

"Finally, the fact that Modi's tirade against anti-globalization forces came on a day the remaining 11 nations decided to sign the Trans-Pacific Partnership by March is going to land a stinging blow on Trump, that much more", Dhar added.

The final details of the revised Trans-Pacific Partnership (TPP) to be signed in March have won approval from all 11 member states following concessions to such holdouts as Canada and Vietnam that will be spelt out in separate agreements. The revised TPP covers 12.9% of the world's gross domestic product and 14.9% of global trade. This comes a year after the US declared its exit from the deal. Despite the U.S. withdrawal, the current agreement is still on par with Japan and the European Union's recently completed Economic Partnership Agreement.