Principle vs strategy

India's disillusionment with the multilateral trade process is evidenced by the enthusiasm with which it has gone around entering into bilateral or plurilateral agreements, mainly with its immediate neighbours and other countries in Asia.

Agreements with Sri Lanka and Thailand have already taken effect. The Prime Minister's recent visit to Laos to attend the Asean summit is part of the process of building up to a wider agreement with that group of countries.

Over a longer time-frame, there are plans to engage countries in the broader Asia-Pacific region, including Latin America.

India is not unique in taking this direction; many countries are pursuing a strategy of bilateralism and regionalism even as they continue to participate in the multilateral process.

This trend is obviously causing concern to the powers-that-be in the World Trade Organisation (WTO), which is the custodian of the multilateral framework. Its director-general, Supachai Panitchpakdi, was in India to participate in the India Economic Summit, during which he voiced his disappointment over the growing attractiveness of regionalism.

He cited the strong case for the multilateral approach, a leading advocate of which is Prof. Jagdish Bhagwati. But, as compelling as Prof. Bhagwati's arguments are in theory, at a practical level the functioning of the multilateral process has raised legitimate concerns about fairness and equity amongst its less affluent members.

The principle of free and fair global trade as being beneficial to all participants is unexceptionable. What the theory does not take into account are the problems inherent in institutionalising and operationalising it.

Recent ministerial meetings of the WTO, from Seattle to Doha to Cancun, have underscored the deep difficulties in aligning the interests of a hugely diversified global community in the form of multiple agreements.

Given the complex linkages across sectors inherent in the process, lofty principles of liberalisation have, more often than not, given way to opportunistic reciprocity between pairs or groupings of countries, who clearly see immediate benefits in coming together on an issue.

Such opportunism leaves countries like India, with its multiple and sometimes conflicting interests, at risk, because its natural allies on individual issues are vulnerable to hard bargaining driven by the rich and powerful. India did succeed in forming a strong alliance on the agricultural front in Cancun, but that group is itself vulnerable to fragmentation through regional and bilateral agreements.

These lesser agreements will probably not do very much to further trade. Thailand and India, for instance, have very similar trading baskets and the opportunities for gainful exchange, at least in the short term, appear limited.

However, from a strategic perspective, they are the building blocks of more enduring coalitions, which could conceivably change the entire bargaining scenario at future multilateral negotiations.

The gradual alignment of interests with an increasing number of countries is likely to be the biggest benefit from the increasing number of agreements. Far from weakening and undermining the multilateral process, in the long term, they just might prove to be its saviours.