Rule of three again

World Trade Organisation (WTO) Director General Pascal Lamy should take serious note of this book. Its authors, Jagdish Sheth and Rajendra Sisodia, have painted a scenario in which the world by the middle of the 21st century will evolve into three broad regional trading blocs. The authors, who teach marketing at US universities, have not offered any explanation for why they visualise a world without the WTO or the new multilateral trade regime Mr Lamy is trying so hard to put in place under the ongoing Doha talks.

For want of an explanation, it has to be presumed that the authors do not see multilateralism in trade going any further. It is true that in the wake of growing uncertainty over an early conclusion of the Doha round, many countries have been working in parallel to forge bilateral or regional trade treaties. It is possible, therefore, to argue that multilateralism in trade is doomed, even though there are optimists who find it difficult to believe that the WTO can wither away so soon. So, for such a scenario to appear convincing, the authors should have taken care to devote at least a chapter on why they imply that multilateralism will fall apart, the WTO will disintegrate and the world will be better off with three powerful and inter-dependent trading blocs.

The flaw, perhaps, originates from their otherwise correct assumption that political developments in the 1990s saw several regimes across the globe facing electoral reverses because they could not offer adequate economic growth to electorates. They of course make a mistake by including India in this category by arguing that the PV Narasimha Rao government was voted out because it failed to meet the people's expectations of growth. The irony of the Rao government, as we all know, is that the last three years of its tenure saw a growth rate of over 6.5 per cent per annum. Rao lost the elections for different reasons. But on Europe and America, their assumption is largely correct.

The problem, of course, starts when they juxtapose this political message with the demographic shift that is taking place in the world. With an increasingly ageing population and no hope for any spectacular rise in growth rates, these developed countries in the US and Europe will recognise the need for forging economic ties with emerging economies. Instead of an east-west exchange, they envisage that the world will have to look for north-south co-operation. It is in this that the authors see great scope for the formation of regional trading blocs.

There are quite a few surprises in the way the authors group the blocs. Israel, they argue, will see greater complementarities in forming a part of the European bloc, which is being seen as headed in that direction. In spite of being a close political and economic ally of the US, Israel, they point out, will benefit more by integrating with the EU. In fact, this book's entire scenario seems to have a bias in favour of the European bloc, expected to form an alliance with countries in north and south Africa.

India, according to the scenario, will fail in its attempts at aligning with the bloc comprising Japan, China, South-east Asian nations, Hong Kong, Taiwan and Australia. The authors dwell on how political problems in east Asia will vanish. That will leave India along with its South Asian neighbours to become part of the American trading bloc. The authors argue strongly in favour of the world's two largest democracies getting closer as partners. That leaves the poor countries in central Africa. The authors have no clear suggestion on their fate, apart from a faint hint that they can be used profitably by emerging countries like India and China to meet their need for natural resources.

The book has listed a few routine handicaps (like an entrenched domestic private sector, opposition from political parties, cultural diversity and corruption) that might pose some hurdles to the formation of these trading blocs. However, the authors offer no concrete suggestions to overcome them. They seem to have adopted the Gandhian approach of hoping that good sense will prevail and the countries will see their natural interests and join the trading bloc that will spur growth.

Commendably, the authors provide comprehensive coverage of recent global developments, and the book has been marketed well with a foreword from Philip Kotler that offers a crisp summary. If short of time, read this.

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TECTONIC SHIFT
THE GEOECONOMIC REALIGNMENT OF GLOBALIZING MARKETS

Jagdish N Sheth/Rajendra S Sisodia
Foreword by Philip Kotler
Sage
Price: Rs 550; Pages: xv+350