In December last year, the push to try and complete the Doha round of trade talks ended in failure at the World Trade Organisation’s headquarters in Geneva. The Doha round had begun 10 years earlier, in 2001, but has run into several stumbling blocks; disagreement over agricultural subsidies and controls, in particular, has consistently held up progress. Meanwhile, new issues have arisen in the past decade, such as the rise of informal barriers to trade like differing labelling standards. Unsurprisingly, many countries have moved forward on bilateral trade deals. Such agreements are frequently less than ideal – they can divert, rather than increase, trade – but given the Doha deadlock, there are few alternatives. India’s landmark trade agreement with the Association of Southeast Asian Nations, or Asean, is coming into force in stages. The section dealing with the free movement of goods became effective in 2010, and it is now reported that the agreement on services trade should be ratified by the end of March. Trade has not increased to the degree it should have; India has held back on slashing tariffs, with the commerce ministry claiming that one or two Asean countries, too, have delayed full ratification.
Tardiness in ensuring that the gains from freer trade are available to India’s consumers and producers is visible, too, in the ongoing negotiations for a comprehensive trade agreement between India and the European Union (EU). The EU’s trade department estimates the gains from trade as being substantial — in the region of euro 5 billion. Yet negotiations for the Broad-based Trade and Investment Agreement, or BTIA, have been on for seven years, and 13 rounds have failed to produce any result. The idea is to essentially remove tariffs on as many as 90 per cent of tradeables. Yet some sector-specific concerns have been raised. India’s automobile manufacturers, for example, have claimed that tariff-free imports of European cars would cause them to lose a “level playing field”. Such claims for protection are by and large unpersuasive, and auto tariffs should not be allowed to derail the agreement. However, worries about the effect of the EU’s much more stringent intellectual property rules on India’s consumers of generic pharmaceuticals are of greater moment. There are also questions as to whether India’s trade in generics with pharma-hungry markets in Africa will be hit. Assuaging these concerns must be given the highest priority by negotiators from both sides.
While freer trade is essential to build up depth in markets and stability for manufacturers and service providers, much research shows that bilateral and plurilateral trade agreements are simply not as effective as multilateral trade liberalisation. A multitude of different agreements with varying exceptions and concessions confuses the medium-sized exporter, who finds it difficult to respond to the opening up of these markets. For example, India signed a trade agreement with Chile in 2007. But instead of shooting up, trade with Chile declined from $2.3 billion in 2007-08 to $2.1 billion in 2010-11. While pushing for more and clearer free trade agreements (FTAs), India must not lose sight of the fact that the only real magic bullet for trade is the completion of the Doha round.
