M P Pinto: Arcelor, Airbus and all that

The high priests of globalisation have turned out to be apostates and the preachers now prey.

Anyone studying, as I was, in an American university when Indira Gandhi launched her wave of socialist legislation was truly up against it. Professors and students alike, brought up on the magic of the market, gave short shrift to India's ideological commitment to a system that most Americans believed to be inherently flawed. What never ceased to amaze me, however, was the stand that most American students took whenever the record of the US itself was discussed. Imposition of a highly restrictive quota regime under the Multi Fibre Agreement or curbs on foreign manufacturers of automobiles and steel were defended with the simple mantra: "We have to protect the American way of life." And faced with the mystique of these four powerful words, pleas for consistency were useless.

The same convoluted logic characterises the European response to Mittal Steel's take over bid for Arcelor. Although Guy Dolle, the embattled CEO of Arcelor, did make the obligatory claim that his company enjoyed a much higher value than the $23 billion offered by Mittal, this was not the real objection. That was couched in less flattering terms. Arcelor's steel company, he said, was like some rich perfume; Mittal Steel, the world's largest steel company is like a cheap eau de Cologne. A free translation would read: he is not European and, therefore, not one of us. But political correctness demands that racist subtexts should be suitably disguised.

This is not the first time that the French have reacted angrily to perceived threats to their supremacy. Many years ago when the V P Singh government, alarmed at the crash of the newly acquired Airbus 320 from France, grounded all the aircraft, the French simply could not believe that any Third World country could have the temerity to sit in judgement on the quality of a French product. And, as in the present case, racist reactions were not long in coming. Most commentators were convinced that Airbus's fly by wire technology was far too sophisticated for simple, badly trained Indian pilots to handle. The irony of making such an allegation about a country whose reputation as an island of excellence in software was even then being established, completely escaped them. "Giving an Airbus 320 to an Indian pilot," said a wag, "is like putting a camel driver at the wheel of a Mercedes."

The peculiar thing is that India, like other developing countries, is supposed to be steeped in the bad old protectionist tradition of opposition to the opening up of its economy while the West swears by the market. It is difficult to count the number of times that we have been hectored by the West on the virtues of free trade and the need to integrate with the global economy. Yet, whenever these protagonists of liberalisation are put to the test, double standards become apparent. Markets should be opened and trade freed from government control only as long as the markets in question are in the third world and the freeing of trade allows the entry of Western business into areas earlier out of bounds to them. Protecting the American way of life by imposing textile quotas is perfectly legitimate, preventing "outsiders" like Mittal from acquiring European icons is just the thing, but helping a nascent domestic industry to grow in developing countries through the erection of tariff walls is illegitimate and self defeating.

Even the call to rally to Europe's defence does not work. Arcelor is headquartered in Luxembourg while Mittal Steel is in Rotterdam. Both are European cities and there can be no argument about protecting Europe against "outsiders" unless outsiders are defined in racial terms. If two European entities are to merge what possible objection can even a protectionist have? Indeed analysts have pointed out that there is no economic argument against the merger because the markets catered to by the two groups are largely separate and anti trust action is unlikely to pass muster. In any case do not the imperatives of a free market demand that such decisions be left to the market, in this case the shareholders, and not to politicians whose economic expertise is suspect?

This is where the real issue should be joined. Globalisation's USP is that it opens the world to the competent and to those who dare. Fifty years ago it would have been impossible for a young Indian businessman to take on the world by purchasing steel mills in every part of the globe and building up the world's largest steel company. Pre-globalisation logic would have ensured against it. But having established that efficiency would be the sole criterion for judging success, how can anyone now insist that industrialisation is the prerogative of the West or that factories can only be taken over by those who belong? Mittal is bound to acknowledge that it was the forces of globalisation that have enabled him to record the meteoric rise that has made him the third richest person in the world. If he had been born in his father's generation, such an amazing achievement would not have been possible. But it is equally important for those who swear by the same globalisation to recognise that its characteristic is that, in rewarding efficiency, it will not look at a person's background and pedigree.

It is in this context that one should view Kamal Nath's spirited intervention in the matter. Not only did he condemn economic insularity at a time when the buzz word is globalisation but he also highlighted the contrasting attitude of the Indian government when the French cement major Lafarge acquired a substantial chunk of the Indian cement industry. No barriers were erected by the Indian administration and both the takeover and the price were dictated by the market. From being the bad boys always at the receiving end of sermons on the merits and virtues of free trade, India finds that the tables are turned. The High Priests of globalisation have turned out to be apostates and the preachers now prey.

The writer is former Secretary, Ministry of Shipping