Thursday, Oct 02, 2014

The real threat to WTO

The US must address Indian concerns that it may abandon the WTO and pursue a trade agenda inimical to India once it gets the trade facilitation deal through.  Source: Reuters The US must address Indian concerns that it may abandon the WTO and pursue a trade agenda inimical to India once it gets the trade facilitation deal through. Source: Reuters
Written by Sanjaya Baru | Posted: July 31, 2014 12:32 am

…isn’t India. It is miscast in the role of spoiler.

Aside from war and migration, observed the Nobel prize winning economist, Thomas C. Schelling, “trade is what most of international relations are about. For that reason, trade policy is national security policy.”

One of the few economists to take any serious academic interest in national security issues, and known for his analysis of nuclear deterrence from a game theoretic perspective, Schelling made these observations in 1971 to a United States Congressional Commission on “National Security Considerations Affecting Trade Policy”.

While economists like to believe that trade policy is defined by rational calculus, the wielders of power and policy have always known that trade policy is integral to a nation’s strategic policy. The transatlantic powers created a post-war trading regime under the auspices of the General Agreement on Trade and Tariffs (GATT) designed to serve their geoeconomic interests. This was sought to be democratised, though only partially, with the World Trade Organisation (WTO), creating not just a “rules-based” trading system but also a disciplinary mechanism to enforce those rules.

India correctly took the view that it had a “strategic stake” in such a multilateral rules-based system, and successive governments have worked hard with the West through the WTO. The current impasse in the WTO has in fact been created by the dilution of Western commitment to that regime, and not by developing-country intransigence, much less India’s.

In the current stand-off on India’s stance on its food security policy, Western powers are pretending as if they are the upholders of fair play and India the spoiler. The fact is that major trading powers have never shied away from being spoilers in multilateral trade talks whenever it has suited their national interest. It should be recalled that the US and EU have readily deployed non-economic weapons to threaten their trade partners whenever their economic interests have been threatened. When Japan emerged as a competitive global exporter, building a huge trade surplus vis-à-vis the transatlantic economies, the US deployed domestic laws, Special and Super 301, to get Japan to adopt “voluntary export restraints” (VERs). The EU “single market” was created in the early 1990s as a conscious response to Japan’s rise.

Hence, it would be churlish for the West to criticise the Indian government for giving primacy to domestic politics in external trade negotiations. The real threat to the WTO-based multilateral trading system has come in recent months from the US initiative to enter into WTO-plus plurilateral agreements, namely, the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).

While a plethora of such agreements around the world continued…

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