Jaitley146;s brief

Union Commerce Minister Arun Jaitley was right to claim that his brief at the Cancun ministerial of the World Trade Organisation WTO is not defensive, as alleged by some economists, but is in fact a strategic offensive aimed at offering to give in areas where India is ready for more competition and seeking to take where we need new markets or where we need time. Whether the brief that Jaitley has gone to Cancun with will work or not depends critically on whether or not the European Union will agree to a phased reduction of agricultural subsidies.

The EU, especially France, Spain, Italy and Germany, are not yet ready for such a subsidy reduction. Hence, the EU may end up spoiling the Cancun ministerial. This time round India cannot be accused of being the spoilsport. It is significant that the Union cabinet has authorised Jaitley to soften the earlier rigid stance taken on at least three of the four Singapore issues. These four issues, namely a multilateral agreement on investment, a competition policy, trade facilitation and transparency in government procurement were added on to the WTO agenda at the Singapore ministerial in 1996. India has to date staunchly opposed any multilateral negotiations on these. However now, for the first time, India is willing to consider a discussion of three issues, barring investment, aimed at seeking a clarification on what exactly is the link between these issues and the core agenda of the WTO and its dispute settlement system. Conscious of the fact that several developing countries may be willing to go along with most Singapore Issues, and mindful of the fact that this may be the price the EU will extract for a commitment on agricultural subsidies, the Union cabinet has also authorised Jaitley to settle for a plurilateral agreement on investment with an 8220;opt in8221; or 8220;opt out8221; clause. This will enable India to stay out. If this deal between subsidies and Singapore Issues is worked out, Cancun could have a reasonably satisfactory conclusion, provided the other smaller chips fall in place. While a smart negotiating strategy helps widen the margin for national manoeuvre, Indian policy makers must not fool themselves into believing that a clever commerce minister can help stall the much needed economic reform at home.

The real WTO challenge is not in Cancun but in Kanpur and Kannur! In other words, it is here in India. We cannot delay for long further trade liberalisation and greater integration with the world economy. Globalisation is not just about North-South economic relations but also about South-South economic cooperation where India lags equally behind. Hence, even after Jaitley succeeds in serving his brief well and returns home with some compromise draft, there will be work to be done in terms of tariff cuts and easing up on foreign investment norms. Trade negotiations, therefore, are about domestic policy and not about external policy.