At the Asean summit in Nay Pyi Taw, Myanmar, Prime Minister Narendra Modi did well to make an assertive pitch for the “mutual recognition of degrees”. An accompanying pact to the services and investment free trade agreement that India signed in September, which would compel the signatories to honour academic and professional qualifications obtained in other countries, is non-negotiable if India is to benefit from free trade. In a bid to protect their domestic service sectors, some Asean countries — Thailand, for example — are insisting that Indian professionals obtain local qualifications before they are allowed to practise in their jurisdiction. That such demands crop up in a country’s domestic politics is not surprising — along with winners, there are losers from globalisation, too. But it is neither fair nor tenable to erect artificial barriers to stem the free flow of services even as merchandise trade continues unencumbered. There is an obvious double standard when Asean countries raise the “loss of livelihoods” argument to protect their domestic service sectors while Indian rubber farmers, for instance, reel under competition from Thailand, and Indian coconut farmers are going out of business due to Indonesian and Malaysian palm oil. It is for individual countries to redistribute the net benefits of free trade, which are undeniable.
India has a clear comparative advantage in services — wages for skilled workers, who are mostly proficient in English, are comparatively low. Among Asean countries specifically, India is a leader in the services sector — it exports $152 billion worth of services compared to Singapore, a distant second, at $117 bn. Overall, not only does more than 50 per cent of India’s GDP come from this sector, but in 2013-14, it had an invisibles trade surplus of $1,15,212 million against a merchandise trade deficit of $1,47,609 mn. Simply put, while China wants to be the factory of the world, and the US fancies itself as the global proprietary-technology hub, India could aim to be a services giant.
But India still runs an overall trade deficit with Asean countries, $8,144 mn in 2013-14, because they have an edge in manufacturing. The pact for the mutual recognition of qualifications, one step towards dismantling artificial barriers to services trade, would go a long way in plugging this gap and help India leverage its prowess in IT, financial services and healthcare. For free trade to be fair, it has to be truly free.