The Hindu Business Line : Opening the gates wider

EARLIER THIS MONTH, after attending a strategy session chaired by the Prime Minister, Dr Manmohan Singh, on the negotiating guidelines at the ongoing WTO talks, the Commerce Minister, Mr Kamal Nath, said India would not open its markets for subsidised imports from developed countries. As he put it: "We are looking at trade flows and not subsidy flows." In view of what the Prime Minister said the other day at the Trade and Economic Relations Committee meeting, on opening the economy to imports from our neighbours, New Delhi may look at trade relations with these countries a bit differently. Specifically, Dr Manmohan Singh wanted India to open its doors wider to the exports of its neighbours (with which it has concluded Free Trade Agreements or is doing so) even if that means sacrificing its own economic interests to an extent. But this must be done without going overboard.

Clearly, what is behind Dr Singh's thinking is the large trade surplus the country has run up with Bangladesh, Pakistan and Myanmar, among others. This is certainly `unequal' statistically, though not perhaps unfair given the stage of development of the economies. Even so, from the equity point of view (some are less developed countries and have been singled out for special and differential treatment by the international community), New Delhi cannot be faulted in its intention to sacrifice some of its own economic interest by taking measures to absorb imports from these countries. As Dr Singh said, the country "must have a more open economy with responsibility towards its neighbours."

Surely, Big Brothers have a special role to play in groupings that include smaller and weaker economies. But the key issue is how this approach can be integrated into New Delhi's FTA policy. Indeed, for the Prime Minister, circumstantially, there appears to be a strong link between `big-brotherly munificence' and FTAs as the TERC meeting itself focussed on early approval of such agreements with Asean and GCC, among others. The meeting also discussed proposals for FTAs with South Korea and Israel, a comprehensive economic and cooperation agreement with Mauritius and methods by which trade with SAARC and BIMST-EC economies can be increased.

The Prime Minister said that "India should be prepared to buy more." But this could affect the domestic producers and one can already hear murmurs of protest from them. In fact, some FTAs (such as the one with Thailand) and the agreement with Singapore have run into trouble on such issues as rules of origin and the alleged advantage they give multinational companies (dealing in automobiles, for instance) operating both in India and in these countries. Yet these domestic producers need to come to terms with the inevitability of lower import tariffs, and gear themselves up to produce at lower costs. They will realise that their rigid and high-cost structures do bend surprisingly in the heat of competition, and that it is less bruising when they sharpen their competitive skills initially with opponents such as producers from Asean or the Gulf (as the Prime Minister is proposing) than when they go head on with those from China, Japan or the US.

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