The Hindu Business Line : Free trade ironies

The basic objective of the Doha Round of multilateral trade negotiations is to liberalise trade even further so that the average world citizen reaps the benefits of lower prices and better product quality. India, on its part, has been engaging in talks with a number of countries and groupings to conclude free trade agreements, the objective of which is also to make the trade exchange smoother. But the prospects of freer trade appear just now to be clouded in view of the in creasing protectionist pressures being generated by the increase in prices worldwide. One result of this has been that while WTO member-countries have been negotiating as free-trade enthusiasts on the Doha Round, at the level of domestic policy, they have increasingly been behaving as diehard protectionists, doing their best to look after the interests of their own industry and the consumer.

Take, for instance, the case of iron ore exports, which domestic steel producers would like reduced in view of an expected shortage. What the steel-makers want is for the export duty of Rs 300 a tonne on high-grade ore and Rs 50 on the low-grade variety to be increased so that exports are discouraged and more iron ore remains in the domestic market, which would result in lower ore prices. The Union Steel Minister has said explicitly that the steel industry must be assured adequate supplies of iron ore at reasonable prices as the domestic demand for steel is likely to grow by 14-16 per cent in the next seven years. Second, consider the non-basmati rice export scenario which, in recent times, has been marked by the imposition of a total export ban (last October) and subsequently, when the ban was lifted, by stiff duties to discourage sales abroad. These measures were taken at a time when exporters were aiming at a 30 per cent increase in sales to meet the higher demand from East and West Asia. Not surprisingly, importers have registered their protest at this unilateral price increase which, from New Delhi’s point of view, has been seen to be unavoidable because of a sharp increase in food prices in the domestic market, especially in an election year. The irony of the present situation is that, as far as rice is concerned, countries such as Malaysia are keen on importing the commodity (even on a barter basis), to increase supplies in their home markets and keep prices under control.

What all this means is that at a time of sharply rising food and commodity prices, the ongoing efforts to liberalise world trade are being severely buffeted by counter pressures that are strengthening the hands of the protectionists. Clearly, succumbing to such transient pressures is not an option at all, particularly for the developing countries, which see the whole world as a potential market. The Doha Round, therefore, must be got off the ground as quickly as possible, if only to serve as a symbol that trade liberalisation is in and barriers are out, both for the poor and rich alike.

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