`Let us take a leaf out of China's book in WTO'

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We should have a similar strategy as China and quietly advance our interests instead of mouthing collegially on behalf of people who may or may not want us to represent them.


There is no doubt that the US slowdown will have an impact on India. But compared to China, where more than 60-65 per cent of its GDP is trade, for us, it is still 35 per cent on goods plus another 5- 10 per cent on services. We are less relatively exposed than China.

G. Srinivasan

Prof. T. N. Srinivasan ofYale University is a personfamiliar with globaltrade policy issues,though he has his theoretical underpinningson econometricswith his early grounding in mathematicsat the Madras University.Over the last four decades, he hadtaught at various academic institutionsof repute, including MIT,Stanford University and IndianStatistical Institute, Kolkata.

A recipient of Padma Bhushanaward in 2007, Prof. ThirukodikavalNilakanta Srinivasan wasalso a former Chairman of the Departmentof Economics at YaleUniversity where he was teachingsince 1980 and is currently in theYale University EconomicGrowth Centre, holding the SamuelClark Jr. Professor of Economicschair.

Recently in the capital to takepart in a half-day symposium organisedby the civil society, CUTS,on Preferential Trading Arrangements(PTAs), Prof. T. N. Srinivasanspoke to Business Line at thesidelines on a range of issues thathave a bearing on national andinternational trade policy.

While Mr T. N. Srinivasan doesnot see any major slowdown inthe Indian economy in the shortterm,he has doubts over its sustainabilitybeyond the next threeor four years, depending on howinfrastructure and other constraintsare addressed.

Describing the current slowdownin India's second generationof economic reforms in thewords of the Finance Minister,Mr P. Chidambaram, in anothercontext (FRBM Act) as a "temporarypause", Mr Srinivasan saidthat this is not surprising. "I amhopeful that reforms will continue,regardless of who wins theelections and regardless of positionsthey take in electoral competition.Once they are back inpower and are reasonably surethat they can stay for five years,reforms will go on".

Excerpts from the interview:

Excerpts from the interview:On rising global food pricesand food subsidies by the richworld: It is well known that ifsome countries in the world tradingsystem subsidise foods andthat results in lowering the world prices, food-importing countrieswill gain and food-exportingcountries will lose.That is a standard argument.But what you have to distinguishis whether one is talking abouttemporary fluctuations in foodprices due to circumstances ofthat particular period - for example,in 1974, world food priceswent up because of concatenationof circumstances, with the SovietUnion suffering a major failure ofharvest and so on and so forth.Since then, food prices havecome down. So if you take a longtermperspective of the trend infood prices relative to manufacturedprices or services prices, thetrend has been downward.So, one should not make a tradepolicy judgment based on shorttermfluctuations, but should lookat it in terms of long-runperspective.India is right in saying that theintervention policy by the US andthe EU in agriculture is deleteriousto the global trading systemand that it should go.It is fine. But we should applythe same principle to ourselves.What do we do?In 2001, there was a huge buildupof food stocks in the publicdistribution system (PDS) and weallowed exports of food by privatetraders and subsidised some ofthe exports.Now, wheat prices are high andwe import it. What we are doing isresponding to short-term exigenciesabout rising domestic stocks/prices in deciding our trade policy- whether we are going to allowimport or export. This is not apolicy that is enunciated or dictatedby our long-term comparativeadvantages in agriculture.There are many areas wheresignificant comparative advantageshave to be exploited. That iswhat we should look at, and set upan enabling environment forthese advantages to be exploited.Sometimes, it is believed that thegovernment gives support price toforeigners which is much higherthan what it gives to domesticfarmers.But after the harvest, givingfarmers higher prices is not going to bring more food into the market.Right now, we need morefood in the market and we have toget it from elsewhere; this wouldadd to the supply in the shortterm.So you have to think in terms ofwhat kind of intervention bringsin the long-run beneficial results.Our agricultural trade policy isbased on short-term domesticconsiderations rather than longtermones.On resumption of Doha Trade talks under WTO umbrella:Unless there is a change inthe position of major actors, particularlythe EU and the US, aswell as Brazil and India, there isunlikely to be any progress intalks.But one glimmer of hope is withthe possibilities of recessionlooming on the horizon, the USproducers might want to have aglobal market and trade liberalisationdone elsewhere would bebeneficial to them.Their lobbying might lead theUS to reconsider some of its positionsto get a deal in Doha. It islikely that the prospect of a USrecession might also lead othersto reconsider their positions.On India's move in WTO:Don't you notice that China hasnot been saying anything? All thenoises have been made by Braziland India.We should have a similar strategyas China and quietly advanceour interests instead of mouthingcollegially on behalf of peoplewho may or may not want us torepresent them anyway.So we must tone down the rhetoricand not beat too loudly thedrum of special and differentialtreatment; let us take a leaf out ofChina's book by adopting quiet diplomacyin the WTO.On services liberalisation: Indiahas a number of advantages inservices and we should press foropening up labour-intensive servicesin GATS negotiations. Weshould also be willing to open ourservices sector.Right now, construction contractorssuch as Larsen and Toubrodo not want to compete for themajor infrastructure projects becausethey cannot find adequatenumber of needed workers.I understand that the Chinesebid was the lowest for one of ourport projects because Chinawants to bring its own labour todo the work as they are sure ofwhat they can get from the labour,which is more productive than India.We have qualms about lettingthe Chinese labour work on theconstruction contracts. To changethis requires political will and rethinking.Our reservations are based onthe fear that we have no instrumentto monitor labour and ensurethat all the Chinese labourdoes not disappear into the Indianeconomy.But the potentials from a liberalregime for labour-intensive servicesareenormous.In servicesnegotiations,we will have togive as well astake. Simplyharping onwhat we wantto take is notgoing to get usanywhere -whether it isNAMA (nonagriculturemarket access)or services oragriculture. Iwould like tosee India moreforthcoming in opening up itseconomy.On US slowdown and India'sprospects: There is no doubt thatthe US slowdown will have an impacton India. But compared toChina, where more than 60-65per cent of its GDP is trade, for us,it is still 35 per cent on goods plusanother 5- 10 per cent on services.We are less relatively exposedthan China.Whether the US recession willbe short and revival will takeplace soon is difficult to predict.By and large, given our largereserves and our situation, we cantide the crisis of a recession but,on the other hand, what is of concernto me is whether the turmoilin the global financial market reflectssomething deeply wrongthat is yet to come out. If it is, itcan put an entirely different complexion.

(This article was published in the Business Line print edition dated February 5, 2008)
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