Ever since Anand Sharma replaced Kamal Nath as commerce minister, everyone wants to know how the new United Progressive Alliance (UPA) will act on free trade. The Doha Round of the World Trade Organization (WTO), which Nath helped scuttle last year, remains the big test. Sharma said in June that the Doha impasse had been broken.
WTO director general Pascal Lamy seems to have picked up on this optimism. In an interview with the Business Standard on Tuesday, he noted: “Since the US and Indian elections, there seems to be a different atmosphere surrounding the talks, a willingness of both sides to look at different ways of tackling the outstanding differences.” Yet, there’s enough ground for scepticism.
First, the recent UPA record hasn’t been encouraging. Consider the free-trade agreement with the Association of Southeast Asian Nations (Asean) that’s causing some strife within the alliance. Defence minister A.K. Antony has raised apprehensions and Manmohan Singh has had to give reassurances that farmers won’t be harmed.
Second, it’s unclear if the UPA has a credible plan to rehabilitate the marginal farmers—half of rural households—who will be rendered uncompetitive after Doha. If this plan involves safety nets, the UPA’s flagship rural employment scheme is only worsening the rural market by setting a wage floor.
Third, it would be naively optimistic to put faith in New Delhi’s or Washington’s renewed interest. Sharma already complained last week that a new approach to Doha negotiations isn’t acceptable to India. And US trade representative Ron Kirk is part of an administration that has yet to prove its free-trade credentials, what with the “Buy America” provisions in the US stimulus or Barack Obama’s talk about moving jobs from Bangalore to Buffalo.
Fourth, the elephant in the room remains the global recession. November’s Group of Twenty summit in Washington pledged allegiance to free trade; but the World Bank noted in March that 17 of these 20 countries had erected trade barriers. When governments are keeping their economies afloat through stimulus packages that extend benefits to local manufacturers, they aren’t about to pay anything except lip service to Doha.
We’d be elated if the world moved closer to signing Doha. But we aren’t holding our breath.
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