Suresh Prabhu’s Buenos Aires tango
With the US moving firmly away from the rules-based multilateral trading system towards a new emphasis on bilateral wheeling and dealing aimed squarely at advancing American national interest, by hook or crook, the forthcoming Eleventh Ministerial Conference (MC11) of the World Trade Organization (WTO), due to take place in Buenos Aires, Argentina, from 10-13 December, assumes heightened importance.
Regular readers of this column will recall that after the failure of the Tenth Ministerial Conference (MC10), held in Nairobi in December 2015, to reaffirm the centrality of the Doha Development Agenda, I had summed up thus: “Having killed a development-oriented, genuinely multilateral, consensus-based process, a weakening but still powerful hegemon, the US, will seek to assert itself in the twilight of its ascendancy.” (“Message From Nairobi”, 21 December 2015, goo.gl/gkKySe).
Recall that this was my conclusion in the waning days of the Barack Obama presidency in the US—in other words, when the global hegemonic power was still under a president who, at least in theory, believed in global rules and institutions; under Donald Trump, who has averred the primacy of American interests over “globalism”, and favours pragmatic deal-making over institutional rules and niceties, it would be foolish to expect US trade negotiators to play nice in Buenos Aires.
The stakes for India are high. As an emerging power which is a spoke rather than a hub of overlapping preferential bilateral and plurilateral trade deals, India does not have the economic clout of China to go toe-to-toe with the US, and benefits enormously from the rules-based, consensus-driven approach of the WTO.
Outside of the Trans-Pacific Partnership (TPP)—rightly so, as I have argued—and on the fringes of the Chinese-led Regional Comprehensive Economic Partnership (RCEP), India has much to lose if the rules-based system collapses and devolves into a trade policy version of the “Gunfight at the O.K. Corral”, with Trump in the self-appointed role of the town marshal mixing it up with assorted outlaws and baddies, ready to shoot first and ask questions later.
Nor should anyone doubt that enforcer-in-chief Trump means what he says. Having already withdrawn from the TPP on the third full day of his presidency, now, in the crucial renegotiations of the North American Free Trade Agreement (Nafta), triggered by Trump, his chief trade negotiator, US trade representative Robert Lighthizer, has turned the screws on his Canadian and Mexican counterparts, credibly signalling that the US would rather torpedo Nafta than agree to a deal not in keeping with US interests.
None of this bodes well for a languorous tango in Buenos Aires for any of the US’ would-be dance partners.
To his credit, Suresh Prabhu, the new Union minister of commerce and industry, has been making all the right noises in the lead-up to MC11—striking a note of pragmatism and moderating expectations, while at the same time insisting that India will pursue its national economic interest and draw red lines where necessary. This tempered rhetoric—we will have to wait and see if it is matched by reality—is a refreshing contrast to the somewhat more dogmatic and less agile tone struck by his predecessor in the role, Nirmala Sitharaman.
Prabhu’s work in Buenos Aires is cut out for him. As reported in this newspaper on 25 November, the US apparently blocked attempts to agree on a draft ministerial declaration for MC11 which would have reaffirmed the centrality of the WTO in global trade liberalization as well as blocking reference to the Doha Development Agenda as a central goal of the WTO. There is, thus, a real possibility that the US will play spoiler and block any sort of meaningful ministerial declaration as the MC11 negotiations play out.
India’s best hope is that we can forge common cause with other emerging powers, possibly including China, who share a stake in the preservation, if not the enhancement, of the rules-based multilateral trade regime. Other potential allies are traditional “middle powers”, such as Canada, Australia, and a clutch of European countries, all of whom are highly open economies with a great deal to lose if multilateralism falters.
Yet, with the possible exception of China, none of these countries has the economic might to get into a full-fledged slugging match with the US, so America’s demands to remake the global political economy will need to be reckoned with—and even accommodated—to the extent possible without compromising the foundational principles of the WTO, which are the commitment to rules and to consensus.
But the demands of a combative and weary hegemon cannot be neglected or wished away. The recognition of that pragmatic reality should shape our negotiating strategy in Buenos Aires.
Crucially, India must at all costs avoid the temptation to showboat, and attempt to score rhetorical points at the expense of the US and other advanced economies and as the self-anointed putative champion of the developing world, which seems to be our default shtick at major international gatherings. Of all recent commerce ministers, the mild-mannered but steely Suresh Prabhu seems best poised to do just this.
Vivek Dehejia is a Mint columnist and resident senior fellow at IDFC Institute, Mumbai. Read Vivek’s Mint columns at www.livemint.com/vivekdehejia
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