Opinion polls that came out over the weekend, after Barack Obama won the Democratic Party nomination, show him at 48% ahead of Republican John McCain’s 40%. Obama does not seem to be a free trader by nature. And there is reason to believe that he would ratchet up his innate protectionism during the campaign as the US economy struggles with sluggish growth, if not outright recession.
Illustration: Jayachandran / Mint
It may thus be tempting to conclude that the prospects of a new global trade pact are brightest right now. And, hence, lead some to believe that a trade deal under the Doha Round should be pushed through in a hurry.
However, by some estimates, the global food crisis will force developing countries to spend twice as much on food imports in the current year as in 2000. This is being used to make a case to justify exorbitant food subsidies in some Western economies in a new trade order.
Both temptations should be ignored. The first, because it is still too early in the election season to say who will take charge in the US; also, there is often a big difference in campaign rhetoric and actual policy prescriptions. Secondly, the subsidies for farmers in the West both challenge and distort the notion of comparative trade advantage and introduce inequalities in competition.
While it is a matter of concern that even seven years after the Doha Round was kicked off, its members are yet to strike a consensus, it is also a fact that such negotiations will be time-consuming. Also, the context is dramatically different from the last such deliberation, popularly referred to as the Uruguay Round.
Unlike then, some of the developing countries, such as Brazil, China and India, have a stronger global presence and hence rightfully have a greater say.
Balancing of interests is very critical in arriving at a lasting solution; pushing something through against the interests of key member groupings is a recipe for disaster. Even the Uruguay Round took seven years to conclude, after it was kicked off in 1986.
The old paradigm of trade talks has changed. Developed countries and regions, such as the US and the European Union, are as defensive about protecting their domestic markets against cheaper imports as they are aggressive in negotiating easier access to new markets.
It is time to reframe the debate. Certainly, hustling a consensus through is not an option.
Should India rush into a trade deal? Write to us at firstname.lastname@example.org