Free trade: Rest In Peace

Free trade: Rest In Peace
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First Published: Thu, Jul 31 2008. 11 50 PM IST

Illustration: Jayachandran / Mint
Illustration: Jayachandran / Mint
Updated: Thu, Jul 31 2008. 11 50 PM IST
In the end, it had to be agriculture. It provided a good excuse. The future of hundreds of millions of small farmers was a perfect foil for hard-nosed Indian and Chinese negotiators to put an end to the Doha Round of international trade talks. Never mind if these farmers barely scrape a living under protectionist walls.
For the record, the deal ended because the US and India could not agree on the special safeguard mechanism designed to curb the effects of a sudden surge in imports of commodities such as sugar, cotton and rice. India and China wanted a 10% surge as a cut-off, something the US thought would serve protectionist ends. The US wanted a 40% threshold. If the US and the European Union did not want to tame their farm lobbies, India too was in no mood for the deal.
Illustration: Jayachandran / Mint
The dismal end of the talks may not bother many. By 2006, global trade had expanded to $13.6 trillion, up from $7.6 trillion in 2001. In contrast, the World Bank estimated that successful implementation of the Doha Round would deliver $50 billion more annually, down from the $850 billion per year it prophesied in 2001, when the talks began.
So, is it too much to mourn the loss of a deal? Yes. Global trade is not mere statistics. It is about better opportunities for all. With uniform, rule-based, trade in agricultural commodities nowhere in sight, poor nations will be the biggest losers. India too will lose opportunities. As an aspiring economic power, it cannot propel ahead in the absence of new markets.
India and other countries will now have to adapt to a harsher world, one that increasingly believes in bilateral and regional trade agreements. At the end of the Uruguay trade round in 1994, there were 80 bilateral free-trade agreements. By 2010, the World Trade Organization (WTO) estimates, this number will rise to 400. While not protectionist, such agreements allow ample scope for domestic lobbies to get away with what they want.
The patchwork nature of these deals when coupled with a tide of protectionism is likely to cause two developments. One, the authority of WTO will be eroded and its ability to settle trade disputes whittled down greatly. Two, the ability of trade to dampen country-specific macroeconomic problems, for example, due to high food prices, will be greatly reduced.
Will the world think again in favour of such an agreement? Not so long as protectionism has respectability.
(Is the world worse off without a trade deal? Write to us at views@livemint.com)
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First Published: Thu, Jul 31 2008. 11 50 PM IST
More Topics: Ourviews | Doha Round | Trade talks | WTO | India |