The gap between what the world should be and what it actually is seems to widen on a daily basis. President Donald Trump’s assertion of planned US control over the Strait of Hormuz might sound far-fetched at this juncture, given Iran’s resistance and his yen for airborne castles, but should the US levy a fee for passage through that strait someday—a proposal Trump withdrew soon after making it—it would be yet another blow to free trade.
Since free trade is an idea backed by both theory and practice, even if the latter has always been imperfect, what’s going on should worry everyone with a stake in global prosperity.
Free and open sea-lanes for ships to criss-cross have been a bedrock of the world order that today’s White House has sought to upturn—if not with tariffs that distort the world economy, then with a grand revision of its role as a global superpower.
An America that asks to be paid for its use of force, even if only for the greater common good, could be called ‘transactional,’ as the cliche has it, but would also signal a big abdication. How this plays out in the sphere of geopolitics is open to conjecture, but a clear casualty of such a US policy shift would be frictionless trade.
India picked up signs of globalization going into reverse early enough. In the US, unease over trade can be traced to a financial jolt caused by a risk overrun that was blamed by some on China and others cast as enablers.
In Geneva, the World Trade Organization (WTO) had been showing symptoms of dysfunction all along. In New Delhi, an analysis of trends sped up the pursuit of bilateral pacts as a pragmatic option for access to overseas markets.
In 2019, India turned away from the East’s Regional Economic Comprehensive Partnership, led by China, but has since struck a flurry of deals with much of the West (or rich world). These aim not just to boost mutual trade by easing barriers, but each other’s economies via intricate fabrics of ties that cover investment, human resources and other valuable exchanges.
Hard-won as these agreements are, the government’s pride in their win-win potential is justified; and with the India-UK deal going into effect on 15 July, so is rising export optimism across the country.
Yet, in the shadow of a $100 billion-plus trade deficit with China, India’s path to an overall export-import balance—let alone a surplus— remains riddled with questions that are hard to answer.
While New Delhi’s quest for foreign ties has placed emphasis on complementary market openings mapped by national planners, would this jigsaw not snap into place more efficiently if forces of demand and supply freely led trade patterns? Mutual gains all around—many of them unforeseen—are the classic promise of barrier-free trade. Chinese export artifices and obstacles posed by domestic lobbies may have bred cynicism over the WTO vision, but can we be sure that a trade patchwork that emerges from the ruins of a multilateral rulebook will work in India’s favour?
Forced into it or not, fragmented trade that’s exposed to a maze of clauses is vulnerable to friction. Moreover, since markets are dynamic, a hard-set calculus of one’s competitive edge may get outdated faster than a review clause could fix.
Global free trade is pegged on gains that could accrue even by virtue of a relative advantage. Although it looks like a dismal pursuit in a volatile world, we must not give up on its revival. It deserves a fair chance to prove itself; and, as a neutral power, India is well placed to campaign for it.