Author: PN Vijay
Publication: The Financial Express
Date: June 5, 2003
Through the WTO, we can actually
become leaders in agriculture and services
The World Trade Organisation has
clearly become the most important multilateral forum in the world, being
far more pervasive and effective than even the United Nations. Even China,
which had long stayed aloof from all such entities lobbied ferociously
to get into it and has finally achieved its aim. India has been one of
the founding members of WTO and is today in the thick of the various debates
that go on within the WTO.
Unfortunately in India there is
still considerable cynicism and skepticism about WTO. Almost all those
who consider themselves nationalistic condemn WTO as a flag bearer of a
new form of economic colonialism and are forever lobbying against it. This,
as I will try to explain, is not quite correct and is born out of a lack
of understanding of the ground realities. This proper understanding is
very critical since that would strengthen the hands of our negotiators
as they take on the rich nations in various conferences that lie ahead.
The WTO has three broad components
and these relate to manufacturing, agriculture and services. Patents and
investments can be broadly brought under the first named category. The
scope of this article is not enough to go into detail on such a vast subject
as this and so, per force one needs to look at the macro level only; one
may hasten to add the arguments at the micro level that are even more compelling.
To begin with, in India much of the discussion on WTO has been on manufacturing
and the fears have been that WTO would force us to open markets and the
country would be loaded with imports. The prophets of doom used to say
four or five years ago that once we reduce duties and remove all quantitative
restrictions, the country will become the dumping ground for all second
rate products.
The truth has been totally different.
We have removed QRs totally and reduced duties a great deal. But we have
seen that our exports are booming, imports are growing at a much slower
rate and we are having a current account surplus for two years running.
And as for flooding, the situation is just the opposite. Our imports are
mainly petroleum products, edible oils and items imported for purposes
of value addition and reexport. These three imports have nothing to do
with WTO and are being done purely to keep our economy going, keep prices
down and keep exports up respectively. In fact, if we took away these three
items, one will come "to an astounding fact. Our exports are five times
our imports without the above three! With the US, we have such a positive
trade balance it is embarrassing! Same is the case with China where in
spite of the bogey of cheap Chinese goods flooding the Indian market, our
exports to China are more than twice our imports from China. In short,
after WTO, Indian exports are growing, our imports are stagnating, and
our currency is today one of the strongest and most envied in the world!
Let us look at agriculture where the bogey of WTO is raised again and again.
The WTO agreement on agriculture stipulates certain ceilings on mar-et
support that a country can give to its farmers. For developing countries
like India it is 10 per cent of the GDP. Our market support is in fact
far less than 10 per cent. As for dumping, we have found rates which go
as high as 150 per cent and 300 per cent for sensitive commodities like
edible oils, processed foods,etc-what this means is that we have the right
to raise the import duties to these levels in case we so desire. In actual
fact the duties we have imposed are far less, meaning that we have scope
to increase them if our farmers are threat-led. So there is no reason whatsoever
anyone to say that the WTO is putting international pressure on our farmers.
On the other hand, after WTO our farm exports are going up by leaps and
bounds and are today touching Rs 0,000 crore. They are about 15 per cent
of our total exports, more than five times what they were 10 years ago.
It just proves a point which many of us have known instinctively; that
when it comes to agriculture, India is a low cost producer compared to
other nations except in a few cases like edible oils, etc.
When we turn to services, we find
that we are competitive but we need the WTO umbrella to force the Western
nations to open up their markets to us. The negotiations on services is
at an early stage and nations are only making voluntary commitments. But
it is becoming clear that nations are getting scared of India's phenomenal
manpower which is low cost and highly skilled. Just like we used to impose
QRs in the good old days they are imposing visa restrictions, which are
nothing but QRs on human beings! But to get good solutions for these issues
and to turn these into opportunities for our younger generation, we need
WTO since that is the only forum where the rich G-8 will have to listen
to the developing nations.
Not that WTO is totally good. There
are many issues that concern us and we need to be clever in handling them.
But they are far less in number and importance than the opportunities that
have got thrown up by globalisation of trade. What is required is for people
in this' country to understand that India has gained a lot by joining WTO;
that WTO is good for the country; that WTO is the only way we can achieve
our future goals of becoming a leader in agriculture and services just
like we have become in software. Such an understanding will ensure a national
consensus on what is admittedly the most important economic issue before
the country, namely globalisation.
(The author is a Delhi-based investment
banker and Convenor of the BJP Central Economic Cell. The views expressed
herein are personal. He can be contacted at pnvijay@vsnl.com)
