November 29, 2014The Hinduagricultureeconomics

From a domestic to an international narrative

India has the wherewithal to be less finicky about complying with international rules when they come in the way of national interests

Co-authored with Pranay Kotasthane

The Hindu This is from my column in The Hindu that ran between 2015-2016.

It now looks like the impasse at the World Trade Organization (WTO) over agricultural subsidies has been resolved, although there are a few more procedural hoops to cross. As Michael Froman, the United States Trade Representative, noted, The breakthrough at the WTO could not have been possible without the direct and personal engagement of Prime Minister [Narendra] Modi and President [Barack] Obama.” Earlier this year, Indian negotiators had effectively vetoed an excruciatingly negotiated multilateral trade agreement, citing the need to provide food security to India’s needy population. Had India not been placated, the future of the multilateral trading system would have been in jeopardy.

The motivations and merits of India’s position aside, consider the fact that India could take the position it did despite being isolated at the WTO negotiations. That is indicative of a kind of geoeconomic power that India did not possess two decades ago during the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) negotiations that paved the way for the creation of the WTO. In a changing world order, an India that grows rapidly will shape geopolitical alignments and geoeconomic frameworks.

Consider also the implications of New Delhi’s position this year: not only would have a multilateral trade agreement come undone, but the very future of the WTO would have been in doubt. The failure of multilateralism would have resulted in bilateral and regional spaghetti bowl trading arrangements that might have, in turn, created new geopolitical groups. The ideas of international free trade and open markets that underpin globalisation would have taken a beating. Agricultural policies of both the rich countries and the developing world would have been affected, impacting global human development. India’s relationship with the U.S. would have suffered with the possible effect of transforming the global balance of power, given the country’s capacity to act as a swing power.

All this to protect the interests of a section of Indian farmers who depend on the government to set higher-than-market prices for public procurement.

The case at the WTO lucidly illustrates the theme of the ongoing collaboration between Takshashila Institution and Hudson Institute: India’s growth trajectory has implications for the world. Even as the Modi government has injected new vigour into domestic and foreign policy, it is important for everyone to get a better grip on the mechanics of both how India’s growth affects the world and how international developments influence India’s prospects. There is a deficit of studies in this area, resulting in a perpetuation of mindsets and positions that are no longer relevant.

Rule-abiding country’

The older of the two authors remembers reading the pages of this newspaper when the Uruguay Round of GATT was being negotiated. That was a time when we mostly saw the world either as a threat or as a donor. Foreign and trade policies were geared defensively by India to protect its interests. Without much power, India had to rely on international rules, so getting the phrasing right in international agreements was of considerable importance. India took justified pride in being a rule-abiding country.”

Many parts of the Indian government continue to have organisational mindsets of this era to various degrees: defensiveness, legalistic fastidiousness and compliance with rules. This, for instance, means that India’s negotiators would go to the extent of breaking the WTO to ensure that the country’s position was properly codified in the agreement.

Yet, as the WTO example itself shows, India has changed and can change the world. The outside world is now more an opportunity and a partner, and less the threat and donor it used to be. Our new mindset ought to be one of confident engagement and risk management, not defensiveness. Moreover, India has the wherewithal to be less finicky about complying with international rules when they come in the way of national interests. By no means is this a case for India to be a wholesale rule-breaker, but it does suggest that our negotiators need not spend enormous amounts of time hammering out perfect clauses.

In fact, it is not only diplomats and trade negotiators who must be aware of the connection between domestic policy and international developments. All policymakers need to be aware that there is an international narrative running parallel to the domestic narrative in all sectors.

World policymaker

The Indian policymaker is already a world policymaker. For instance, labour reforms are not merely about protecting workers and creating employment, they are also about India providing a competitive alternative to global supply chains that want to be diverse from China. India’s innovation policy is not only about encouraging entrepreneurship and research, but also about international intellectual property rights regimes. Health care policy in India might be seen as how best to provide treatments to the needy, but it plugs into the global debate on how to make healthcare affordable in both the rich and the developing worlds.

There are many more The Hindu columns here

Given India’s size, population and preoccupations, our public discourse focuses entirely on domestic narratives. When they intersect, international developments are seen as rude, almost arbitrary intrusions into our lives. The other angle, such as the one where some Indian farmers are affecting the course of 21st century history, needs much greater coverage.If India returns to a high-growth trajectory, it is this that will be the more interesting story.

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