Roughly coinciding with Prime Minister Narendra Modi’s visit to the United States, the US department of commerce and the state department recently hosted their Indian counterparts in Washington DC to engage in the first-ever “strategic and commercial dialogue” between the two countries. The goal was to advance putatively shared objectives on the geopolitical and economic aspects of their bilateral relationship.
This is an eminently worthy exercise. Can, however, India ensure that its own ideas and interests will be properly taken into account and that US views and interests will not wholly define the discussions?
Consider trade policy, which was the main issue in the commercial discussions. The Peterson Institute for International Economics (PIIE) — an influential think tank in Washington DC — appears to have taken the lead in defining for India its trade policy priorities, by recently issuing a white paper on this topic. This paper argues that India must attempt to join the US-led preferential trade agreement, the Trans-Pacific Partnership (TPP), which would require India’s acceptance of the US-designed template for such agreements. This would mean that India would have to embrace, for instance, the US view on intellectual property protection (including in the pharmaceutical sector) and free capital flows.
This is worrisome for multiple reasons. The report is likely to reflect the interests of US corporates that are reputed to have funded the PIIE research (though funding need not imply capture). Further, a prominent former PIIE staff member now occupies a leadership position in the Indian government, with responsibilities that include trade policy. As the eminent trade economist Pravin Krishna, borrowing my student Paul Krugman’s brutal style, has put it: Will India be entering a dialogue or an echo chamber?
The design of trade policy today and the question of how to navigate the challenging international policy environment with the competing forces of multilateralism and rapidly proliferating bilateral and regional trade agreements are challenging matters, requiring a grounding in the complex economics of the issue. Engaging international trade and foreign direct investment to power India’s growth, and scaling up the achievements in Gujarat require that the PM draw on the top Indian experts in trade policy, of which India has no lack (consider only the best-known — Pravin Krishna and Devashish Mitra). Comprehensive expertise in trade policy is needed to assist the commerce minister, often besieged by protectionist pressures and not always well-trained in the issues at hand, as in the present case where the otherwise-able minister has been trained at JNU, which has excellent instruction in some areas but specialises in anti-trade rhetoric.
Bureaucrats, even when competent in the complex and subtle issues of trade policy, cannot but be mindful of their minister’s views even when these views are erroneous. This advisory function cannot be handed over to the professional bureaucrats, who will often be ignorant of the more complex aspects of trade policy and who will also inevitably be risk-averse and unwilling to challenge their ministers.
To illustrate: The clear mandate obtained by British Prime Minister David Cameron recently and German Chancellor Angela Merkel’s growing stature in Germany have opened up the possibility of a new Independent Commission on Trade Policies, whereas the earlier one with me and Peter Sutherland as co-chairs had not been supported by India because the then Prime Minister, Manmohan Singh, had been ill-advised to do so. When I was in Berlin recently, I discussed this with Merkel’s top advisers (she was called away by the unending Greek crisis). My further attempts to discuss the renewed Bhagwati-Sutherland initiative with the topmost Indian diplomat in Berlin yielded no response whatsoever. With my reputation as a free trader who favoured continued trade liberalisation, and with the commerce minister sceptical of trade liberalisation, the embassy likely backed off from hosting someone who might land them into trouble with the minister.
Besides, I must stress that India does not have to toe the US line that we sign on to the TPP and other preferential trade agreements (PTAs), lying in every bed we can find (the way Chile has done). We are a much bigger country, with a huge potential domestic market, which should interest other trading nations. We can therefore say: We are open to trade liberalisation in PTAs but we will not sign on to all the non-trade features built by US lobbies into the TPP under the pretence that these are the marks of a “modern” trade agreement. Thus, if we want to join a golf club, we must know how to play golf; but we cannot be expected to go to Church and sing madrigals with the other members! We should, therefore, help design the kinds of PTAs that we will join. Let us put our own oar into the water without acting as a small, unimportant country that has no choice but to kneel and genuflect.
Jagdish Bhagwati is professor (Economics, Law and International Affairs) at Columbia University
The views expressed are personal