Southerly trade winds
Doha round talks are off, and any progress seems unlikely for months, if not years. With this goes some of our hopes of boosting growth through increased trade. The WTO in its present form remains too unwieldy — its sheer size, the enormity of the task and the multitude of conflicting interests — and biased in favour of the richer players. Its reform requires a change in the underlying structure of international trade — a contentious, long-drawn out process. So the option before us is to keep open the route of regional and preferential trade arrangements.
Fortunately, Indian trade policy envisages pursuance of all tracks — multilateral, bilateral and regional, as Commerce Minister Kamal Nath reiterated on Monday — and is thus well-suited to cope with the situation. The two proposals announced last week — India’s trilateral FTA with the Mercado Común del Sur (Mercosur) and the South African Customs Union (Sacu) and the comprehensive economic cooperation agreement (Ceca) with the EU — make sound economic and strategic sense. The FTA with Mercosur and Sacu will bring together the economic and trade powerhouses of the developing world — Brazil, Argentina, India and South Africa, besides Uruguay, Paraguay, Namibia, Botswana, Lesotho and Swaziland. Trade between these countries is expanding steadily. For instance, trade between India, Brazil and South Africa in 2005 stood at $ 2.34 billion, double the 2004 figure of $ 1.2 bn. India is well placed to benefit from the vast Mercosur market, with its markets-and-products schemes that offer WTO-compliant export incentives and the special concessions to companies trading with this region. The FTA is also strategically significant as Brazil and South Africa are members of the Nuclear Suppliers Group. Improving ties with African countries is also important, given India’s bid for a permanent seat in the UNSC.
The proposed Ceca, an agreement on trade in goods and services, investment, movement of service providers and taxation, meanwhile will cement India’s relationship with the EU, its largest trading partner. It’s a good move given that the EU has proven to be more adaptable regarding agriculture issues at the WTO. This pact will also be significant because it will enable Indian professionals to work in the EU. Hopefully, the Doha Round will get back on track, but in the meantime, let’s keep our powder dry.