Published 08:56 IST, January 7th 2019
Global Trade Wars: When Elephants Make Love the Grass Below Will Get Crushed
Made in China Ganesh idols to slippers, bags to clothes to electronic equipment, not to mention solar panels are flooding the Indian market even as our leaders – across party lines – continue to extoll the virtues of soft power and writes tomes on it.
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A few months ago in Bangalore, I was looking for bangles for a friend in Geneva. I went to three places across market segments. All three times, the salespeople told me Korean bangles are best as the enamel does not wear off and the clasp is perfect.
Clasp is perfect. That could well be a metaphor that speaks to India saying the country should be ready for trade wars more than ever in 2019 because the grasp of the industrial majors in global trade is firmly focussed on exports to Indian markets.
Made in China Ganesh idols to slippers, bags to clothes to electronic equipment, not to mention solar panels are flooding the Indian market even as our leaders – across party lines – continue to extoll the virtues of soft power and writes tomes on it.
There isn’t anything called soft power unless you believe incense sticks and pearls will open the big doors where powers that are militarily and economically strong have already carved out their space and dug deep. Do not fall for the jugaad logic either. That kind of tinkering is fine when you want to fix an electric wire in your house or a street lamp in the neighbourhood.
No country has taken off economically based on jugaad. India’s share of global trade in two percent, manufacturing and services included. The global trade dashboard will be extremely volatile in 2019, thanks in large part to noises from Washington and Beijing and a fast deteriorating situation between the European Union (EU) and the United States (US). In fact, never have relations between the US and EU been as bad in the last 70 years as they are now.
It has been my view for over a decade that making in India for Indians is where India’s success story must begin. Unless Indians start consuming Indian products, healthcare, energy, goods and financial services, there is little point in expecting other countries to help us do so. Even if they were to do so, they would extract blood and make India a dumping ground. Much like in diplomacy where the only interest is self-interest, so too in trade where there must be no giving without getting.
One of a handful of journalists who reported closely on the transition of the General Agreements on Tariffs Trade (GATT) to the World Trade Organisation (WTO), also called the third leg of the Bretton Woods organisations (the other two being the World Bank and the International Monetary Fund), here’s one thing I can say with certainty – if a country recognises India as a soft power, it is not a compliment. It means they are engaging in meaningless conversations to gain market access in India. India is growing at some seven percent as against a global average of some three percent – that is a signal of something even if economists and politicians argue about it. Fact remains that the next five years are very critical for India to remain stable and build on infrastructure, health, energy, food supplies and finally water.
In their book Create, Copy, Disrupt – India’s Intellectual Property Dilemmas, Prashant Reddy T and Sumathi Chandrasakheran have devoted an entire chapter entitled Surrender at Geneva. The surrender in question occurred in April 1989 when India succumbed to western pressure on trade-related intellectual property (TRIPS) after pretending it would not budge. Suddenly texts appeared from nowhere and the final draft showed that New Delhi had done a complete volte-face from its national position by linking intellectual property and trade. Pharmaceuticals were the worst hit by this turnaround and India could secure nothing in return, not even a dismissal of the Multi-Fibre Arrangement) an international agreement on trade and textiles which was in place from 1974 to 2004 and remained in place even after the WTO came into force. A heavy textile exporter, India was among the countries most hit.
The Geneva-based South Commission (which former Prime Minister Manmohan Singh led from 1987 to 1990) summed it up succinctly when it said, “…In a number of respects the outcome of the Uruguay Round may vitally affect the domestic development and future of the countries.”
On 20th September 1986, the Uruguay Round of multilateral trade negotiations was launched at the seaside town on Punta del Este in Uruguay.* Eighth under the auspices of the (GATT), this round was billed as the most ambitious and complicated of any international trade talks since the end of World War 11. It went much beyond facilitating trans border trade in goods and tariffs. The 15 items on the Uruguay Round’s agenda were a mix of traditional and new issues. The former consisted of market access and agriculture in particular.
The new issues were where emerging countries like India would be most hit. These were traded in services, and trade-related investment measures (TRIMS) and TRIPS. The mould was being recast so as to permanently freeze countries like India at a point in the spiral where there was neither going up or down. There were voices of dissent in the country, but they were hushed first in New Delhi and later Geneva. In some cases, it seemed as if instructions were coming from India directly to the Director General (DG) of the WTO bypassing the Indian negotiators. India after much drama about how the country would never give in did exactly that.
There was worse. While GATT came into being in 1948 as a loose and temporary agreement and remained a provisional treaty for 40 years – a contract between governments acceding to it and not a treaty requiring national ratification - the WTO was a new game altogether. It was a single undertaking meaning if a country did not buy almonds from California in the US, Washington could impose trade sanctions on the country in an unrelated market segment. Retaliation across sectors was born and New Delhi fell between multiple stools. Got nothing, was forced to open markets in TRIPS, TRIMS and Services and also face cross-retaliation. According to Chakravarti Raghavan, one of the most eminent authorities on international trade wrote in his book Recolanisation – GATT, the Uruguay Round, and the Third World wrote that the Uruguay Round would do to the next century (the 21st) what gunboat diplomacy and colonisers did not the last (19th) century.
The thrust of their synchronised positions of the United States (US), the European Union (EU) and Japan were to use the negotiations to maintain an international regime to protect foreign capital and technology and secure compliance through political pressure. The Uruguay round was an attempt not to put the clock back, but to remake the clock so that developing countries remained constantly behind in the curve of economic and technological progress. Debts were not rescheduled, transfer of technology incumbent on a host of factors that impinged on national security, markets were forcibly opened by the US and India was often the target. Not too long ago mangoes from India were banned in the EU because of health concerns also called non-tariff barriers (NTB). These carriers can be imposed on many concerns ranging from the environment to health.
It was during that time when sentences like nothing’s complete till everything is took root. The then DG of WTO the late Peter Sutherland said he would bang heads together if he had to secure a deal in Marrakesh (Morocco) where all of us had shifted or the final coming down of the gavel. We slept on tables and on the floor, drank endless cups of coffee and turned our large pressroom into a home of sorts with each of keeping a look out for other’s stories. When, when, when is all we’d ask Sutherland whenever we saw him in the corridors. You’ll see me dancing on the table was his standard answer.
At the height of the negotiations, a top negotiator told me when two elephants make love, the grass below is bound to get crushed. Speaking of which, it is rather important to mention that even as the multilateral system is being shaken at its roots. The Permanent Five in the United Nations (UN) Security Council (US, Russia France, China and the doddering United Kingdom) continue to vehemently oppose the entry of countries like India, Germany, Brazil etc. to the high table. The P5 as the group is called is in no hurry to recast a post World War 11 legacy that has outlived its weight. Even in BRICS there’s Russia and China and the latter has been successful in thwarting EU policies through Greece, a country and whose ports it virtually owns.
Much as we rejoice in support from this or that economic major, our eyes must be peeled on what India and Indians get. The Indian public must be brought into confidence about what is at stake. The Geneva Surrender, for example, was a below the belt agreement for which Indians are now paying. I do not wish to see India as a country of programmers, assembly line workers and where other countries can dump their goods. I want to see India as also a major exporter of goods. As markets in the developed world mature, the growth engines will come from emerging markets. Whoever says growth engines says employment and free trade. India which is potentially the democratic world’s largest growing free is where the world wants to do business with, but at their bidding.
Three-piece suits have taken the place of gunboats, and the only way forward for India is to create jobs and more jobs and compete with the best in the world however long it takes to get there but as soon as possible. For this to happen, an entire generation of Indians who are used to durbars and dynasties have to make for the country to flourish.
*I’ve written about this is detail in my 1997 book 'India Is For Sale' in the chapter 'Why Does India Buy Almonds from California'.
17:36 IST, January 6th 2019