Protectionism in advanced economies undermining WTO gains: Sitaraman

20 Jul 2017


The increasing insularity, the rising tide of protectionism in many large economies, and the accompanying ominous rhetoric tend to put at risk many of the achievements of the World Trade Organisation (WTO), and even its relevance, minister of commerce and industry Nirmala Sitaraman told a WTO meeting in Geneva, Switzerland.

Besides, she said, national policies to erect non-tariff barriers, impediments to the movement of professionals (labour), questionable attribution of trade deficits to the WTO, and talk of virtually dismantling it and refusing to adhere to its rules, have added to the pessimism arising from the lack of progress in the Doha Round of trade negotiations and the growing protests against globalization.

She said it was the WTO, an intergovernmental institution that helped prevent member countries from sliding into trade protectionism in the aftermath of the 2018 global financial crisis.

''It is perhaps not in the least bit far-fetched to believe that the WTO has kept us from a race to the bottom in many challenging global economic situations,'' she said.

Ironically, she said, this rising tide of protectionism is more evident now in countries that have benefitted significantly from the global economic order, to become amongst the most prosperous in the world. These very countries would now like their people to somehow believe that they have been unfairly treated at the hands of countries that are significantly poorer, she said.

According to her, the anger could be an offshoot of the rising inequality due to the uneven distribution of gains from trade and from economic progress in general, both within and across countries.

But, this, she said, has largely been due to a failure to address the issue of differential economic circumstances and endowments across countries, and shortcomings in various social policies impacting equity within a society. ''The recent disenchantment with globalisation has been wrongly attributed in populist political discourse to trade per se. It would be disingenuous on our part to blame the WTO and international trade for these outcomes. Such a course will only lead to a worsening of the problem,'' Sitaraman said.

For years, developing countries clamoured for fair trade while the developed world pushed for free trade. Today there is a virtual reversal of positions. The WTO has also the mechanisms to ensure it by addressing departures from fair trade like dumping and excessive subsidisation leading to artificial depression of prices, particularly of agricultural products.

However, WTO, somehow, has lost its way after moving some distance on this path under the Doha framework.The Doha Round made little progress and the new agenda has undeniably weakened the negotiating function of the WTO.

While the Doha Ministerial Declaration, launched the Doha Round, contains a strong development mandate, to address the inherent imbalance and asymmetries in trade rules, the new narrative emerging from the developed countries and many think-tanks in the developed world was that the WTO should deal with trade and not development.

This, she said, is a mockery of what was agreed to at Doha. She also recalled the preamble to the Marrakesh Agreement that stated: ''We shall continue to make positive efforts designed to ensure that developing countries and especially the least developed among them, secure a share in the growth of world trade commensurate with the needs of their economic development.''

While this mandate continues to be the bedrock of the Doha Round, a few countries view some elements of the Doha agenda as being ''outdated? and hence not relevant. But, she said, failure to conclude the negotiations does not reduce the relevance or significance of the issues particularly relevant for most developing countries.

Ministerial Declarations are an article of faith, and not an exercise in semantics to be ignored if fulfilling these commitments proves inconvenient for some countries. The successful conclusion of the Doha Round is a shared responsibility of all WTO members,'' she said.

On India's decision to remain a reluctant dealmaker to certain aspects of international trade liberalization, she said, India remains committed to trade liberalisation and deeper integration with the global economy and it has come a long way.

Both the average agricultural and industrial tariffs have declined over time. The tariffs on 71 per cent of our tariff lines are between 5 and 10 per cent. The widening gap between our bound and applied tariff rates reflects India's steady movement towards a lower tariff regime. ''The prevalence of relatively high bound tariffs can be one parameter to assess trade openness, but is certainly not the only one or the most relevant one. We need to look at other parameters such as the ratio of trade to GDP, trade deficit as a percentage of exports and the foreign value-added in gross exports. On each of these parameters India compares favourably with most of the economies of comparable size,'' she pointed out.

Yet, Sitaraman said, the depth and sweep of trade liberalisation that has been implemented in India in the past 25 years has few parallels in history.

During the past three years the government has liberalised and simplified the foreign direct investment policy in sectors such as, railway infrastructure, construction and pharmaceuticals. Many new initiatives have been taken to improve the ease of doing business in the country.

Besides, she said, the transformative, comprehensive and ambitious fiscal reform, the Goods and Services Tax, recently implemented by the government are all aimed at facilitating trade.

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