Tag Archives: World Trade Organization

Is India Open For Business?

WTO logoThe Sixth Review of the Trade Policies and Practices of India offered an excellent opportunity to learn about the development of the trade, economic, and investment policies of India since its previous WTO Review in 2011, and its overall readiness for business.

WTO members commended India’s accelerating economic growth during the review period, particularly in the services sector, and the milder inflation in recent years.   However, members also recognized India’s need and willingness to overcome its structural bottlenecks, including fiscal deficit, shortfalls in infrastructure such as education, health care, transportation, and power supply, delays in project approval, difficulties in land acquisition, low manufacturing base and agricultural productivity, and cumbersome labor market regulations. In this respect, WTO urged India to pursue further tax reforms, which may increase government revenues, as well as to increase investment in infrastructure.

In terms of trade policy challenges, India’s share of world trade continues to be small, with only a slight increase from 1.3 percent in 2009 to 1.7 percent of global merchandise exports in 2013.  Further, given uncertainties in the international economic environment in general and within India’s major trading partners in particular, the country may experience future challenges in its trade sector. Moreover, domestic factors like weak infrastructure, rising wages and scarcity of skilled labor in the case of services are inhibiting growth of trade and related activities (WTO, 2015)

Finally, the rising incidence of non-tariff barriers, in the form of sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT), remain a major trade concern.  While tariffs have been going down globally (also as a concomitant to rising number of FTAs), the use of technical regulations/mandatory standards as barriers has grown, along with the growth of a variety of conformity assessment procedures.  The resultant increased transaction costs arising from complying with such regulatory requirements adds to the costs of India’s exports and erodes price competitiveness (WTO, 2015).

Thinking About Thinking About A Bali Deal

U.S. Secretary of State John Kerry (L) shakes hands with Indian Prime Minister Narendra Modi at the Prime Minister's residence in New Delhi August 1, 2014.India has blocked a landmark trade treaty, the first global trade reform since the creation of the World Trade Organization 19 years ago.  This collective action problem demonstrates the constraining character of previously dominant political and economic games.  Policymakers everywhere are seeking to restructure the state so that it can play new roles in the future (Cerny, 1995) of global governance.  India, included.

On the one side, a firmly held conviction that the decisions that ministers reached in Bali (2013) cannot be changed or amended in any way — and that those decisions have to be fully respected.  And on the other side of the debate some believe that those decisions leave unresolved concerns that need to be addressed.

U.S. Secretary of State John Kerry, who was on a visit to India, told Prime Minister Narendra Modi  that India’s refusal to sign the trade deal had undermined the country’s image.

A labourer spreads wheat for drying at a wholesale grain market in the northern Indian city of ChandigarhIndia says it is willing to sign a global trade deal, but just not yet.  The country’s unresolved concern is food security.   India’s new nationalist government has insisted that a permanent agreement on its subsidised food stockpiling must be in place.

My view is that the multilateral trading system is important not just to support economic growth and development, but also to deal with global issues of governance.  However, domestic politics matter, for either side.  The reality is Indian incomes are increasing rapidly, but not as rapidly as one would infer from official labor income data and growth statistics (Piketty, 2014).  Food security is a supreme national interest.

The possibilities for collective action through multilateral regimes have increased, but these operate at least one remove from democratic accountability (Cerny, 1995).  As Putnam (1988) puts it, it is fruitless to debate whether domestic politics really determine international relations, or the reverse.  Think about it.  The answer to that question is clearly, “Both, sometimes.”