In a world that is ‘de-globalising’, where trade blocs are rapidly gaining ground and trade wars are imminent, it takes a brave economist to advocate free trade and tariff cuts. Arvind Panagariya, Professor at Columbia University, the first NITI Aayog Chairman and now the Chairman of the 16th Finance Commission, does that in his book ‘India’s Trade Policy: 1990s and Beyond’.
This book is a collection of articles that Panagariya wrote in Indian newspapers and magazines over the last three decades. Though there is an attempt to organize them thematically, it suffers from repetition, something common to collection of articles.
The articles are bunched in 10 parts ranging from trade policy, trade relations with US and China and the WTO and the various rounds of negotiations held under it – Seattle, Doha, Cancun, FTAs and the future of global trade.
In the first four parts, issues relating to India’ trade policy over the years is discussed. Panagariya fervently advocates tariff cuts and free trade and firmly believes in the benefits of a rapidly globalising world economy. Many of these articles were written in 1990s and early noughties and the issues and policy prescriptions reflect the flavour of those times.
Dump anti-dumping
He is a passionate opponent of that favourite instrument of policy makers – anti-dumping duty. In a couple of articles written in 2018, he frowns on the government’s decision to raise tariffs and the return to protection. Panagariya is clearly not a fan of the government’s decision to support MSMEs and curb imports. Instead of appointing a panel to curb imports, Panagariya feels it would be a better idea to have a panel to boost exports.
There are a couple of articles on Nehru’s “self-sufficiency” strategy where Panagariya argues how the focus on heavy industry starved the small and light industry segments of scarce financial resources affecting jobs creation in the process.
In an article written in 2017, Panagariya criticizes the ‘Make in India’ policy arguing that along with reducing imports, this policy will also reduce exports and hurt the competitiveness of Indian industry. It would be interesting to see what Panagariya would have to say on the government’s flagship industrial policy – the PLI scheme. But sadly there is no article in this collection on this crucial policy issue on which a lot of funds and policy focus have been accorded.
Interestingly, in an article written way back in 1989, Panagariya calls for trade liberalization but seems cautious on easing rules on foreign investments. In a series of articles on India-US trade relations, Panagariya calls out some of the US’s unfair moves on Super 301 and H-1B visa, which the Indian IT sector feels targets them unfairly. Donald Trump’s tariff hikes in 2019 and India’s measured response to it finds mention in one of the articles. If Trump returns to the Oval office, the world will have to brace itself of more such tariff hikes.
On India’s testy trade relationship with China, we can discern a clear shift in Panagariya’s stance. The articles written 10-15 years ago call for deeper trade engagement with China despite the growing imbalance. But post-Galwan, the author is wary of China and advocates a strategy of “decoupling”. He favours signing free trade pacts, especially with the US, EU and other like-minded countries to counter China’s economic heft.
WTO and its discontents
There are 15 articles in the section ‘India and multilateral trade negotiations’, which is perhaps the meatiest part of the book. A couple of these articles are co-authored with Jagdish Bhagwati. Unfortunately given that the WTO is a shambles now many of the issues dealt in this section may seem dated now.
Panagariya comments on India’s stance on the various rounds of WTO that took place in Singapore, Seattle, Doha, Cancun, and Hong Kong. The West’s attempts at including non-trade or “Singapore issues” like labour, trade facilitation and environment and India’s valiant and pragmatic attempts to keep these issues out and focus only on the trade issues are brought out by Panagariya in these articles.
Of course India had to cop a lot of criticism in the Western press for its “obstructionist” attitude, but on the whole Panagariya gives credit to the Indian negotiators of that era for keeping the focus on India’s core interests, though he does on occasion wishes there was greater flexibility by India.
Agriculture subsidies is another bugbear that Panagariya talks about and here the US (which has a comparative advantage) and the EU (which is lacking in comparative advantage) were often adversaries.
Interestingly there seems to be a healthy bi-partisanhip in India’s stance where the Vajpayee’s NDA government and Manmohan Singh’s UPA government converged on trade issues. Though Panagariya does not specifically mention this, it comes through clearly in the articles.
The hollowness of the West’s pious incantations on labour issue is called out by Panagariya. He argues that far from caring for the rights of developing countries’ workers, the West fears more the competition from the developing world.
In a world that has clearly lost its appetite for a rules-based global trading system, there is a question mark hanging over the future of the WTO. Though Panagariya calls on the developing world to resurrect the WTO’s fortunes, in a world fast moving towards bilateral trade pacts and plurilateral trade blocs, the WTO’s future looks bleak.
This book will be of interest to those looking for a quick read on India’s trade journey over the last three decades.
Check out the book on Amazon.
