The Hindu : Globalisation: concept & concerns

Online edition of India's National Newspaper
Tuesday, Jan 07, 2003

Opinion

Opinion - Leader Page Articles

Globalisation: concept & concerns — II

By C. Rangarajan

India is in a position to wrest significant gains from globalisation. However, we must voice our concerns and in cooperation with other developing countries modify the international trading arrangements.

WHAT SHOULD India's attitude be in the environment of growing globalisation? At the outset, it must be mentioned that opting out of globalisation is not a viable choice. There are at present 142 members in the World Trade Organisation (WTO). Some 30 countries are waiting to join the WTO. What is needed is to evolve an appropriate framework to wrest maximum benefits out of international trade and investment. This framework should include (a) making explicit the list of demands that India would like to make on the multilateral trade system, (b) measures that rich countries should be required to undertake to enable developing countries to gain more from international trade, and (c) steps that India should take to realise the full potential from globalisation.

Before elaborating each of these elements, it must be pointed out that India's balance of payments position has been considerably strengthened in recent years. The current account deficit which peaked to 3.2 per cent of GDP in 1990 has been declining and is remaining around only one per cent of GDP in the last few years. The import growth rate has not shown any alarming rise. In fact, this has been the most comfortable period as far as the external sector is concerned.

There is considerable concern about the next round of negotiations in the WTO. Developing countries including India should project strongly their viewpoint. Without being exhaustive, the demands on the multilateral trading system should include: (1) establishing symmetry as between the movement of capital and natural persons, (2) delinking environmental standards and labour related considerations from trade negotiations, (3) zero tariffs in industrialised countries on labour intensive exports of developing countries, (4) adequate protection to genetic or biological material and traditional knowledge of developing countries, (5) prohibition of unilateral trade action and extraterritorial application of national laws and regulations, and (6) effective restraint on industrialised countries in initiating anti-dumping and countervailing action against exports from developing countries.

Negotiations are not that easy. We have to yield in some areas to gain in others. But what is important is the approach. We must stay and fight whether they be intellectual property rights or public policy considerations. Doha showed some success in this direction.

The purpose of the new trading system must be to ensure "free and fair" trade among countries. The emphasis so far has been on "free" rather than "fair" trade. It is in this context that the rich industrially advanced countries have a role to play. While requiring developing countries to dismantle barriers and join the mainstream of international trade, they have been raising significant tariff and non-tariff barriers on trade from developing countries. Although average tariffs in the United States, Canada, the European Union and Japan — the so called Quad countries — range from only 4.3 per cent in Japan to 8.3 per cent in Canada, their tariff and trade barriers remain much higher on many products exported by developing countries. Major agricultural food products such as meat, sugar and dairy products attract tariff rates exceeding 100 per cent. Fruits and vegetables such as bananas are hit with a 180 per cent tariff by the European Union, once they exceed quotas. Even in the case of dismantling the Multi-Fibre Agreement (MFA), it is stretched up to 2005 and has been back-loaded so that much of the benefits will accrue to countries like India only towards the end. In fact, these trade barriers impose a serious burden on the developing countries. It is important that if the rich countries want a trading system that is truly fair, they should on their own lift the trade barriers and subsidies that prevent the products of developing countries from reaching their markets.

The third set of measures that should form part of the action plan must relate to strengthening India's position in international trade. India has many strengths, which several developing countries lack. In that sense, India is different and is in a stronger position to gain from international trade and investment. India's rise to the top of the information technology industry in the world is a reflection of the abundance of skilled manpower in our country. It is, therefore, in India's interest to ensure that there is a greater freedom of movement of skilled manpower. At the same time, we should attempt to take all efforts to ensure that we continue to remain a frontline country in the area of skilled manpower. We must maintain a competitive environment domestically so that we can take full advantage of wider market access. We must make good use of the extended time given to developing countries to dismantle trade barriers. Wherever legislation is required to protect sectors such as agriculture, they need to be enacted quickly. In fact, we had taken a long time to pass the Protection of Plant Varieties and Farmers' Rights Bill. We must also be active in ensuring that our firms make effective use of the new patent rights. South Korea has been able to file in recent years as many as 5,000 patent applications in the U.S. whereas in 1986, the country filed only 162. We need a truly active agency in India to encourage Indian firms to file patent applications. In effect, we must build the complementary institutions necessary for maximising the benefits from international trade and investment.

Globalisation, in a fundamental sense, is not a new phenomenon. It is as old as history, starting with the large migrations of people across the great landmasses. Only, recent developments in computer and communication technologies have accelerated the process of integration, with geographic distances becoming less of a factor. Is this `end of geography' a boon or a bane? Borders have become porous and the sky is open. With modern technologies which do not recognise geography, it is not possible to hold back ideas either in the political, economic or cultural spheres. Each country must prepare itself to meet the new challenges so that it is not bypassed by this huge wave of technological and institutional changes.

Nothing is an unmixed blessing. Globalisation in its present form though spurred by far reaching technological changes is not a pure technological phenomenon. It has many dimensions including ideological. To deal with this phenomenon, we must understand the gains and the losses, the benefits as well as the dangers. To be forewarned, as the saying goes, is to be forearmed. But we should not throw the baby out with bath water. We should also resist the temptation to blame globalisation for all our failures. Most often, as the poet said, the fault is in ourselves.

Risks of an open economy are well known. We must not, nevertheless, miss the opportunities that the global system can offer. More than many other developing countries, India is in a position to wrest significant gains from globalisation. However, we must voice our concerns and in cooperation with other developing countries modify the international trading arrangements to take care of the special needs of such countries. At the same time, we must identify and strengthen our comparative advantages. It is this two-fold approach which will enable India to meet the challenges of globalisation which may be the defining characteristic of the new millennium.

(Concluded)

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