TCS Daily


Forget the WTO; Concentrate on Trade

By Sauvik Chakraverti - January 12, 2006 12:00 AM

The failure of WTO talks in Hong Kong wasn't difficult to predict. It has been obvious for some time that vested interests have hijacked the original agenda. Instead of free trade, influential voices are promoting a different message: poorer WTO members should seek to export everything, but import nothing.

In the face of such a bald illogic, perhaps we should reiterate a simple fact: just as we produce in order to consume, so we export in order to import. And just as consumption is the most important aspect of our visit to the market, so imports are the most important part of international trade.

Developing countries, led by India, whose people are poor in part because they have been unable to import for decades, are waiting for EU concessions on agriculture before allow them to open their markets. Many have criticized the EU's intransigence on the issue. And they should. But many others, quite rightly, have asked developing nations to look at Hong Kong's example of unilateral free trade and draw important lessons from it. Indeed, developing countries like India should proceed forthwith to free trade unilaterally -- even if the US and EU continue with protectionism and subsidy of agriculture.

Unilateral free trade is a very good idea for a huge country such as India. If subsidized grain enters the market, poor marginal farmers, subsistence agriculturists and day laborers get cheap food. They will move away from subsistence farming as grain will be cheaper to buy in the market. They will move 'from subsistence to exchange', in Peter Bauer's words, and integrate themselves with the urban exchange economy. Instead of grain, Indian farmers will produce fruits and vegetables or even flowers -- solid cash crops. And this benefit will be paid for by US and EU taxpayers.

Indian farmers are also consumers. Farmers should look not only at what crop they will sow or where they will sell it, but also at the more important question of what they will buy with their money. The personal possessions of every poor Indian will record a quantum jump -- and this is the only true measure of the 'wealth of nations'.

People trade, not nations

So why is this so difficult to understand? On a simple level, trade talks of any kind -- multilateral or bilateral -- are doomed to failure because they occur between nations, while it is individuals who actually trade in the market. When individuals trade "reciprocity'" is meaningless. We never make it a point to buy from those who buy from us. A butcher does not go to the tailor who buys his cuts. He simply sells his cuts and goes to the best tailor that his money can buy. Buying and selling are independent decisions, and we seek benefit in both -- but separately. When reciprocity does not exist between individuals, what hope can there be to find it between nations?

In view of this argument -- and the dismal hijacking of the WTO by other political interests -- one is tempted to propose a radical solution: the WTO should be abandoned altogether. Nations and their governments will only get in the way of trade and cause economic losses all around. Each privilege they grant a few producers will in turn be a punishment that will rain down on the majority of consumers. If India opens up its borders to trade unilaterally, the developed world will benefit too, and the global recession that looms will have a softer impact when it arrives. Thus, the entire world stands to gain if more poor nations adopt free trade unilaterally

Indians should see their 2000-mile long coastline as a huge, unutilized economic asset. With free trade, great trading cities will mushroom all along the twin coastlines. Both Hong Kong and Singapore prospered because of their harbors. In China, it is the coast that is taking the lead. The same will happen to India if trade is made freer.

Fifteen years of 'liberalization' have convinced Indians of the need for free markets. Those who want free trade are upset that WTO talks are stuck. They have long endured protectionism at the hands of the Indian state. To these people, my message is: don't expect free trade as a result of government initiative. The government will only try to sell favors and Indian businessmen are notorious favor-seekers. Call for free trade as a removal of all state interference in the global market. That is, call for unilateral free trade. The rest will fail to follow at their own peril.

Sauvik Chakraverti is a journalist based at the Centre for Civil Society in New Delhi. He is author of Articles Against the Indian Socialist State and For Liberal Governance.

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