Beyond Europe’s farm subsidies

India would benefit more from lowering its own tariffs

Amid all the brinkmanship, posturing and drama in Hong Kong, where trade ministers of the world are gathered to attempt a deal and save the Doha round of multilateral trade negotiations, the issue of EU’s agricultural subsidies has remained as a major bone of contention. As far as India is concerned though, getting Europe to cut its agricultural subsidies is not as important as lowering its own tariffs. Arvind Panagariya’s essay in this month’s Foreign Affairs magazine makes this argument in considerable depth. Those looking for an easier read can consult Tim Harford as he explains why those with the bananas cannot ship them.

This month’s Foreign Affairs also carries a fine essay by Jagdish Bhagwati, who argues that despite all the pessimism most of the obstacles — including the stand-off on agricultural subsidies — are in the ‘policy zone’ and can be overcome by appropriate policy decisions.

Unlike on agriculture and manufacturing — where India can achieve much more by doing its home work — it needs to focus its offensive on getting developed countries to open up their services sectors. And instead of defending its own tariffs on the import on industrial goods, India would be better off defending against the inclusion of non-trade related issues (like intellectual property rights, labour standards, investment, etc) into the WTO agenda.

8 thoughts on “Beyond Europe’s farm subsidies”

  1. Ashish,

    Thanks for that link. I noticed that we share similar views on how Indian’s MPs get paid.

  2. Some times I wonder if policy makers ever read Mr. Bhagwati or Mr. Panagariya or others who make sensible free trade recommendations and point glaring non-issues that ministers and NGOs continue to harp on.

    I am surprised that you think India should fight IP and investment rights. Sure they are not directly related to trade, but there is no other forum to deal with these issues and FDI and business partnership decisions are based on IP and investment rights.

    India has a lot to gain from taking firm positions on IP and investment rights protection. Just like lower tariffs improved Indian businesses (despite socialists warning that Indian business can’t do it), IP rights production will improve innovation in the country and it is a key for sustainable growth in the long term. India is basket case for investment rights when just three decades ago the government stole or confiscated both Indian and foreign business investments from airlines to banks to colas. By taking these rights seriously, future investments in India will have some fall back.

    Although Indian labor conditions in most Indian businesses have a long way to go to reach any sort of decent standard (labor reform will help in this respect), WTO labor standards are a ruse for rich countries protectionism and should be rejected by India and other developing countries.

  3. Chandra,

    No, I’m not advocating defending against IPR and other issues per se; rather, their inclusion in the WTO’s agenda. Inclusion on non-trade issues in already complicated multilateral negotiations will divert focus from the WTO’s mandate — to liberalise international trade.

  4. Hey Nitin,
    I think you misunderstood Chandra. he did not argue against IPR, hes suggesting we should protect individual rights. We have to provide and then protect individual rights in all matters, personal and business. By providing appropriate rights to one’s contribution and assets we ensure that more will follow. Its in our best interest to award IPR and protect rights (and not businesses).

  5. Pankaj,

    How does an argument to avoid IPR and other unrelated issues in WTO become an argument against IPR itself?

    It is not whether or not India must protect intellectual property rights, but that the WTO is not the right forum to discuss this. There are all sorts of desirable issues, but WTO will be most effective if it concentrates on the issue that it is supposed to — trade.

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