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| Sunday, 7 August 2005 |
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Features |  |
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Globalisation: Some current concerns by Dr. C. Rangarajan The new millennium is being looked forward to with great hope and expectations and also with some trepidation. How will this new millennium be different? What are the challenges and opportunities for which we should be prepared ? It is difficult to forecast what the future is going to be. Nevertheless, we can perceive three strongly emerging trends. First, technological changes are going to be even faster. It will be no exaggeration to say that the new millennium will be characterised by some fundamental changes in technology. Second, the new millennium will see greater integration of the economies. The process of globalisation will gather further momentum. Speed in communications will accelerate the flow of goods and services along with finance. And third, the wave of rising expectations will surge even further. All countries will become aware of the changes happening all over the world and the developing economies will naturally demand that their aspirations are met. Not only different countries but also different segments within a country will demand that their rights are fully respected. Associated with rapid changes in technology will be the acceleration of globalisation. The term 'globalisation' evokes, once again, several concerns in the minds of many. People are afraid that it could lead to political and economic hegemony, if not in physical but in ideological terms. But globalisation, in one sense, is not a new phenomenon. It is as old as history, starting with the big migrations of people across the great landmasses. Only recent developments in computer and communication technologies have accelerated the process of integration, with geographic distance 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 or economic or in the 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. Response to Globalisation Opting out of globalisation is not a viable choice. We need to stay and win. 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. Demands on the trading system There is considerable concern about the series of negotiations in the WTO. Developing countries should project strongly their viewpoint at these negotiations. 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 industrialized 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 extra territorial 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. The failure of the last Ministerial Round in Cancun is fresh in the memory of everyone. The failure brought out sharply the differences between the developing and developed countries regarding the approach to multi-lateral trade. The breakdown of negotiations was due to two sets of issues. The first related to agriculture and the second to the so-called 'Singapore Issues' covering investment, competition policy, transparency in government procurement and trade facilitation. The developing countries have long claimed that agriculture in the industrially rich countries has been enormously subsidised preventing the developing countries an access into these markets. What the developing countries demanded at Cancun was to eliminate the distortions in the trade in agricultural commodities created through the high level of subsidies in the developed countries. However, the developed countries showed no inclination to reduce the agricultural subsidies. Under these circumstances, a level playing field was impossible. Similarly, the developing countries have also argued for a long time that the so-called Singapore Issues were not related to trade directly and had to be dealt with, if at all, in other fora. Recognising the fact that there are gains to be achieved from multilateral trade, all efforts should be made to bring the warring parties together and an attempt made to bridge the gaps. To some extent, conflicts among countries on trade matters are endemic. Until recently, agriculture was a major bone of contention between the U.S. and the E.U. countries. Frictions are also bound to arise among developing countries as well. When import tariffs on edible oil were increased in India, the most severe protest came from Malaysia which was a major exporter of Palm Oil. Entrepreneurs in India complain of cheaper imports from China. In the export of rice, a major competitor of India is Thailand. If development is accepted as the major objective of trade as the Doha Declaration proclaimed, it should be possible to work out a trading arrangement that is beneficial to all countries. Rich country initiatives 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. They have often indulged in "double speak". While requiring developing countries to dismantle barriers and join the main stream of international trade, they have been raising significant tariff and non-tariff barriers on trade from developing countries. Very often, this has been the consequence of heavy lobbying in the advanced countries to protect 'labour'. Although average tarrifs 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. The tariffs collected by the US on $2 billion worth of imports from Bangladesh are higher than those imposed on imports worth $30 billion from France. 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 come forward to reduce the trade barriers and subsidies that prevent the products of developing countries from reaching their markets. Otherwise the pleas of these countries for a competitive system will sound hollow. The above is an extract from the speech delivered by Dr. C. Rangarajan, Chairman, Finance Commission of India as the chief guest at the last convention of the Institute of Chartered Financial Analysts of India. |
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