Trump: Trade challenges just became harder
Donald Trump's anti-globalisation tirade was more than an election
rhetoric. He began executing it on day one in office by first
withdrawing from the Trans-Pacific Partnership, or TPP, followed by
mandating the building of the Mexican wall, visa ban and review of the
work visa regime. Trump means to execute his "American vision" quite
stubbornly. The judiciary, American intellectual class and multinational
corporations are going to resist, albeit for how long in the teeth of
his leadership style, remains to be seen. Lately, he has also shown his
pragmatism on China and Japan.
How far can Trump go to materialise
his "Buy and Hire American Dream" is evidenced by his proposed tax and
trade policy changes. How would he craft such policies on the benchmark
of WTO rules needs to be seen. To what extent the American industry
would require to improve its competitiveness is yet another challenge.
Thirdly, forward and backward global linkages of American manufacturing
and services with developing economies should also give Trump a reason
to ponder before he executes any of his grand designs.
The
most significant statement coming from Trump is America's focus on
bilateral trade agreements. This fits in well with his leadership style.
Will Trump ask India a price in the nature of a trade agreement, if in
his global perspective on China containment, he offers India a greater
role on the global stage? If so, can India pay that price? How do we
look at our agriculture sector in this context? Will non-trade issues
continue to dominate the potential relationship? There are issues
related to productivity and structure of our agriculture. India has held
on to its position on intellectual property. Can it do so for long?
Multilateralism
in trade policy has been on the back-burner, courtesy the Obama
regime's fascination with the TPP. Trump is not going to change that
anymore, though for different reasons. The WTO will continue to be a
slow-moving discordant organisation. If India wants to benefit from
multilateralism, it must take a look at its approach to some of the
subjects being discussed under the Doha rubric and improve its
leadership position in WTO.
Nevertheless, it is time for India to
put its act together. The emergence of the TPP as a new architecture of
global trade was itself a good reason to sit up and expeditiously
recalibrate industrial and economic reforms. Despite the strenuous
efforts of the political leadership, manufacturing has not picked up.
Irrespective of the catch phrases introduced in the politico-economic
lexicon of the country, the fact remains that India can improve only by
becoming more competitive in the manufacturing sector. A recent CII
survey of four critical sectors of India's economy - pharmaceuticals,
textile and garments, electronics, and auto components - shows that
India's logistics and infrastructure sectors face serious deficits. Even
in case of a 10 per cent reduction in indirect costs, it would generate
only up to 5-8 per cent extra exports. Some fundamental structure and
process-related reforms are overdue in the trade logistics and
infrastructure sector.
An environment against free-trade
agreements has been built on account of deep-seated protectionist
psyche. It will not be a surprise if this psyche in India gets a
reactionary boost due to protectionism in the US. Stitching free-trade
agreements is an intrinsic part of an emerging economy's trade policy.
These agrements require strategic approach, careful selection and
expeditious negotiation. It is difficult to deal with China from an
extremely defensive position. We need a categoric political
understanding with China in the emerging architecture - both political
and economic - in the backdrop of Trump's emergence in the United
States. If co-existence at a higher and sustained rate of growth can be
the hallmark of this understanding, we should conclude the regional
comprehensive economic partnership (RCEP) with some more forward-looking
vision. Unfortunately, the industry in some critical sectors remains
protectionist. Building strong value chains within Asia will be the
fundamental reform which India, China and ASEAN can bring through the
RCEP.
If we are going for the RCEP on the Eastern front, the
Western front needs to be strengthened all along the International
North-South Corridor, involving Iran and Eurasia, in terms of trade and
infrastructure linkages. A sustainable trade partnership with potential
African markets is long overdue. This must be built on the understanding
of asymmetric responsibilities by India as in South Asia.This needs
strong political push.
The anti-globalisation wave witnessed in
the US, the UK and some other European countries clearly indicates that
the business model of information technology services exports may lose
its charm sooner than we think. We must distribute our eggs in some more
baskets even if it requires learning new languages and acclimatising to
new cultural environments. It also necessitates faster upgrade on the
technology chain through a new breed of innovative technology and
business practices. India envisions itself high up on the technology
ladder. Are we prepared to deal with the demands this may put on us in
the areas such as intellectual property protection and data privacy? Is
there a case for differential approach to intellectual property
protection in India, based on distinction of mass-serving technologies
and high value creating technology of the future?
Services
continue to be the fulcrum around which India will build its new
economy. Quality consciousness and standards-based regulatory regime
must infuse appropriate ecosystem for emergence of a set of
state-of-the-art services and technology-based products. The challenges
before India's trade policy have only become harder.
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