Local politics trump global free trade – even for India’s great liberaliser

By Raghavendra Verma, in New Delhi

India has been blamed for the failure of the World Trade Organisation talks in Geneva, where its commerce minister Kamal Nath was portrayed as a villain for spoiling a golden opportunity. At home, however he has been lauded for his principled stand and for withstanding the pressure from United States.

The Indian parliament is full of socialists, communists, nationalists and most of all, opportunists who would jump on any issue that could be portrayed as anti-poor or anti-farmer. So onlookers might think it easy for Prime Minister Manmohan Singh to play safe and let the WTO talks falter. However Singh’s recent actions elsewhere in the political throng portrays him as a much stronger ruler, who pushed through an Indo-US nuclear deal against all odds and hostility from Indian parliamentarians. He was even accused of pledging India’s national interests to United States by his onetime communist allies who withdrew support from his Congress-led government and almost brought down his government. With this background and at a time when the United States is making strenuous diplomatic efforts to help India get necessary approvals at various international nuclear agencies, it is hard to imagine that Singh would risk antagonising Washington at the WTO.India‘s administrators and advocates of free market economics well understand that the Chinese model of growth, that bulldozes all opposition to implement executive decisions issued from the top, cannot be adopted, primarily because of its democratic set-up. The long drawn violent battles over land transfer deals for the industries in West Bengal and other states are clear examples. So policies such as free trade that adversely affect a substantial section of the society have a little chance of success unless there is a strong internal pressure group to keep the politicians on their toes. Indian industry – that until the last decade was itself advocating protectionism – can hardly be expected to play that role.Furthermore the likely benefits from the successful completion of WTO deal are too esoteric for the general public to comprehend, and when the government is already delivering 8%-9% annual growth, the issue gets further muted. In contrast, if there was a boom in food imports and the government was unable to act because it had not secured a sufficiently strong Special Safeguard Mechanism (SSM), (the issue bringing down the Geneva talks), then farmers could be very upset. That issue could have become a Albatross round the government’s neck during the election year.Way back in 1991, it was under Singh’s position as finance minister that the flawed socialist model practiced since the country’s independence in 1947 was replaced by liberal economic policies. However because of local political concerns, when he was in a position to deliver the same fruits of liberalised trade at a much higher scale to the whole world, he let an obscure issue such as the SSM made all the hard work and concerted efforts made in Geneva’s Doha Development Round go in vain.