Know what’s good for thee

Impending WTO entry for China is no cause for Indian cheer

Shefali Misra

A fiction has been swallowed whole by many in India: China’s imminent accession to the World Trade Organisation (WTO) is “good” for India. Some lazy thinking and a habit increasingly of accepting without question whatever the western world argues are probably behind this.

Whatever the reason, there are two skeins of thought in this perception. One is that China will become bound by WTO disciplines that will force it to allow greater access to its own markets and prevent some of its present predatory trade behaviour (read, for the most part, “dumping” or exporting goods below “normal value” in foreign markets to gain market share).

The second is the old mentality of Indian industry whereby, by reflex almost, it runs to hide behind whatever voluminous skirt happens to be available. Industry wallahs probably believe that China will, by default, end up fighting some of India’s — or, rather, their — battles in the WTO because of a quite involuntary overlap of interests in some areas. Both perceptions are plain wrong. The West is quite right to want to bring China into the WTO fold — on its own terms. These countries stand to benefit hugely from prising open China’s humongous market, whether in cars or insurance or telecom. True, the free market ideology appeals like nothing else to the Indian chattering classes these days but, pray, how is India to benefit from China opening its markets when it does not have much to take there either in direct foreign investments or exports?

As for binding China to WTO disciplines, this is the still greater myth. Just what sort of disciplines would China be forced to observe that would benefit India? One thing that springs to mind is better respect for intellectual property rights (IPRs). Indeed China has been making a great show for some years of its improved IPRs compliance. Well, good for it, but it is hard to think of Indian IPRs, at risk of being abused by China today, that would thereby be protected.

So you say “dumping”. Now it may gladden some Indian hearts to note that India is not alone in panicking at the “flood” of “cheap Chinese imports”. In certain sectors, China is giving Japan, the world’s second largest economy, the heebie-jeebies too and facing a flurry of anti-dumping actions. But whether or not China really indulges in dumping is a good question. If fierce competitiveness — however acquired — amounts to dumping, China dumps. But as far as the WTO is concerned, dumping is a term technically defined to check below-cost or below “normal value” sales in foreign markets. Still, let us assume, for argument’s sake, that China dumps. Its being in the WTO is not going to change a thing.
Already, and without being in the WTO, China faces the most anti-dumping investigations worldwide. India, of course, is also among the usual suspects here: it initiated, suo motu, anti-dumping action against several Chinese goods months ago. If anything, entering the WTO will strengthen Beijing’s hands in fighting against trade aggression of this sort by giving it equal recourse to the WTO disputes settlement process.

Now for the belief that, willy nilly, China will fight India’s battles in the WTO. Somehow I don’t think that even the most naive in India believe that a strongly nationalistic government like China’s does anything for another country on ideological grounds: the feeling is that, on issues such as labour standards et al, the additional weight of China’s voice will strengthen the developing world’s hands. Suspect reasoning. Unity on this issue in the developing world — driven by enlightened self-interest — is strong enough that China adding its voice will probably not make much difference.

But the most important point remains. As silly and aspirational attempts to compare India to China are in matters economic, it would also be silly not to admit that Indian and Chinese trade interests are antagonistic: India is way too puny still to offer China any real competition, but China is competition for India in limited and unfree world markets where export gains for countries are a zero-sum game.

As of now, India’s one trade advantage against China is that it is a WTO member and a beneficiary of all that this entails, while China, with seven or eight times its world trade share, is not. When China enters, that minimal advantage will be gone. This is why it would be foolish to get excited about China’s WTO accession. The West will gain from China’s newly open markets, India will not. The advantage will be big enough for the West to offer China the benefits of being in the WTO. That will do India no good.

This is not to urge obstructionism, but to urge good sense, realism and preparedness for the day, hardly far away, when China is there at the table.