Having forecast that international trade flows will contract a real 10% this year, the WTO together with the World Bank has been loudly warning against how protectionism can send this situation spinning out of control. Of course none of these sermons can completely curb countries? fancy for sheltering selected industries. In some instances, this leads to positively ridiculous scenes, with a recent one starring India and China. And it sort of started with kid stuff, with India banning Chinese toys. Now, troubles are nothing new to these toys. Mattel had to recall some two million of them in 2007, mostly on account of excess lead. This June, it was ordered to pay up $2.3 million for violating a ban on bringing dangerous products into the US, where a law has been in place since 1978 banning children?s articles that have more than 0.06% lead. But the US didn?t ban Chinese toys, we did, without anything like an equivalent regulatory regime in place. China threatened to take the matter to WTO. We withdrew the ban, saying we would be okay with toys certified by global safety agencies. Moving on, now China is threatening to ban Indian food products like seafood and sesame oil if India does not also lift the ban on its milk products. Given that China is India?s biggest trading partner now, such tit-for-tat is ridiculous indeed.
It is not the contention here that Chinese products haven?t been plagued by legitimate safety issues, nor that China itself has been very rational in its bans. When Chinese milk products were found contaminated with melamine in September, India kept company with a host of countries that banned them?specific products were named in some cases and the ban has been reversed in others. China responded belligerently. It said a little melamine was alright. It too started pointing reproving fingers at imports, banning the likes of Irish pork and Italian brandy. To put this in context, Britain that buys nearly half of Ireland?s pork exports didn?t bother with a ban. If Beijing can, it will arrogantly face down its accusers one by one. Only if Indian actions are considered and based on sound regulatory footings can it hold its own ground. Neither quality showed through as we imposed and reversed the toy ban in a matter of two months. And Chinese guard was really up with 1,000 toy exporting companies closing down in just the Guangdong province in 2008. What should India do with the milk imbroglio? Stand firm if we have verifiable data that the threat continues, and back away if that?s not the case. Seafood isn?t a major Indian export to China anyway. But surely the two giants can talk milk and seafood without resorting to threats.
