India should build capacity, infrastructure to leap high in global free trade

Written by S Saroj Kumar | Updated: Jan 30 2010, 04:23am hrs
With the global GDP output expected to treble from $62 trillion in 2007 to $200 trillion in 2039 and India poised to rise from being 11th largest economy to 2nd largest economy, there is an urgent need to check the loopholes in the countrys free trade process. Speaking to S Saroj Kumar of FE, Harvard Business School professor and convener of agenda council on emerging multinationals, World Economic Forum, Tarun Khanna stressed on the need for greater free trade movement and deeper integration of global trade and commerce. Excerpts

What is your take on opposition to free trade in agri business by Indian farming community

While I strongly support the need to protect domestic agriculture industry from the adverse global competition, I very much denounce the practice of subsidy patronage extended to reap political benefits. The subsidy regime has done nothing to improve capacity augmentation and technological modernisation of farming practices and output.

When the US and EU extend heavy subsidy to their farmers why cant India subsidise its farmers

This is an oft-repeated statement mouthed in favour of perpetuating the current subsidy dispensation. The glaring gap one fails to take note of is that no attention is paid on creating and strengthening the institutional mechanism on par with Europe and US. Why skill training has not been institutionalised for farm workers remains a moot point. Subsidy and grant infusions are a proven practice in the creation of mature markets in advance countries. India should first create an infrastructure and trained manpower to compete at the global scale.

What according to you is the right approach in opening Indian food market for global trade

This is no tirade against subsidising the poor farmer and his occupation. As we aspire to move closer to global trade practices, we cannot shirk the need to focus on internal institutional development. This kind of institutional development has helped Africa to seamlessly brace up with free trade associations. Brazilian bio-fuel industry was handheld by the government still it had outgrown its fledgeling phase. Instead of sticking to the path of blind protectionism the Indian government should build up the necessary capacity for infrastructure and skill and then weave a safety net to counter disadvantage in the free trade play.

Indian policy makers long for greater bilateral cooperation with China at a time when India has filed maximum number of anti-dumping cases, nearly 17 in 2008, against it. How do you see the prospects of Indo-China trade

Trade relationship and ligitation need not be a zero-sum game. There may be issues of anti-dumping and unfair trade practices, however, there are more deals to be made with China for the mutual economic good of both the growing economies. Even after 48 years of war we wallow in the misinformation about our neighbour. Bringing down the information barrier on economic investment and trade knowledge would greatly bring the Asian countries together on free and bilateral regional trade.

What is the likelihood of Saarc becoming the EU of South Asia

No doubt the common tariff and single currency would facilitate greater exchange of trade and commerce among countries, but it requires a lot of time and understanding to appreciate the distributional consequence of trade. It took nearly 60 years for the European Union to fructify the untiring efforts of agencies like European Steel and Coal Agreement and Treaty of Rome. I am not pessimistic of such protracted period of time on Saarc (South Asian Association of Regional Cooperation) and the seven regional countries in south Asian region. These would eventually understand the benefits of binding closer after the success of Doha round of trade talks.