WTO: The Punching Bag!

Published: Business Line, September 19, 2002
By Pradeep S Mehta

“Tata Engineering to counter WTO threat with LF (low-floor) buses”, read a headline in a respected business daily in June. This news item was from a wire service story. I was surprised why should a large and respected business house need to combat the World Trade Organisation on its buses. The mystery was resolved to an extent, when the news item quoted the company’s regional manager in Kolkata, as saying that with the WTO regime setting in, it would be difficult for Indian manufacturers to survive in the market with buses made out of truck chassis. Now that Volvo is offering competition, Tata Engineering wants to give us better vehicles. The poor WTO had nothing to do with it. It is due to competition and government policy that we will get better and safer vehicles.

This sort of misconceptions abound about the WTO. Media reports, or rather misinformed reports, leaves senior politicians and bureaucrats frothing about the WTO and globalisation. The Government does little to clear doubts. Reverting to the issue of Tata vehicles, indeed, consumers in India have had to suffer bumpy rides in buses, made out of lorry chassis for as long as any one can remember. We would have continued on such vintage busses, trucks and cars, but for the the liberalisation of the automobile sector by Rajiv Gandhi.

In 1985, he opened up the two-wheeler segment, and the black-market for scooters immediately disappeared. In the 1990s, Mr P. V. Narasimha Rao, opened up the car market, and from 1995 on, one could make some thing more than an either or choice. There was no WTO around during those years. If more cars were available that was due to voluntary liberalisation. It is another matter that the auto policy got embroiled in a WTO dispute, because it would have violated our commitments under the WTO Agreement on Trade-Related Investment Measures.

But has that harmed our interests? No, because now the car market in India is very competitive and saturated. If manufacturers have to survive, they will have to look for markets outside India. Until, we had competition in the car industry, we had a choice of the Ambassador, Premier Padmini or Standard. That is, until Maruti came in with Suzuki. Even then there was not enough competition until other foreign auto-makers came in. Consider the case of Malaysia with a similar nationalistic outlook. It nurtured its own brand, Proton, but once it realised that it could not compete with Japanese and Korean cars, it opened up the market. It also realised the cost of protectionism for the economy if there was little competition in the market place.

Returning to the WTO — the favourite punching bag. Another article in another business newspaper, blames it for the woes of coffee. The author speaks of the use of biotechnology by the countries of the North to produce coffee in their countries, and that it will spell the death knell for coffee produced by natural means in the South, including India. The author writes: “And the all-encompassing WTO is widely believed to provide a commercial legitimacy and `structural framework’ to hasten this process of diminishing the dependence of the North on nature and the South for the supply of agricultural commodities of their interests”.

On the contrary consumers in the North are demanding organically- produced agricultural goods, including coffee. It will no longer be a niche market but will continue to grow at an exponential rate. As far as coffee is concerned, the market will grow on the basis of consumers’ choice, but the consumer will certainly not switch to artificial or genetically produced coffee. Competition can come from tea or aerated drinks. But if one wants to drink coffee, then forget a synthetic coffee drink.

One can, of course, pose counter-factuals such as the indigo dye, which died due to synthetic dyes becoming available. The consumer was then concerned with getting the typical blue colour on their clothes. Its taste or smell did not matter. Yet, there is a revival in the demand for the natural indigo dye, even if only for a niche market. There is a big move towards things eco-friendly and organic. No WTO agreement will prevent the expansion or development of such goods and services. When one speaks of indigo, the exploitative British merchant comes to the mind. During Raj days, surely there was exploitation by colonial rulers and their businesses with the aim of filling their own coffers.

East India Company continues to haunt us. On another occasion, when news came of relaxation of FDI in print media, one report likened it to the revival of the East India Company.

Surely, the presence of foreign TV channels has not led to re-colonisation. Be that as it may, the role of the WTO is to ensure that every one gets a fair market and to prevent exploitation, that rules are in place to enable the aggrieved to challenge distortions. Indeed, the WTO is an unequal treaty, but it is certainly not entirely a set of one-sided agreements. Much has to be done, but to make the WTO punching bag for all the changes happening in the economy is like tilting at windmills.

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