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A Golden Opportunity For India

Arvind Panagariya

            During his forthcoming visit to the United States, Prime Minister Atal Behari Vajpayee will have an unusual opportunity to promote the Indian viewpoint among the U.S. leaders and policy makers on issues of mutual interest to the two nations.  For the first time since Rajeev Gandhi’s visit more than fifteen years ago, all eyes in America will be on a visiting Indian Prime Minister.  Among those watching Vajpayee will be George W. Bush and Al Gore, the Republican and Democratic presidential hopefuls, respectively, as well as Bill Clinton, and the Congress.

            A key area in which the Prime Minister must take initiative to influence the American thinking is the new WTO Round.  It may be recalled that the efforts to start such a round at the third WTO Ministerial Conference in Seattle in December 2000 had collapsed in the midst of differences between the United States and European Union (EU) and between developed and developing countries.  Since then, the United States and EU have been working together to bridge their differences.  On May 31, 2000, they issued a joint statement pledging to try to launch the new Round “during the course of the year.”  They have also stated their wish to “include the social issues of labour and environment” in the WTO agenda.  At the recent G-8 summit held in Okinawa from July 21 to July 23, 2000, the major developed countries have endorsed this essential position.  Therefore, it is safe to assume that the new Round will be a top priority for the next U.S. President.

            Though our own opposition to the inclusion of labor standards into the new Round in any form and of environmental standards into the WTO negotiating agenda has been well known, we have not been successful in communicating the legitimacy of our position to the American public.  While we brand and denounce all demands for social and environmental clauses in the WTO as protectionist, morally and ethically driven groups in the United States view us as unwilling to bring about social changes that, in their view, must be a part of all democratic societies.  In turn, this impasse opens the door to alliances between the latter and protectionist lobbies, which eagerly push for social and environmental clauses in the WTO as the only means to promote social and environmental agendas.

Therefore, it is of utmost importance that when Vajpayee speaks to the U.S. Congress, he drives home the lesson that, with its longstanding democratic tradition, India fully shares the American dream of a world without child labor, decent wages for all and the workers’ right to unionization and collective bargaining.  That, even as he speaks, new laws are being enacted to bring India’s practice in conformity with the Child Labor Convention of the International Labor Organization (ILO), which it has recently signed along with the United States.  He should also remind the Congress that, despite very tight fiscal situations, Indian states are rapidly building new schools to move children out of labor force as well as streets into education.  The State of Karnataka has even adopted a formal goal of eradicating all child labor in six years and it is only a matter of time that other states will follow suit.  India boasts of a larger trade union membership than the United States.  And along many dimensions, Indian confers more rights on the workers than the United States.

The Prime Minister must also remind his hosts that trade sanctions will likely hurt the cause of higher labor standards.  For instance, only 5 percent of child workers currently produce goods that are exported.  Trade sanctions will only move these children out of export industries into other, less pleasant, employments.  Not surprisingly, instances have been reported in Bangladesh and Nepal when fears of trade sanctions led to sudden retrenchment of child workers.  Many of these children suffered a fate worse than in their original employment, some ending up in destitution and prostitution.  Keeping such harmful effects of sanctions in view but recognizing the need for active promotion of higher labor standards, the natural course is to delegate the task to the ILO as previously agreed by all WTO members in the Singapore Ministerial Declaration of 1996.

To underline his message, Vajpayee should christen the new Round “Trade Liberalization Round” and call for an agenda that focuses on promoting a more liberal trade regime in all sectors without straying into controversial, non-trade issues.  Developing and developed countries, in general, and India and the United States, in particular, stand to reap huge benefits by further opening up their markets to each other.  Despite much liberalization, many developing countries, including India, continue to have high trade barriers on goods exported by developed countries.  Likewise, developed countries maintain high barriers on products exported by developing countries such as textiles and clothing, fisheries, leather and agricultural products.  India and the United States have much to gain from exchanging market access in services as well.  With its vast pool of middle-level skills, India can provide the United States a variety of back office services at low cost via the Internet and temporary movement of natural persons.  Equally, the United States can export to India financial services of all kinds including insurance and banking.  Thus, the American insistence to bring labor standards into the WTO risks large potential benefits from traditional liberalization that has been central to the growth and poverty-alleviation experience of many countries since the Second World War.

Our ministers accompanying the Prime Minister must complement him by reaching out key groups, including NGOs, and explaining to them our viewpoint.  Commerce Minister Murasoli Maran, in particular, must also seek space in the leading U.S. newspapers such as the Washington Post and New York Times to explain why he and his government seek a Trade Liberalization Round at the WTO and the pursuit of labor standards at the ILO.

Economic Times, August 30 2000