Wall Street Journal ⁽⁷⁾

Read full article Abstract: The WTO talks between the G-4 nations -- Brazil, India, the United States and the European Union -- have collapsed yet again. This time, the only surprising twist was that U.S. Trade Representative Susan Schwab put the blame primarily on India and secondarily on Brazil. In truth, the breakdown of the Doha Round in Potsdam, Germany, had less to do with India and Brazil's protectionism than with the U.S.'s paralyzing inability to respond to long-standing, world-wide demands for the reduction of its (and the EU's) agricultural subsidies. Until we confront this central fact, success will remain beyond our grasp. The good news is that the Doha Round has already made substantial progress on other contentious issues -- such as poor nations gaining easier access to generic drugs and the least-developed countries enjoying virtually free-market access without duties and restrictions. With many of these issues settled or taken off the table, and many players placated, the endgame came down to the four "big players": the U.S., the EU, Brazil and India. Each had to make substantive trade-barrier…

Trade talks at Cancun broke down principally because the G-20 group of mainly larger developing countries rejected U.S. and EU offers on reducing their agricultural protection. Two years later, as the Hong Kong Ministerial approaches, agriculture remains the make-or-break issue in the Doha negotiations. But the impasse can be broken. Read full article Abstract: Trade talks at Cancun broke down principally because the G-20 group of mainly larger developing countries rejected U.S. and EU offers on reducing their agricultural protection. Two years later, as the Hong Kong Ministerial approaches, agriculture remains the make-or-break issue in the Doha negotiations. But the impasse can be broken once we clear up the misinformation on (a) the magnitude of EU and U.S. subsidies and (b) the level of protection through trade barriers in developed and developing countries in agriculture. The New York Times has editorialized that the "developed world funnels nearly $1 billion a day in subsidies," which "encourages overproduction" and drives down prices. The World Bank's president, Paul Wolfowitz, similarly referred to developed countries expending "$280 billion on support to agricultural producers" in…

The right strategy for India is to walk on two legs: traditional labor-intensive industry and modern IT. Both legs need strengthening through further reforms; and four specific reforms are of special importance. Read full article Having sustained 6% annual growth since the late 1980s, India is now regarded as an unequivocal economic success. Prime Minister Manmohan Singh, who visits the White House on Monday, initiated many of the key economic reforms during his tenure as the finance minister in the '90s. But his task remains incomplete. India continues to trail well behind China, which has been growing at the annual rate of 10% since 1981. From an equal level in 1980, per capita income in China today is more than twice India's. The proportion of the population below the poverty line has dropped below 5% in China compared with 26% in India. Though trade has grown rapidly in both countries, it has grown far more rapidly in China. Exports of goods and services grew at the annual rate of 15.2% compared with 10.7% in India. By 2003, China's share in…

Read full article (Jagdish Bhagwati and Arvind Panagariya) (WSJ, 27 Dec 2004) Abstract: The longstanding Multi-fiber Arrangement (MFA) on Textiles -- next to agricultural subsidies and trade barriers the most objectionable trade-restricting affliction of the world trading system -- will finally become history on Jan. 1, 2005. The textile lobbies in many rich, and in some poor, countries are scrambling already to resurrect its protective effects in alternative ways: for the removal of the MFA means that the rich countries will face more competition; as will those poor countries, with no inherent ability to compete, that had developed production simply because they had a guaranteed MFA quota. The focus of the huge media attention, therefore, has been the rich drama within the textiles sphere itself: Who will win, who will lose? Yet the real story lies in the lessons that this episode offers more generally for trade policy. What are these lessons, as seen from the "textiles lens"? When the MFA's demise was negotiated at the conclusion of the Uruguay Round, a 10-year "gradual" removal of restrictions was agreed to,…

Read full article Abstract: In May 2004, when India unexpectedly voted into power the Congress and its allies (later renamed the United Progressive Alliance) and Manmohan Singh became prime minister, it was a dream come true for proponents of economic reform. As finance minister in 1991, Dr. Singh -- who meets President Bush today -- had steered his country out of a major macroeconomic crisis. He went on to liberate India from its "license raj," with its myriad of controls on imports and investment. The measures he put in place in his five-year term delivered a handsome annual GDP growth of 7.5% from 1994-97 and 6% during the 1990s. Four months into UPA rule, prospects are less rosy. GDP growth, which had touched 8% in 2003-04, is set to decline to 6% this year. Inflation, at 3.4% in 2002-03 and 5.4% in 2003-04, has edged up to 7.5%. Until April, everyone was betting on the appreciation of the rupee. But it has depreciated more than 6% against the dollar since then, despite the sale of several billion dollars by the…