India must rethink its trade stance as WTO struggles for relevance

WTO meet in Cameroon tests global trade unity as India pushes reform with pragmatism amid rising geopolitical tensions and shifting economic priorities

The 14th ministerial conference of the World Trade Organization (WTO) — the session to be held in Yaoundé, Cameroon, from March 26 to 29 — comes at a crucial juncture. Trade ministers from across the world are expected to discuss the challenges and opportunities facing the multilateral trading system and decide the agenda. The global trade order has been upended by the world’s largest economy over the past one year, with little regard for well-settled trade principles. Given the state of current policy thinking in the United States (US) and its actions regarding the WTO over the past decade, it remains to be seen to what extent the multilateral forum can advance the trade agenda. Geopolitics has also become a bigger risk for trade. 

As reported by this newspaper this week, India’s position going into the conference is that the foundational aspects of the WTO should not change. These include issues such as consensus-driven decision-making at the forum and non-discriminatory tariff treatment by trading partners. Further, pending issues must be addressed before new items are added. The position is understandable. However, it must also be noted that the WTO has seen little progress over the years. The nature of world trade has changed in recent decades with the emergence of global value chains (GVCs). However, the consensus-driven decision-making process has not kept pace with the changes. As a result, countries have turned to free-trade agreements (FTAs), which are allowed under the rules, as an alternative to attain deeper integration and facilitate GVC-led trade. 

While the terms of an FTA remain limited to only the countries doing the deal, outcomes of plurilateral negotiations can be included in the WTO rulebook with consensus. One such issue is the integration of the Investment Facilitation for Development Agreement. The idea is to facilitate investment by focusing on issues such as transparency, simplifying administrative processes and rules, and improving regulatory capacity. The agreement is supported by 128 of the 166 WTO members, including developed and least developed countries. India has opposed it, but it is hard to see why. India anyway needs to do all this to attract investment, which is absolutely necessary to grow at higher rates. Aside from the standpoint of macroeconomic management, where India needs foreign capital to supplement domestic savings to achieve higher growth, foreign capital also brings technology and can enable the country’s integration into GVCs. 

Equally important for the Cameroon conference is that several such issues, including the moratorium on ecommerce Customs, are likely to be discussed there. India must take a pragmatic position at multilateral forums and, more generally, in its trade and investment policies. Over the past year, India has shown considerable openness to trade and signed agreements such as those with the United Kingdom and the European Union. Although the fate of the agreement with the US remains uncertain, the initial framework reflected a pragmatic approach. India needs to carry forward the momentum and open itself to global trade. It is reported that India is considering joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. It must pursue this possibility. Exports can be a major source of growth, as demonstrated by a number of countries over the past few decades. The nature of global trade has changed, and India must adapt quickly. It can also be a major driver of reforms at the WTO.