Too many too soon?

Jagdish Bhagwati, the well-known economist, once called the rapidly proliferating regional and preferential trade agreements a 'spaghetti bowl' of confusion, loose ends and rules that no one can unravel.

Unmindful of the warning, India has taken to these with a late-comer's enthusiasm. There is already a free trade agreement with Sri Lanka, framework for deals with Thailand and Singapore, and another now with a regional grouping that includes Thailand, Sri Lanka and Bangladesh.

More are promised with Israel, the Mercosur countries in South America and South Africa, not to speak of Saarc itself.

The fact that the Sri Lankan agreement has not worked smoothly, and that the Thai agreement has provoked murmurs of protest before the ink is dry, does not seem to make anyone pause and ponder: Is this really the best way to go? And can so many agreements, with different rules of origin, be made to work in harmony?

It is generally accepted that regional agreements that dovetail into a multilateral framework are to be welcomed, especially since they exploit the advantage of geographical proximity.

But if they are seen as a substitute for an open, multilateral system or have complex rules and definitions that are mutually in conflict, then they aren't such a great idea.

The WTO has already taken cognisance of no fewer than 300 such agreements, and with many more in the works it is obvious that the process may have gone too far; the multiplicity of these agreements will make simple, open multilateral agreements more difficult to hammer out.

From an incentives view, regional agreements create more problems than they solve because they create the wrong sets of incentives, especially in the complex rules of origin game.

They tend to distort the pattern and composition of trade in a manner that does not benefit the economy as a whole but only some sectional interests. In other words, they are best viewed as short-term arrangements of convenience.

To some degree, the rash of agreements that India is pursuing reflects dissatisfaction with the way multilateral trade talks have been progressing under the WTO banner.

It is interesting that all the agreements are, or will be, with countries at roughly comparable stages of development "" so this is really another version of the old cry for South-South trade, or a variant of the G-15 initiative.

Indian commercial interests will broadly welcome them for precisely that reason: it is easier to think of trading with South Africa or Thailand than with the powerhouses of the world. But for that very reason, it is in the final analysis a sub-optimal solution.

The most 'positive' view that one can take is that, until there is a breakthrough in the WTO, these preferential agreements will help Indian manufacturers and exporters move a couple of notches higher in their trading ability and readiness.

The problem with multilateral arrangements is that they tend to treat minnows and lions on par. But India is not a minnow any longer, and should be working confidently towards the successful completion of the Doha round.

The PTAs are at best a half-way house; they cannot be the final goal, and should not be negotiated such that they stand in the way of the end objective.