Unlearnt Lesson

the yuan, the Chinese have exhibited great maturity. But, obviously, they have wrung out some concessions in return. One of these is the less hardline stance by the EU.

In 1949, when China went communist and withdrew from Gatt, few people could have imagined that by the end of the century it would be on the verge of re-entry, that too as a trading giant. Even two decades ago, when Deng Xiaoping started China down the road to economic reform, the idea was unthinkable. Yet, today, China is poised to enter the WTO, the successor to Gatt on terms of its own choosing. Not just this, when it does enter in a couple of years, it will be a major force within the WTO which cannot be ignored.

 

Contrast this with the experience of India. In 1949, India was one of the first countries to join Gatt. With a 3.5 per cent share of world trade and as the upholder of the liberal democratic flame, it wielded great influence. But since then, although it remained an active member of Gatt, it turned increasingly pedantic and ideology driven. It became impossible within the Indian trade policy establishment to be practical about commerce. Add to this the bias against trade introduced by high policy and it is hardly surprising that Indias is a marginal voice in world trade affairs.

But this lesson has not yet dawned on Indias political parties. As they approach the general election and release their manifestos, none of them has chosen to emphasise expanded trade as a major policy objective. Instead, there is a clear refrain towards greater protectionism. To the extent that without a clear political consensus, trade reform will be slow, this spells bad news.