Not A Fair Trade-off
Are “reforms” done for the general good of India, or for the general good of the rest of the world?
Times were tumultuous when Dr Manmohan Singh was the Secretary General of the South Commission in Geneva (1987-1990). I had occasion to meet him a few times in his office in Quai Wilson and we spoke about international trade, options for the south, Bofors, etc. The Uruguay Round of trade negotiations which would lead to the creation of the World Trade Organisation (WTO was the third leg of the Bretton Woods organisation. The other two being the World Bank and the International Monetary Fund) had been launched in 1986 and the Berlin Wall had fallen in 1989. Part of his job as a leading voice from the south along with late President Julius Nyerere of Tanzania was to propose ways in which developing countries could independently secure their growth trajectories to match the needs of their populations, while at the same time propose intelligent de-regulation of their economies to invite Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII).
For a reporter from the south, it was important for me to seek Dr Singh’s views on what the road map for countries such as India, Brazil, etc could be (apartheid in South Africa was then in its last few gasps). He was quite clear about the direction large developing countries would have to take. It would be a tightrope walk between competing ambitions of a globe globalising on many globes. The South Commission said in a report that the Uruguay Round was an attempt to tackle issues of strategic importance for the design and management of the global economy including the linkages between money, trade and finance. In a number of respects, the outcome of the Uruguay Round would vitally affect the domestic development and future of the developing countries, it had warned.
When he returned to India as Finance Minister in 1991, Dr Singh carried out a series of structural reforms that were contradictory to what he had been advocating as the head of the South Commission. To be fair, he did not have much of a choice. Our balance of payments deficit was huge and our foreign exchange reserves stood at $1 billion, barely enough to pay for imports for a week. However, it is precisely because of the situation we found ourselves in that there was greater need to remain vigilant and push through intelligent deregulation in sectors which would invite investments and fuel growth. In other words, it was in our interest to ensure that our markets were not being opened under duress. Nothing like that happened.
The prescription for our so-called recovery was dictated by the Bank and the Fund. They were doing their job. Banks generally don’t lend money to lose it. It would not be an exaggeration to say that the country was not taken into confidence. Just like we were accusing the West of imposing rules on us which would further marginalise our economies, we turned around and did the same thing to Indians who were not part of any market, let alone global markets, and made commitments in their name.
The pressure to perform or perish was exerted on all countries with large markets in what authors Susan George and Fabrizio Sabelli called the “bigotry” which accompanies international economic prescriptions of the Bank and the Fund. In their book, Faith and Credit – The World Bank’s Secular Empire (1994), they wrote that countries did not argue with the structural adjustment salvation model because you do not argue with god. The central thesis of the irreverently poignant book was that the Bank was a supra-national, non-democratic institution which functions very much like the medieval Church. In an interview with me Sabelli said the Bank’s predictions and prescriptions are doctrinaire, they have a rigidly structured hierarchy preaching and imposing their global doctrine and a quasi-religious mode of self-justification ably assisted by self-serving politicians and bureaucrats in the country. He pointed to the Mexican economic crisis in 1994 as yet another example of the Bank’s work in developing countries.
And then, there was the Uruguay Round which lasted from 1986 to 2004 and came into effect in 2005, and were billed as the most ambitious multilateral trade talks of the last century. There too, the Indian electorate was not taken into confidence and while we applauded the rights of French farmers to protect Cognac and mushrooms (agriculture was a major issue between the United States and the European Union), we didn’t think it was necessary to speak to our farmers or for that matter to us about international trade commitments which would require root and branch changes in many sectors of our economy. There were fears in India then that global trading rules would be re-written in ways which would further marginalise us. These voices were stifled. A top European negotiator told me the talks would be a three-way process between the United States (US), the European Union (EU) and Japan. As for large developing countries like ours, he said, “when elephants play, the grass below is bound to get crushed.”
The US trade negotiator Carla Hill was even more precise. She said if push comes to shove, the US was prepared to pry open developing country markets with a crowbar – a statement that earned her the nickname Crowbar Carla. We did not provide her the opportunity to use the crowbar. While in public our negotiators were going eye-ball to eye-ball with other countries, New Delhi was busy conducting private negotiations in green room talks and telephone diplomacy which often resulted in Indian documents landing on our official negotiators’ desks out of thin air.
In New Delhi, we publicly argued if our chief negotiator should come from the Ministry of Commerce or Ministry of Foreign Affairs, and both offices resorted to planting stories in the media including international media about their respective virtues. The US sought and secured the transfer back to India of one of our top negotiators who was doing his job of protecting India’s interests. It was also the time when developing countries like Brazil saw India in action and drew their own conclusions about our role as dependable developing country partners.
Chakravarti Raghavan, an eminent journalist and an international authority on trade and development, who referred to Dr Singh as Manmohan, wrote in his incisive work ‘Recolonisation – GATT, the Uruguay Round and the Third World’ (1990) that the talks would do to the 21st century what gunboat diplomacy had done to the 19th. In addition to all the traditional areas under negotiations, the West introduced three more. These were trade-related intellectual property rights (TRIPS), trade-related investments (TRIMS) and Services. So while India’s textile exports were being curtailed under the highly discriminatory multi-fibre agreement (MFA came into existence as a short term measure in 1974 to allow developed countries time to adjust to developing country textile exports, and lasted for 30 years), we were staring at cross-sector trade sanctions and retaliatory procedures. Unlike GATT which allowed for rules to be imposed within a sector, the WTO was a single undertaking allowing signatories to hit across the board. In other words, if India did not want to buy useless almonds from country A, that country could stop selling us technology vital for our growth.
Ironically, it was also the time when Mikhail Gorbachev was talking about Perestroika (restructuring) and Glasnost (openness). The world’s second-most powerful man who when he had the option of rolling out the tanks chose instead to bring down the Berlin wall, was calling for intelligence and prudence with freedom and free-trade. Gorbachev, who spends his time between Geneva where he heads the International Green Cross (IGC) and Moscow, had this to say recently. “In 1989 incredible changes occurred that just a few years earlier were deemed impossible. But this was no accident. The changes reflected the hopes of that time and leaders duly responded. We brought down the Berlin Wall in the belief that future generations would be able to solve challenges together…But politics remains locked in the iron cage of demands and dogmas of neo-liberal economics turned obsolete and counter-productive.”
Dr Singh has consistently called for a reform of international lending institutions and spoken often at international forums about the urgent need to address poverty and disease. Even during his recent visit to the Non-Aligned Summit (NAM) in Iran where he found himself in the august company of dictators and murderers bringing back memories of former prime minister, Mr Inder Kumar Gujral’s famous hand-shake with Iraqi dictator, Saddam Hussein, Dr Singh said NAM countries should strive for a just and equitable world order. The NAM, like the G-77 has long ceased to be relevant to anyone.
As a former resident of Geneva, I am not sure Dr Singh had physics in mind when he announced his Big Bang reforms. I am assuming that he meant India when he said “we” will not go down without a fight. India does not want to go down with him or for that matter with any other government. Don’t be surprised however, if we suddenly top all charts and ratings because most of these are fixed by people who are better than us at the game.
As the 13th prime minister of India, Dr Singh has just announced the 12th five-year plan in tumultuous times. The challenge is not from the Bank, the WTO or the Fund or for that matter any external forces. While attracting FDI is important, it is equally important to restore faith in systems and institutions that have been systematically destroyed for over a quarter of a century. Let us inform ourselves correctly about where things are in India, how we live, what we eat or don’t and how many of our children die from preventable diseases. Does India trust experts who are arguing about our poverty line? The aam aurat in whose name we do things can share a few tips about balancing the budget. We are a huge nation which can transform itself into the world’s largest talent pool. Simultaneously, we have to drive and navigate our global agenda with vision and clarity, not fear and submission couched as international obligations and plans that attract investors. There is little guarantee that money will start pouring into India next week. Money will go where it feels safe. For now, India is still on the wait and watch list. 2012 is not 1991.
We are not and we never were a shining global player even when we were clocking two digit growth figures because we were not creating jobs and pulling people out of poverty and disease. We can be a major player though. And standing between our aspirations and hopes is us, Indians. The enemy is within.
PS – The jury on FDI in multi-brand retail is still out. It is not a one-shoe-fits-all option and they have had to leave many countries with egg on their face. Carrefour and Wal-mart may be able to help us with details or case studies on their experiences.
Image Courtesy – Ajit Ninan
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