Trade is a launchpad for the development of the domestic economy: Suresh Prabhu

Economic times, October 17, 2022

Trade is a launchpad for the development of the domestic economy”, said former Commerce & Industry Minister Suresh Prabhu, in his keynote address at a roundtable organised by CUTS International to discuss the trade policy India needs.

He highlighted that trade always has upsides and downsides, and trade policy measures should aim to leverage the positive gains and minimise the negative consequences.

The roundtable saw a number of distinguished experts laying out the concrete steps required for Indian trade policy reform. “We want to design a practical roadmap for the governmentto achieve the trade policy India needs”, said Pradeep S Mehta, Secretary General, CUTS, who steered the session.

In his opening remarks, Naushad Forbes, Co-Chairman, Forbes Marshall, stated that India’s economic history makes a powerful case for free trade. He said that India should seek to join more Free Trade Agreements (FTAs), while learningfrom its experiences with past FTAs.

Forbes also called upon Indian industry to articulate its interest in free trade more clearly, and for that voice to be heard by policymakers.

Martin Wolf, chief economics commentator at the Financial Times, noted that changes in the global trade environment did not mean the end of trade, but in fact these changes had themselves created huge opportunities.
For India to capitalise on these and insert itself into global value chains (GVCs), it must think clearly on services, including digital trade, reduce formal and bureaucratic trade barriers, and accelerate skill acquisition and integration with the global knowledge pool.

Montek Singh Ahluwalia, former Deputy Chairman of the Planning Commission of India, pointed to the need to have a clear tariff policy, supported by an exchange rate policy, to help realise greater trade.

Ahluwalia also recognised FTAs as tools to not just enhance market access for exports, but also to stimulate reforms domestically. He suggested that India should be open to deeper behind-the-border integration that is a part of newer FTAs.

While some attendees considered trade policy and industrial policy to be inextricably linked to each other, others sought to draw a distinction between the two. The importance of attracting investment, and for achieving scale which stimulates competitiveness and encourages firms to focus beyond the domestic market, were mentioned as steps to drive both trade and growth. Many highlighted the need for India to lower tariffs on industrial products and address anomalies in tariff policy, such as inverted duty structures.

In a similar vein, there were many calls for India to more actively participate in FTAs. However, there were also contrarian voices, which stressed on the need to fully understand India’s experience with past trade agreements before embracing new ones, and to fully take into account concerns about the impacts of trade liberalisation on sensitive sectors like agriculture and dairy.

Other comments focussed on the need to ensure domestic trade integration, as a prerequisite to better international trade performance. This would require greater involvement of state governments and a more machinery nationally to implement trade policy.

Given that trade policy can generate both winners and losers, the importance of policies to handhold those who are most vulnerable to the adverse effects of trade was also discussed.

The need for greater political will, a commitment to domestic reforms, a focus on MSMEs, increased uptake of technological solutions, and a comprehensive FTA strategy, are some of the other priority policy areas that came up during the discussion.

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