Contradictory winds?: Subramanian, who opposed India's WTO stance, to be Modi's chief economic adviser

By Our Representative
Contradictory winds appear to be blowing in New Delhi, which does not seem to known which policy directions to take after India’s dogged refusal to sign World Trade Organisation’s (WTO’s) trade agreement. One clear indication of this is Government of India’s decision to appoint Arvind Subramanian, Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics and a senior fellow at the Center for Global Development, as its next chief economic adviser. Recommended by finance minister Arun Jaitley, Subramanian declared that India was going the “wrong way” in rejecting the WTO deal.
In an article in late July, when the WTO negotiations were about to collapse, Subramanian said, by opposing the Trade Facilitation Agreement (TFA) India is being perceived for being obstructionist. “The reputational costs for the new government that is trying to project an image of being investor- and market-friendly and constructive in its international engagement are potentially high”, he said, adding, “Moreover, India seems isolated in its current position, with China, Brazil, Russia - the band of BRIC brothers - and other emerging market countries distancing themselves from New Delhi.”
Subramaniam insisted, “A policy that has limited support in the WTO looks weak and lacks legitimacy, and, hence, is unlikely to succeed”, adding, “If India succeeds in its opposition, and the Bali deal collapses, the blow to an already weak WTO would be significant and India would bear much of the blame. And the costs of a weak multilateral trade system are greater for countries such as India, which is excluded from the emerging Asian trade architecture underpinned by the United States-led Trans-Pacific Partnership.”
Advising India to “withdraw its opposition to the TFA, reformulate its position on agriculture”, Subramanian insisted, India should “proceed to persuade its partners of the merits and fairness of its new position over the next few months, and revisit this issue at the WTO in the near future.” He adds, “India should offer to change its WTO obligations to make them less inefficient and trade-distorting. To show its good faith, it should offer to restrict its ability to impose tariffs in return for greater - but not open-ended - freedom to grant domestic subsidies.”
Subramanian further says, “India would be saying to rich countries, ‘Our agricultural policies are similar to yours, so we want our WTO obligations to be similar to yours, too.’ It could argue further that the structure of obligations is biased against India, because rich countries can subsidise agricultural exports while India cannot. India's offer would codify more efficient and less distorting policies than India's current WTO obligations.”
All this would result in a situation in which, the top economist, who is a respected Indian, China economics expert, and figured in the 2011 “100 Top Global Thinkers” list, underlines, “India would not just be seeking more freedom; on balance it could accept new limits to its freedom on agriculture, especially on tariffs. Of course, the exact details of the new level of tariffs and subsidies will need to be worked out, but the fair principles underlining the offer would be key.”