Davos, India and Protectionism

Last week at the World Economic Forum at Davos, Switzerland, India issued a clarion call to world businesses and governments to follow globalisation, work towards climate change, and make the international institutions more effective. This call has been duly received by the world media and the treatment given by the Western media is on expected lines. Though India has not made any difference between the developed and the developing world, however, it has been pointed out by print and electronic media that India is not serious about practising what it is preaching.

The Western media have categorically mentioned that on one hand, India is making such statements at a global platform, but on the other, in reality, is imposing heavy import tariffs and laying down strict conditions for manufacturing in India, making it difficult for foreign investors to think of setting up their manufacturing base in the country.

They have cited, for instance, that the import duty on solar panels has been increased to 70 per cent which is quite high and will in all probability, not let any of the foreign solar panel companies to be able to compete in the Indian market, and also the conditions for fulfilling high levels of local material requirement for companies like Foxconn, the Taiwanese company which manufactures the bulk of Apple’s products and Ikea the Swedish furniture maker.

Such comments from the Western scholars and media are heavily biased against India as the underlying principle in international trade and commerce still remains the sovereignty of the members and thereby the primary duty of any government in a sovereign nation is to work towards the interest of its own people, rather than working towards globalisation just to prove that it is a good idea. However, it is interesting to note that since 1995, the World Trade Organisation has been at the forefront of international trade globalisation and has been quite successful in streamlining the process, particularly the dispute settlement mechanism between nations.

It is the bounden duty of all member states to work towards free-trade of goods and services across international boundaries, however, it has been observed, of late, that the undercurrents of protectionism in the developed world – which have often been complained by certain developing countries like India, Brazil, and a few other members – have become obvious enough to be noted by all. Working towards globalisation does not mean that a country will put its own interests on the back burner when others are blatantly violating them, not only in spirit, but also in letter.

It is a matter of serious concern that particular developed countries like the United States, Canada, the big economic powers like the European Union and several other first world countries merely provide lip service to the idea of globalisation and continue to create all sorts of tariff and non-tariff barriers to entry of goods from developing and highly aspirational countries like India as the local businesses are, in most of the cases, not able to compete with the goods imported from India.

China, due to its sheer size and global positioning – being a permanent member of the United Nations with veto power, definitely gives it the requisite edge which it uses tactfully to gain economic benefits by negotiating tough – cares little about basic global principles of trade and commerce, and definitely not about niceties in diplomatic relations with small or big economies.

Strong and powerful economies have often chastised and sermonised the developing world, and India has frequently been at the receiving end. But, as India’s stature in business and geopolitical dynamics globally is undoubtedly on the rise, India’s stand in showing the mirror to the Western world comes as no surprise. There is, indubitably, no contradiction between protecting one’s own turf, working towards the interest of the nation, thinking about benefits to the world along with not forgetting one’s own country – all on one side – and true globalisation.

It’s good to remain simple and have high moral ideas to encompass global good, but being a simpleton in not understanding the gameplan of others is surely not expected from a nation which has lately realised its potential and is working to achieve it. India has chosen the right middle path and will do well to stick to it.