DEC 21, 2003
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Of Free Trade And Ironies
 

In the early 1960s, a young Sydenham-Cambridge-MIT-Oxford educated professor at the Indian Statistical Institute started narrowing his eyebrows in suspicion at India's import-substitution policy framework. Little did he guess that he would emerge-in American academia-as the lead advocate of Free Trade, influential enough to herald what the MIT economist Paul Samuelson has called 'The Age of Bhagwati'.

'History has its unforeseen ironies' was the opening line of Bhagwati's 1993 book India In Transition: Freeing The Economy. For a nibblet of his conceptual clarity, glance at the book's contents. Just three chapters: The Model That Couldn't, What Went Wrong? and What Is To Be Done? Indian liberalisers were floored.

As the world threatens to recede into protectionist cocoons, what with America fattening its farmers while blocking European steel and Chinese brassieres, the WTO advisor and Columbia professor's thoughts could do with fresh amplification.

Free Trade works, as Ricardo showed, via the efficiency of every country pressing forth its comparative advantage to satisfy global needs. This helps maximise growth, and that's good-even for the poor. While reciprocal barrier-lowering is desirable, if other countries reject good trade sense, "then, go thou alone" and grant unilateral market access, advises Bhagwati, inspired by Tagore. Talk of 'trade concessions' exasperates the professor-as if granting access is painful. It is, instead, beneficial. "Except in the few cases (rarely applicable to poor countries) when strategic tit-for-tat play is credible, the net effect of matching others' protection with one's own is to hurt oneself twice over," he says.

What miffs Bhagwati even more is the clamour for trade with a 'human face'. It has always had one, he argues. And why call WTO's Doha Round a 'development round'? Development was always the objective (and trade, the policy).

Yet the professor doesn't approve of 'trade-related' issues such as intellectual property being forced onto the WTO agenda; why turn it into a "royalty collection agency"? His best wit, though, is reserved for economics-savvy audiences. "If, in lieu of autarky," he once quipped, "the wretched apple had been traded for something more innocuous, Adam and Eve would have continued in bliss."

 

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