Reflections on GATT Debate | Economic Reforms: Need for Reappraisal

From N.C.’s Writings

The following lines, written by N.C. precisely twenty years ago, carry considerable relevance in the present scenario.

Reflections on GATT Debate

The storm over the government’s meek submission to the Dunkel Draft as now inscribed in the GATT has not really blown over. It has only subsided for the present. As per our Constitution, Parliament cannot prevent the government signing treaties, though ratification may be delayed for a very long time—or not ratified at all for years as is the case with the Universal Declaration of Human Rights.

This does not mean that the uproar over it—persisting for nearly a week—was an exercise in futility. Rather it brought home to the government the volume of serious misgivings about the entire economic arrangement to be brought about by the new GATT, to which the government has committed the country. For a government commanding only minority support in the Lok Sabha, this has been a desperate gamble. And this is precisely the reason why the government kept up studied ambiguity on every item that is going to affect the country under the new world trade regime.

If one analyses the Commerce Minister’s prepared statement, it has throughout tried to hide rather than reveal the actual implications of the new world trade regime to be ushered in next year. The Associated Press of America filed from Geneva on December 17 that “Indian farmers and drug companies are likely to be hit by patent fees on seeds and pharmaceuticals”. But our Commerce Minister has tried to cover up even on this point. The fact that the prices of medicines would immediately shoot up could not be denied at the end. The Minister of State for Chemicals, Eduardo Faleiro, glibly held out the assurance that the government could control the prices of medicines through the Drug Price Control Order, knowing fully well that any international commitment on the part of the government can hardly be negated by any control at home—particularly when the present government is so fervently committed to offer oblations to the God of the Market.

The government has never been serious in taking Parliament into confidence about the problems and pitfalls it was facing in the Uruguay Round of negotiations. At the Punta del Este meeting of the GATT in 1986, India put up a firm stand which was sought to be modified rather surreptitiously by a bureaucrats’ lobby but was scotched at Montreal. However, the surrender lobby was never disarmed and the intrigues on their part continued throughout, until they came on top in 1991 with the present government.

It needs to be emphasised that the line of surrender was clearly palpable when the Dunkel Draft was first published two years ago. It is no accident that this was precisely the point when the government was practically hijacked by the Fund-Bank mafia as represented by Dr Manmohan Singh and his trusted team. The capitulation line in the GATT fitted in beautifully with the submission to the World Bank’s Structural Adjustment prescription which came into view exactly two years ago. In fact, the Dunkel Draft represented a component, an essential component of Manmohanomics. It would be absurd to think that the Dunkel injunctions could be defied without upsetting the well-entrenched structural adjustment edifice that the present Finance Ministry has set up. And the same argument is being trotted out about the terrible disaster that would engulf the country if India refused to sign the GATT as was done in meeting the argument about India not being able to face its commitments to debt-servicing in 1991. As in the case of the new economic policy the government on the Dunkel Draft has studiously avoided telling Parliament the full implications of each of the items of the elaborate structure of the new GATT.

It needs to be noted that an extensive public campaign of exposure was built up immediately after the Dunkel Draft was released, particularly on the question of patents. No campaign in recent years has mobilised such a wide response from the intellectual community cutting across party lines as has been done in the last two years on the Dunkel Draft. There is no doubt that the government was put into a quandary. On the one hand, it had already surrendered on the economic front to the Fund-Bank dictates thanks to the machinations of Dr Manmohan Singh and his team, and on the other it had to contend with serious objections to the Dunkel Draft by all political parties, including a considerable section of Congressmen. Not surprisingly, the government resorted to the subterfuge of so-called consultations to cover up the footprints of its capitulation at the GATT talks. A Cabinet Sub-Committee was set up with Arjun Singh in the chair to elicit public opinion on the Dunkel Draft. It held a number of meetings with spokesmen of different points of view. Nobody has been told what was the outcome of that exercise. Despite many representations from different bodies, public meetings and dicussions, the government maintained a studied silence at home, while it kept up a virtual policy of inaction at the negotiating table of the Uruguay Round. The question of India taking the initiative in rallying the developing nations to force changes in the world trade pattern could not be a possibility at any stage, since the Indian negotiators themselves were hamstrung by the commitments that the government has through-out been making to the Fund-Bank dictates on the economic front. The government also seemed to be fighting shy of telling the public that compliance with the new GATT regime would not spare us from the penalty under the Special 301 that the US Administration is threatening to impose on this country.

How mendacious has been the government’s position is clear from the time-table it fixed for the final round of the Parliament discussion on the Dunkel Draft. While the deadline of the new GATT accord was fixed on December 15, the govenrment conceded a debate in Parliament to begin on December 6. Obviously, the government was not serious about the Parliament debate contributing towards influencing its stand at Geneva. Even the Commerce Minister’s laboured statement could be extracted by Parliament after the Cabinet had already instructed the government representative in the GATT to sign the new accord. As in the case of the economic policy, the government moved without consultation with Parliament, despite the fact that it does not command a clear majority in the Lok Sabha.

It is necessary, however, to note that though the public campaign by an informed body of concerned citizens has been going on, this was not reflected in the last two years in the performance of the Opposition. There have been angry protests in both the Houses in the last one week, that is, only after the horse had fled from the stable. The Standing Committee of Parliament attached to the Commerce Ministry which was meeting for six long months to examine the Dunkel Draft submitted its report only on December 13, that is, two days before the GATT deadline. Inevitably, its critical evaluation of the Dunkel Draft is now invested with only academic interest. Had this job been done three months earlier as a top-priority assignment—which should have been the case—then there was at least a sporting chance to force the government’s hands on this particular issue. As it has been happening on many other issues of urgency, Parliament is nowadays defaulting in its role as the mirror of public perception and concern.

Looking round the world, it is clear that the GATT is hardly going to establish a global regime of peaceful trade pursuit. Frictions are bound to arise between countries and countries, between regional groups, and certainly among the developed giants of the G-7. As it is widely perceived, the new era that opened up with the end of the Cold War, is going to witness the fiercest rivalry among the industrial giants for the capture of the world market—in other words, an unprecedented trade war is in the offing. In such a situation, a watchful government in the developing world representing the overwhelming bulk of the world’s manpower, resources and market, can certainly intervene effectively in defence of the interests of the Third World.

Will India aspire to play that role? Is the present establishment with the halter of Man-mohanomics round its neck, in a position to play that role? This is for the nation as a whole to judge.

(Mainstream, December 25, 1993)

Economic Reforms: Need for Reappraisal

The immediate uproar over the JPC Report centres round largely on the role and responsibility of the dramatis personae which include a whole gallery from Ministers to senior officials apart from brokers and bankers. However, the most significant message that has come out of it is contained in a brief passage of two sentences:

While the mood of the government is upbeat on liberalisation, their orientation towards strict enforcement has yet to manifest itself. Deregu-lation without effective checks and balances would, in the view of the Committee, be an unmitigated disaster.

It is worth noting that this portion falls within the part of the Report that was agreed to by all members of the Committee, and hence not a consensus patchwork but invested with unanimous approval.

The timing of this warning is important. It has come after thirty months of the initiation of the process of deregulation of the economy, popularly called ‘liberalisation’. This is precisely the moment when the euphoria over it is tempered by new concerns. Although under-standably, the government is fighting shy of the scam being branded as the inevitable concomitant of the sudden flush of liberalisation that set in with the new economic policy, the JPC has brought out the dangerously unreliable instrument for bringing about the reforms. It has presented a veritable catalogue of misfits thoroughly unqualified to undertake structural transformation of the Indian economy. No wonder they were mostly sucked up by the venality that brought about the scam. The obvious lesson to be drawn is not only that the guilty are to be disciplined but the necessary checks and balances forged and enforced for the economy to function.

Apart from such structural repairs, the time has come for the very design of the economic reforms to be scrutinised. It is not without significance that some of the most ardent votaries of the God of the Market are now somehow concerned with some aspects of the new economic regime. The Bombay Club is by no means a critic of the new economic programme, but its members are certainly disturbed at some of its features particularly the discrimination in which indigenous corporate sector is placed by the come-hither allurements being extended to the multinational corporations. The idea of offering guaranteed returns to foreign capital in certain sectors militates against the principle of free and fair competition which the globalisation of the market is supposed to offer.

The problem lies in the fact that the economic programme that is now being pursued in our country strictly adheres to the World Bank prescription to the very letter. The copycat approach refuses to take into account the specific conditions prevailing in this country. The fact that our indigenous industries need certain safeguards as they are faced with global competition need not be taken as a badge of their chicken-hearted mentality but is the recognition of a reality, particularly when one finds the giants of the G-7 fighting for the protection wall for their developed industries as well as their agriculture.

Even to a lay observer, unversed in the mysteries of higher economics, it becomes clear that the World Bank prescription has many faults. It is indeed surprising that our government experts have never frankly placed before the public the difficult problems that other countries have had to face while submitting to the World Bank prescription for structural reforms.

The inadequacy of the World Bank prescription in the field of employment generation—to put it mildly—has the potential of landing the country in a politically explosive situation especially for a government that is bereft of stable majority support. While the government is strenuously publicising the bonanza that the National Renewal Fund is going to bring, it is clear even to the lay public that it can hardly tackle the fall-out of the Exit policy.

One of the conspicuous features of the economic reforms exercise so far has been a veritable drive for the systematic demolition of the public sector. The crusading zeal displayed in running down and starving even the profit-making units of the public sector is certainly in keeping with the World Bank tenets, but it hurts the interests of the country. Even those who are ideologically allergic to the very concept of the public sector have to admit the strength and vitality of some of the leading units of the public sector. It was the creditworthiness of such units that enabled the government to contract short-term loans from the international financial market in the second half of the eighties. Many of these have stood global competition, but in the last two years these are not only being neglected or starved but are being dismantled. The disinvestment drive of the PSUs touched even such profit-making units. The JPC has disclosed the scandalous manner the disinvestment operation was undertaken. It is understandable that the World Bank would insist on their closing down to make room for the giant multinationals to invest and capture the market. This way the very backbone of the country’s economic independence is sought to be broken.

All these call for a serious business-like reappraisal of the methods and objectives of our eocnomic reforms as laid down by the World Bank prescription. The Prime Minister has repeatedly emphasised that the process of economic reforms is irreversible that the process of economic reforms is irreversible. But it has nowhere been said by him that there should be no review and re-examination of the World Bank recipe in the light of our rich and varied experience. Such a review does not mean that the urgent need for economic reforms is to be disowned. Rather it involves the harnessing of powerful creative forces in the country which can bring about wholesome reforms for the economy in line with our specific needs, urges and native genius.

The buzz-word of today is ‘globalisation’. Accepting it in the correct perspective, one has to look round and see what’s happening in the world today. Two years ago, when our economic reforms programme was taken up as per the World Bank directive, one could perceive an intoxicating jubilation in the chanceries and the bourses of the West at the collapse of the command economy of the then Soviet Union and its satellite regimes in Eastern Europe. The Cold War controls were removed and with the surge for democracy, free enterprise economy became the order of the day.

But the picture is very different now. The terrible blight that has overtaken the Russian economy by reckless switching over to free-market anarchy without caring for checks and balances, has ruined the country as privation has been inflicted on millions. The inevitable political fall-out of this economic disorder has been the ignominious discredit of Boris Yeltsin on whom his Western sponsors have so heavily invested. The massive protest vote against the Yeltsin establishment—in an election which was entirely managed by the very same outfit—has come as a bombshell for the West, falsifying all the forecasts of their think-tanks and intelligence agencies. It has indeed made a cruel mockery of the name of Yeltsin’s party, Russia’s Choice—as it has turned out to be anything but the choice of the Russian voter!

Instead has appeared the unexpected appariton in the person of Zhirinovsky gate-crashing into Russian politics. The West is now trying to paint him as a fascist. What has pitchforked Zhirinovsky on the centre-stage of Russian politics is the impoverishment of the millions and the hurt national self-respect of the proud Russian people, refusing to be the supplicant of the West. Not surprisingly, the bulk of the armed forces voted for Zhirinovsky.

The phenomenon of Zhirinovsky is not just an isolated instance of the repudiation of the World Bank syndrome. The turn in the tide was first noticed in Poland, then it spread to Lithuania and then seen in Italy. In fact, all over Europe today there is a discerning mood for a revisit to the Welfare State approach as the perspective of unalloyed free market destroys the very foundations of any system of social security and thereby breeds social tension and civil strife.

The architecture of the new world order is therefore very much a manner of debate all over the far-flung continents. There is no reason why we should stick to a design which is already found to be obsolescent, and there is no earthly reason why we should suffer from the inferiority complex that we are incapable of restructuring our own economic edifice relying on our own experience and native genius in line with our own priority of requirements while drawing upon the experience from abroad. That way lies true globalisation—not via blind imitation. The need for a mid-point reappraisal of our economic reforms programme—honest and transparent—is here and now. Delay on this count may be disastrous for the government and certainly for the country.

(Mainstream, January 1, 1994)